Covid-hit Kerala economy struggles to stay afloat

Kerala economy struggling under Covid-19 impact
Kerala is caught between the surging Covid-19 caseload and the need to revive its sagging economy.

By P Vinod Kumar

Kerala economy reeling under Covid-19 impact:  After grabbing global headlines for its successful management and containment of the first wave of Covid-19, Kerala has been at the receiving end from many quarters for a stubbornly high reproductive ratio, or the number of infected contacts per infected individual, during the second wave of the pandemic. The state accounted for around 38% of the active reported Covid-19 cases in the country on July 30.

The state government drew flak from the national media for relaxing the standard operating procedures on the eve of a religious festival. The state government could have steered clear of such unnecessary controversies and insinuations of minority appeasement as the state has been witnessing a spike in Covid-19 caseload. There was no apparent need for the government to ease restrictions while striving to put the Kerala economy back on track.

Kerala should follow a calibrated approach to repair the damage done by the external shocks – first by devastating floods in consecutive years and by the Covid-19 pandemic – to the economy. Its robust public health system has stood up to the most severe healthcare emergency in more than 100 years. It could defeat the pandemic by doubling down on its core strengths.

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Floods, pandemic ravage Karala economy

The economic shock from Covid-19 caused a major disruption in Kerala. Coming on the back of devastating floods that displaced millions of people, the pandemic was a big test for the Kerala economy. The state’s population has shown remarkable resilience in fighting back the healthcare crisis and its ripple effects on the broader economy.

The state administration is facing a pressure cooker situation, firefighting to contain the pandemic with scarce resources and the Union government playing truant. It had to take up the healthcare challenge amid efforts to revive the Covid-hit economy. The numbers provided in the state Budget speak volumes about the state of Kerala economy. A through reading of the Budget documents shows that the state is left with no resources of its own to spend its way out of the current crisis. Despite such a predicament, Kerala has been doing pretty well in its commitments to the people, supporting livelihoods by borrowing heavily.

The government is providing essentials for families that are affected by the pandemic crisis. It has also continued with the income supporting measures despite the acute fiscal crisis. The closure of small and medium businesses, the source of income for most casual labourers, is the real danger for the people as well as the Kerala economy.

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Kerala: Between a rock and a hard place

The problems for the Kerala economy should not force the state government to lower the guard against the rising caseload. It should listen to the wise counsel of experts without diluting its efforts. The immediate priority of the state government should be containing the second wave by bringing down the test positivity so that it could stop the third wave.

With more vaccines in the basket, it is imperative that the government must speed up the inoculation drive. Vaccination, and vaccination alone, can resolve the issue of high TPRs haunting the state. For this, there is nothing wrong for the government stretching its already stressed fisc. Getting the Kerala economy back on track by defeating the coronavirus is the only remedy for many problems faced by the government.

The state government has rightly backed up its income supporting measure for helping people cope up with the crisis. The Rs 5,650 crore package announced by state finance minister KN Balagopal will support small traders, industries and farmers, affected by the Covid-induced economic crisis. It decision highlights the government’s intent to address the needs of the common men and women.


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The state government is on unfamiliar territory with the delta variant forcing the administration and the people to make different personal risk and fiscal calculations. The problem, however, is that no one knows for sure the full implication of the new wave for the Kerala economy. A silver lining in the otherwise gloomy sky is the fact that people are now ready to experiment with new ideas spurring a new retail revolution. The recently announced fiscal measures may also add to this changing tide of events with some much-needed help of the government.

The uncertain new phase of the pandemic is stretching the state administration to its limits. However, despite a surge is the caseload, fatality rate is still under control. This does not mean that the state government can afford to be complacent about the situation in hand. It should top up its efforts to get everyone vaccinated so that the state economy could normalise sooner than later. This is all the more important, considering the fact that the children have to get back to their schools and young generation to work. That is the only way for the state to reclaim its lost ground.

(P Vinod Kumar is Kochi-based independent economist and commentator. Views expressed in this article are personal.)