Though ravaged by torrential rains and floods, the never-say-die spirit of Keralites helps rekindle hopes of a speedy recovery by the State’s economy

Kochi: The worst floods to have hit Kerala in a century with catastrophic dimensions, that too during the peak season of the year, have caused unparalleled misery to businesses. According to State Government’s preliminary estimate, Kerala suffered a damage of around Rs. 19,512 crore.

However, the Kerala Chapter of Confederation of Indian Industries (CII) has pegged the losses at Rs. 30,000 crore. The Mumbai-based CARE Ratings, a leading credit rating agency in India, has pointed out that the State’s economy could be affected by up to 1 per cent depending on the time taken for rehabilitation/reconstruction especially in the tourism/recreation segments.

Dr. T M Thomas Isaac, State Finance Minister, has already hinted that the growth rate may decline by even 2 per cent. It has to be noted that the annual plan outlay for Kerala was pegged at Rs 26,500 crore in the fiscal year 2017-18. Since the onset of monsoon in May, 55 lakh people have been affected by the flood. So far, 483 people have died and 14 are still missing. On August 21, the relief camps lodged 14.5 lakh people.

Unlike other states, Kerala is a ‘money-order economy’ driven by remittances. Even before the floods, the State has been reeling under the impact of declining remittances. The economic woes of West Asia and the increasing indigenisation of the workforce there have led to a decline in remittances to the State, says V K Vijayakumar, Investment Strategist, Geojit.

“More importantly, the remittances are no longer spent on consumption like in the past since NRKs now know that prospects in West Asia are declining. The declining propensity to consume had already impacted businesses in Kerala. Revenue collections also have taken a hit. Initial estimates indicate that GST receipts in 2017-18 are likely to be lower than VAT collections earlier. This declining trend in consumption is likely to be aggravated by the flood. There has been massive loss of livelihood and this will certainly impact consumption. The loss from decline in production of rubber, paddy, pepper and cardamom is likely to be huge. This, too, will impact consumption. Since a lot of money will have to be spent on reconstruction of damaged property, consumption of many other goods will have to be postponed. The cumulative impact of all these on consumption, business and tax revenue of the government will be significant.”


It is collateral damage for Kerala’s tourism industry, which contributes around 10 per cent of the State’s GDP and employs around 1.4 million people. The sector, which has an annual turnover of around Rs. 35,000 crore, is estimating losses worth Rs. 2000 crore. “An initial assessment made by stakeholders on August 23 found that the losses in terms of damage to infrastructure and business would come to around Rs. 2100 crore,” K Bala Kiran IAS, Director, Kerala Tourism, told media persons.

The natural calamity has triggered huge cancellations across all hotels and resorts in Kerala and the industry now feels that it is likely to witness a decline in growth by 4 to 5 per cent. The districts of Alappuzha, Ernakulam, Idukki, Pathanamthitta, Thrissur and Wayanad have been the most affected. “On account of Nipah virus attack in North Kerala during April-May, the industry suffered a setback earlier this fiscal. Now, the devastating floods have wiped out the second quarter of 2018-19. The tourist season for the current year maybe delayed in the worst-hit areas like Munnar and the backwaters of Alappuzha. Now it all depends on the pace at which the State Government restores infrastructure facilities at these destinations, especially road connectivity,” says E M Najeeb, Senior Vice President, IATO and President, Confederation of Kerala Tourism Industry.

Moreover, the ‘Neelakurinji’ blooming season which comes once in 12 years in Munnar, seems to be a lost opportunity for Kerala Tourism this time. Heavy rains and rampant landslides have badly affected the destination. The disaster has also led to the cancellation of the famed Nehru Trophy boat race, a popular tourism event.

The prospects of this year’s spiritual tourism also look bleak as flash floods have inflicted massive damage at Sabarimala, the major pilgrimage destination. According to Travancore Devaswom Board (TDB), the pilgrim centre has suffered a loss of at least Rs. 100 crore. With hardly three months left for the annual pilgrimage season, TDB is trying to put temporary arrangements in place.

Close to 10,000-12,000 km of roads under the Public Works Department (PWD) is estimated to have been damaged or destroyed. Rural roads, which make up for almost 60 per cent of the total surfaced road network in the State, would require an additional Rs. 2000 to Rs. 3000 crore for reconstruction and restoration. CARE Ratings estimate that roughly Rs. 10,000-12,000 crore would be required to repair and restore the damaged road network in Kerala immediately.

Cochin International Airport Limited (CIAL) has suffered a loss of at least Rs. 220 crore on account of the disaster. The airport was closed for 14 days as the runway, taxi bay, duty free shops and other areas of both international and domestic terminals were flooded, causing damage to electrical equipment, including runway lights. CIAL’s solar power system also suffered damage due to water logging.


For the consumer durables market in Kerala, almost 50 per cent to 60 per cent of the entire sales happen during Onam. According to CARE Ratings, the State can expect a drop in the total spending for consumer durables by Rs. 1000 crore due to the lack of demand during the festive season caused by the flood situation.

Going forward, a significant demand for replacing consumer goods such as televisions, refrigerators, air-conditioners and washing machines is anticipated once the floods recede, rehabilitation measures are over and houses are repaired/reconstructed. “Sales will happen, though not immediately but in the months to come,” says Girish D, Branch Manager – Kerala, Sony India. “All those who have incurred damage to electronic goods will definitely require to purchase new items. We will also be offering free services to those coming with damaged products.”

The calamity has caused a 70 per cent dip in the overall retail business for Panasonic. “We expect the situation to improve, but it may not happen immediately. The sale we were anticipating has been delayed because it will take a while for the people to settle down. Onam season is the time when we get the maximum sales. The drop in sales is common to all brands, I believe. As part of our initiatives to assist flood victims, we have announced new service initiatives. As an initial step, from August 25 to September 15, we are giving a service offer for customers. We will not levy service charge and give 30 per cent discount on spare parts,” says Robby Joseph, Branch Head, Panasonic Kerala.

According to Deepak Aswani, Chairman, Retailers Association, Kerala Chapter and CEO, Aswani Lachmandas Group, overall retail business in Kerala may incur a loss of 50 per cent. “Apart from many business houses being damaged and having to shut down, employees from the flood-hit regions are in a bad shape financially and mentally, as well. Also, for many of the retailers, it was too late to cancel orders marked for Onam. All that stock now becomes dead investment. Mobilising capital for procuring new goods for the upcoming season will prove to be a tough task,” he says.

Kerala accounts for the largest share in the purchase of gold ornaments in the country and the monthly per capita consumption of gold in Kerala was approximately 3-4 times higher than the State in the second position. Onam and the days before it witness significant purchase of gold ornaments. However, due to the floods, buying has been affected and it is not expected to pick up in the near future as people who have suffered damage would rather spend on repairs than on gold. “Consequently, gold consumption is expected to be subdued in the current fiscal,” according to CARE Ratings.


Apart from affecting the normal course of life, the floods have also negatively impacted Kerala’s plantation industry. Preliminary estimates show that rubber and tea industries are estimated to suffer a loss of around Rs. 420-430 crore and Rs.35-40 crore, respectively, for the period August-September, 2018 reflecting the impact of floods in the five most affected districts of Kerala – Ernakulam, Idukki, Kottayam, Kollam and Pathanamthitta.

The trade is anticipating an increase in the cost for tyres also. The unprecedented natural fury is most likely to disrupt supply of other plantation produces, including coffee and spices like cardamom. As per stats, India’s coffee production from Kerala accounts for around 20 per cent of the total output and supply of small cardamom from Kerala constitutes about 85 per cent of all-India small cardamom production.


In the wake of the recent catastrophe, our main focus should be on rebuilding a better Kerala, if possible a ‘New Kerala’, says Dr. V K Vijayakumar

Nassim Nicholas Taleb in his famous book ‘The Black Swan: Impact of the Highly Improbable’ explains the consequences of rare and unpredictable events. A ‘black swan’ event like the Great Deluge of 2018 happens once in a century. A disaster like this requires a non-conventional, out-of-the box response. The ultimate aim of reconstruction should not be just repairing the damage and compensating for the loss, but rebuilding a better Kerala, if possible a ‘New Kerala.’

Estimates of money required for reconstruction varies from Rs. 10,000 to Rs. 50,000. These are estimates. What we need first is credible figures of loss and destruction: loss to public infrastructure like roads and bridges, loss due to partially damaged/completely damaged houses, loss to business and industrial establishments etc. Credible data is crucial since assistance seekers tend to exaggerate the loss to get bigger relief. Details relating to loss have to be put on website.

Resources have to be raised from wherever possible. We need not ask for foreign assistance; but if it is forthcoming it maybe accepted, provided there are no strings attached to it.

The emotional connect which NRKs have for their home state should be utilised. Out of the 30 lakh NRKs abroad, around 10 lakhs are resourceful. If at least five lakh NRKs can contribute reasonable amounts according to their capacity, that will be a big amount.

A majority of NRKs would prefer to give money to NGOs who can deliver with efficiency rather than to the government. The unholy alliance of the politician-bureaucrat-contractor is too well known. Therefore, an innovative Public-Private-Partnership with credibility should be devised for the implementation of the reconstruction programme. This PPP model should be transparent and subject to social audit.

People will be coming forward to give money if they know the beneficiary; contribution to the CM’s fund will not enjoy the same personal element. Therefore, it would be a good idea to invite sponsors for reconstruction. Initial estimates say that 7000 homes have been destroyed and around 50,000 partially damaged. If details of these affected people and extend of the damage are made public, it would be easy to find sponsors. This model can be tried in other areas, too.

The Government of Kerala has suggested seeking the Center’s approval for raising the State’s borrowing limit to 4.5 per cent of SGDP (from the current maximum limit of 3 per cent) and borrowing from the market to finance reconstruction expenditure. This would be a mistake. Kerala with one of the highest revenue deficit, fiscal deficit and public debt to SGDP is fiscally vulnerable and therefore, any reckless market-borrowing programme can lead to a debt trap. The State should go for soft loans, with approval from the Centre, with nil or low interest with repayment spread over 30 to 40 years. Soft loan affiliates of the World Bank like IDA can be approached for this.

Winston Churchill, referring to the conditions after the Second World War that led to the formation of the UN, is said to have remarked: “Never let a good crisis go waste.” Kerala should learn from this crisis and try to build an environment-friendly sustainable society. We should also use this crisis to drastically change our present waste management system, which has the potential to unleash another crisis. Surat, which was one of the dirtiest cities in India, transformed itself into one of the cleanest cities in the country after the Plague of 1994. Let us learn from the Surat experience and transform the State. Otherwise, as George Santayana famously remarked, ‘‘those who do not learn from history are condemned to repeat it.’’ Kerala can certainly do better. Let us all strive to make our State a truly Gods Own Country.

(The author is Investment Strategist, Geojit Financial Services)


The World Bank (WB) and the Asian Development Bank (ADB) have pledged their support by offering to provide loan assistance to Kerala in its post-flood reconstruction. Senior officials of both financial agencies have visited Kerala and held talks with the Chief Minister, Finance Minister and Chief Secretary.

It is learnt that the State is pushing for a loan of Rs. 1000-1500 crore for 25 years. In order to open more fundraising channels for reconstruction, the Government will approach the Central Government to raise the State’s market borrowings limit from 3 per cent of Gross State Domestic Product (GSDP) to 4.5 per cent. Meanwhile, donations to Chief Minister’s Distress Relief Fund (CMDRF) has crossed Rs. 1000 crore mark (as on August 31, 2018).



■ A completely new set-up to oversee the building of a ‘New Kerala’ should be established. This should function on a ‘Mission Mode’ and be fully authorised and made accountable for the implementation of the programme. The government could consider setting up an SPV with a very efficient senior officer as CEO with the rank of Chief Secretary, the CM as Chairman and a Vice Chairman who could be a professional with a track record or a very senior officer of the government, say a former Cabinet Secretary or a person of a similar stature, with the rank of a Cabinet Minister.
■ A totally non-partisan approach is absolutely essential which means people who lead it should not be selected based on the colour of the flag they support.
■ Approach Malayalis and well-wishers across the world not only for money but for expertise that they have gained, for e.g. learn from the Netherlands which is probably the most flood-prone country.
■ If the SPV or Board or Authority has a Board and say for e.g. it has 10 members, they all should be reputed in their fields and have exceptional credibility.
■ The credibility of the team heading this initiative will be crucial for bringing in funds from Malayalis and well-wishers across the world for building a ‘New Smart Kerala’.
■ CMDRF will have to be changed as today it is mainly for supporting individuals. But for rebuilding state infrastructure we may have to have a separate fund.
■ As per my estimate, the amount required will be about Rs. 50,000 crore.
■ We need to ensure that river banks which were encroached upon are left free and those who built houses there need to be resettled elsewhere.
■ We should look at annuity-based contracts for rebuilding all roads and bridges.
■ We should approach international funding agencies like ADB and World Bank to supplement the funds.
This is an opportunity for us and let us not be bogged down by ‘isms’ and party or religious or regional considerations. Let us all work together to build a ‘New Smart Kerala.’

G Vijayaraghavan
Founder CEO, Technopark and
Member, Board of Directors, SunTec
(Sourced from the author’s Facebook Post on August 26)

‘‘Nearly 19 lakh farmers in Kerala have been badly affected by floods, but only less than half a lakh of them have joined any insurance scheme. This is because, most often such schemes are implemented mechanically and for the affected individuals it is hard to claim the insurance in time. By bringing more clarity, transparency and timeliness into such schemes, I am sure more people could be taken into confidence.’’

‘‘The Government, with the Chief Minister himself leading thousands of volunteers, forces, officials and healthcare workers from the front, did a fantastic job to mitigate the damage caused by the flood. Aster Volunteers can also be proud of our timely involvement and contribution, especially in the relief camps providing badly-needed medical care. The job is only half done. The more important part of the intervention lies ahead with significant risk of communicable diseases looming large.’’


For Abbey Rodrigues, Senior Vice President, Sales, CERA, owning a waterfront villa in Kerala was a dream. And around two years ago, he made it a reality by building a house at Varapuzha in Ernakulam district. On August 16, Abbey, who is now settled in Ahmedabad with his family, got a message from his architect saying that the area where his house was located was getting inundated by the gushing waters from the fast-swelling Periyar river.

As the house was built at a substantial height from the ground level, Abbey was somewhat relaxed. Next day morning Abbey received a call from his neighbour. “He told me that he had just parked the boat on the roof of his house. Then I felt the gravity of the situation. It was a terrible one. We could do nothing but to wait till the water receded,” Abbey told Destination Kerala over phone.

The tragedy also struck 30 other employees of CERA, including its Kerala Head, Jayadeep Narasimhan. “I just returned to Ahmedabad after a seven-day trip to Kerala. When I visited the houses of my staff, I was heartbroken. My personal loss was nothing compared to theirs. Within a short span of time, we mobilised around Rs. 20 lakh and distributed it to those 29 persons.

During a visit to one of my colleague’s place, a relative of him came to me and said, ‘’Now we know that we are not alone.’’ Those words really touched me. That week gave me a completely new learning experience. What surprised me was the attitude of the affected families. Despite being crestfallen, they remained calm and composed, doing the cleaning work without any grouse. Truly incredible approach,” Abbey said.

According to him, CERA’s Kerala business will be affected by 20 to 25 per cent during this season. “Now we are focussing on supporting the rehabilitation work. We have decided to provide free service to customers of the affected region. In association with CREDAI, we will provide sanitaryware at discounted rates. Once the situation stabilises, we believe, the business will bounce back,” he added.