The Hindu Business Line : Review forecasts marginal fall in Kerala's growth rate

The slowdown in growth rate is seen in all sectors with the tertiary sector at 8.76 per cent (8.88 per cent), secondary sector at 5.56 per cent (6.02 per cent) and the primary sector at minus 2.88 per cent (minus 2.01 per cent).

Thiruvananthapuram , Feb. 3

THE overall economic growth rate of Kerala is set to record a marginal decline in the current year as compared to 2003-04.

According to the advance estimates contained in the Economic Review-2004, tabled in the State Assembly on Thursday, the overall growth rate during the current year will be 6.15 per cent as against 6.31 per cent achieved in the previous year.

The trend in the structural transformation of the State economy that is heavily biased in favour of the services sector has been continuing for quite some time now, says the review.

The contribution of the agriculture sector to the economy, which was at 18.17 per cent in 2002-03, fell further to 16.74 per cent in 2003-04. The review, however, notes that the State's economy has grown at an average of 5.8 per cent during the last decade-and-a-half.

This compared well with the growth in national economy, as against a low of 1.16 per cent in the 1980s. This indicated that the policy of equitable human development followed by the State had yielded positive results albeit with a lag.

The State income at constant prices is estimated at Rs 39,73,699 crore in 2003-04. The per capita income increased to Rs 12,109 from Rs 11,389 in the previous year, representing a growth of 6.32 per cent. This compared well with the national per capita income of Rs 11,684 in 2003-04.

The agriculture economy of the State, which is heavily dependent on cash crops, continued to improve with increase in their prices, especially rubber and coconut. The price situation has been generally good for the farmers, though pepper, tea and cardamom fetched lesser prices than in 2002-03.

On the industrial front, the growth has shown marginal decline since 2001-02. The decline was to the tune of 1.07 per cent and 0.68 per cent, respectively, in 2002-03 and the following year.

The traditional industries continued to be in bad shape, especially in coir and cashew sectors. However, the silver lining is that after a long time viable projects are emerging in these areas. Despite this, efforts are needed to reposition the traditional industries linking with the tourism industry as well as with the global preference for eco-friendly and ethnic products.

The information technology sector, which took a long time to strike roots in the State, has reached a blooming stage. It attracted an investment of Rs 907 crore in 2003-04, generating 7,300 jobs in its wake.

The tourism industry witnessed an increase of 26.68 per cent in the arrival of foreign tourists. It is estimated that tourism has generated eight lakh jobs directly and indirectly in the State.

In the area of infrastructure development, the Union Government's decision to set up an international container transhipment terminal at Vallarpadam and an LNG terminal at Puthu Vypeen, in Kochi, has brightened the scope for good employment generation. The urban infrastructure will be benefited considerably through the ADB-supported Kerala State Urban Development Project to be implemented in five cities from the next year.

On State finances, the review says that the overall fiscal health of the State showed some improvement in 2003-04. The revenue deficit came down from Rs 4,118.66 crore in 2002-03 to Rs 3,680 crore. The gross fiscal deficit as a percentage of gross state domestic product (GSDP) also came down from 5.49 per cent to 5.41 per cent.

The primary deficit also recorded a similar trend. The gross fiscal deficit could have been much lower had it not been for the securitisation of the dues of the Kerala State Electricity Board (KSEB) to the Central power utilities, the review observes.

A disquieting feature of the State finances is the fall in the share of development expenditure in the total revenue expenditure. The share of development expenditure, which was 58.56 per cent of the total revenue expenditure in 1995-96, declined to 51.17 per cent in 2003-04.

The higher growth rate in non-development expenditure has been partially attributed to higher growth rates in debt servicing, salaries and pension payments. The total commitment on these heads, which was 71.4 per cent of the revenue receipts or 66.4 per cent of revenue expenditure in 1995-96, gradually rose to 99.4 per cent of revenue receipts or 73.1 per cent of revenue expenditure in 2000-01.

The burden of interest and debt servicing has been going up alarmingly, the review notes. Within a period of eight years from 1995-96 to 2003-04, interest payments have increased by 362 per cent.

The State's undue dependence on short-tem high-cost borrowings and medium-term loans to clear overdraft liabilities is the major reason for this state of affairs. Incidentally, the total debt of the State stood at Rs 37, 452 crore as on March 31, 2004.

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