Kerala's GSDP to be hit by Rs 108 bn due to rain and floods, says report

Tourism and the agro-based industries, are expected to suffer severe losses given the damage to infrastructure assets and the local crop

Kerala’s Gross State Domestic Product (GSDP) loss would amount to nearly Rs 108 billion due to the torrential downpour and floods, said a report by Acuité Ratings.

The calamity will expectedly affect the state’s finances due to impact on the GSDP and the likely rise in state borrowings to finance the reconstruction activities in the infrastructure sector such as roads.

Acuité estimated the state fiscal deficit to reach up to 5.4 per cent in FY19 from 3.3 per cent in FY18, which may only get partly offset by the grants-in-aid from the Central government and other sources.

Tourism and the agro-based industries, key sectors in the Kerala economy, are expected to suffer severe losses given the damage to infrastructure assets and the local crop or plantations.

The hospitality and tourism sector is estimated to account for around one-fourth of the GSDP and may witness an impact in the current year through a likely drop in tourist flows and the loss in property due to the floods, said Acuité.

A CARE Ratings report said that the fall in tourism is expected for around six to seven months as the state recovers during the peak tourism season. The agro-based and plantation industries such as rubber, tea, paper, textiles, food processing etc. are likely to suffer aggregate losses of over Rs 12 billion, said Acuité.

Floods will also have a significant impact on the financial services sector in the state, it said. Acuité estimated an increase of up to 2-2.5% in the non-performing asset levels of the retail and the small and medium-sized enterprises (SME) portfolio of banks and non-banking financial companies (NBFCs) operating in the state over the near term.

“This may slow down the growth of bank credit and disbursements in the state further impacting the growth in GSDP,” it said.