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Kerala Deluge May Shave Off 2.2% of State GDP, Push Up Fiscal Deficit to 5.4%

Most of Kerala was marooned between August 8 and 20, and around 260 people we killed and over a 1.5 million were driven out of their homes.

PTI

Updated:August 27, 2018, 8:24 PM IST
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Kerala Deluge May Shave Off 2.2% of State GDP, Push Up Fiscal Deficit to 5.4%
Illustration by Mir Suhail/News18.com
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Mumbai: The deluge that ravaged Kerala earlier this month, has shaved off at least 2.2 per cent of state GDP, which will push up its fiscal deficit to 5.4 per cent this fiscal, says a report.

Most of Kerala was marooned between August 8 and 20, and around 260 people we killed and over a 1.5 million were driven out of their homes.

The state administration has pegged the damages-over 90,000 km of roads, hundreds of bridges and around 50,000 acres of crops and over 10,000 homes were destroyed, at over Rs 35,000 crore, which is much more than its annual budget.

According to an initial estimate by rating agency Acuit Ratings (earlier Smera Ratings), the flood has shaved off at least 2.2 per cent or or nearly Rs 10,800 crore of state GDP.

Without central grants-in-aid, state fiscal deficit may exceed 5.4 per cent this financial year compared to 3.2 per cent in FY18.

The key sectors of tourism and agro-based industries are expected to suffer severe losses given the damages to infrastructure and crops/plantations. Tourism alone contributes 10 per cent of the state economy.

Agro-based industries and plantation industries such as rubber, tea, paper, textiles, food processing etc are likely to suffer losses of over Rs 1,200 crore, the agency added.

Giving a sectoral loss due to the floods, the agency said the biggest loss will be seen in the real estate ownership with an estimated loss of Rs 1,725 crore, followed by agro-based industries at Rs 1,216 crore, road transport at Rs 657 crore, financial services at Rs 549 crore, hotels & shopping complex at Rs 161 crore, and mining and quarrying at Rs 75 crore.

Banks and NBFCs may witness some deterioration in the asset quality given the loss of employment and livelihood in certain areas, pushing up NPAs by 200-250 bps in the near-term.

"This may further slowdown growth of bank credit and disbursements in the state further impacting GSDP, putting a brake on the fiscal consolidation efforts and the planned reduction of 20 bps in fiscal deficit in FY19," the report said.
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