Acuité Ratings believe that the catastrophic floods that lashed Kerala in August will have a significant impact on the economy of the state. The intense and incessant spate of rainfall for a period of over ten days may lead to a GSDP loss of nearly Rs. 10,800 Cr as per an analysis undertaken by Acuité. This may further lead to a sharp increase in the state fiscal deficit to over 5.0% in FY19 as compared to an estimate of 3.2% in FY18 which may only get partly offset by the grants-in-aid from the Central Government and other sources.
The key sectors in the Kerala economy are the tourism and the agro based industries which are expected to suffer severe losses given the damage to infrastructure assets and the local crop or plantations. The hospitality and the tourism sector is estimated to account for around 25% 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. The agro based and the plantation industries such as rubber, tea, paper, textiles, food processing etc. are likely to suffer aggregate losses of over 1200 Cr.
