KOCHI: The state is facing a difficult situation due to the adverse effects of recession, the return of expatriates from West Asia due to slowdown and two years of devastating floods. In an interview with The New Indian Express, Finance Minister TM Thomas Isaac talks about the adverse effects of the slowdown that have forced the state to knock at the doors of the Centre to raise Kerala’s borrowing limits. Excerpts:
Q: Has the recession adversely affected the state’s finances?
A: The state’s economy was already facing a big slowdown for the past three years primarily due to the return of expatriates from West Asian countries. This has affected the consumer durables markets in Kerala and there is a steep decline in tax income. Real estate transactions are very meagre and automobiles market is also plummeting. Kerala is already facing a regional recession.
Q: What are the plans to manage recession?
A I hope the Centre unveils a big stimulus package for states. They should take the states into confidence and hold discussions. It should be a concerted effort. Unfortunately, the Centre is squeezing the states. While we are fighting an unusual situation caused by floods, the Centre has cut our public borrowing by around Rs 5,500 crore. While we have been demanding to raise our borrowing limit, they have cut it by 0.5 per cent. This has served a body blow to the state. Tax collection of the Centre has come down adversely affecting the devolution of funds to states.
Q: Considering the financial crunch, how are we managing the flood rebuilding works?
A: Two successive years of floods have worsened the situation. It has strained our resources and increased expenditure. The flood mitigation works have strained our finances further.
Q: What are the plans to recover from financial crunch?
A: We are trying to mobilise funds from external agencies like ADB and World Bank. But Kerala can have the benefits of these loans only if the Centre allows to keep these loans outside the normal borrowing limits, which they have refused to do. We are hoping that the Centre restores Kerala’s borrowing limits and allows it to keep the flood reconstruction loans outside the normal borrowing limits.
Q: Considering the bad finances, how will the state pay the welfare pension, bonus and festival allowance during Onam season?
A: We have made arrangements for public borrowing to ensure that the pension and allowances are paid well before Onam. We are routing all salary and pension payments through the treasury accounts. We have appealed to government employees to park their funds in the treasury. The government is offering 6 per cent interest to treasury savings which is much above bank interest. Response from employees has been encouraging. Last month, around 1 lakh employees routed the salary through the treasury and we got Rs 500 crore this way. Around Rs 200 crore was not withdrawn. We are expecting a similar response this time also.
Q: There were allegations that the CMDRF contributions were parked in banks as fixed deposits while thousands of flood victims are yet to get compensation.
A: That is a silly allegation. The interest for savings bank account is only three per cent, while a fixed deposit for three months fetches 6 per cent interest. There is a time frame for the development works to take place. For example, if we sanction fund for a village road it takes around six months to commence the work. We have given Rs 10,000 as compensation to 8 lakh people. Around 90 per cent of compensation has been distributed. Short-term reconstruction works like housing projects will be completed in a year, while long-term works take at least three years.
Q: Has the recession affected KIIFB funds?
A: KIIFB will not be affected as it has already gained market respect. That shows the structure, design, capacity and credibility of KIIFB are very high. We need around Rs 15,000 crore this year and we have already made agreements for the amount. We will avail the loan only when it is needed.