Kerala Economy: An Economical Paradox

After joining work only I became very much interested in emerging economy of our country India, rather the Incredible India. Every day I was reading about the pace at which our economy is growing and the amount of FDI coming and so many stuffs related to that. This economic development was evident in the place which I worked, Chennai: Capital of Tamil Nadu. In an article on The Hindu daily, I read that around Rs. 400 billion of FDI will be coming to Chennai in the next four years and there have been lot of investments for the past ten years or so. This made me think about Kerala, the place which I come from.

First I did some researches about the economy of Kerala. I found out some hard facts. These are based on the evidence and materials which I got, may not be absolutely true, but I feel that this will through light into economic situation of Kerala compared to other states in Incredible India.
Kerala’s per capita GDP is 11,819 INR. This is much lower than the national average which is around 40000 INR. And the sarcastic fact is that, the human development index (HDI) in Kerala is very high. Actually the HDI of Kerala can be compared to developed countries. This seeming paradox — low GDP and productivity figures juxtaposed with relatively high development figures — is often dubbed the "Kerala Phenomenon" or the "Kerala Model" of development by economists, political scientists, and sociologists. What can be the reason for this paradox? Economist s says this is due to unusually strong service sector.

20% of the GDP of the Kerala is contributed by Keralites working outside India. Its due to this fact the Kerala economy is called Money Order Economy. Even thought this huge percentage of money comes outside kerala, how high level of HDI is achieved? One major reason for this is the democratic socialist welfare economy mainly inspired by the prevalence of communism in the state. And all Governments in the state emphasized on equitable distribution of resources. Due to this policy, the economic progress of the state has been very slow and no major corporations and industries invested in Kerala. Moreover the communist Governments were not very keen on bringing the capitalist to the state. So this is the state of Kerala now. What is the future of the state? Rest of south India is galloping ahead reaping the economic boom. What can be the possible threats Kerala can face with ridiculous policies of the government?

It’s evident that the slow growth of GDP in Kerala is due to policies followed by the government. They are not ready to follow the path of other governments in south India. The kerala government is very much happy with the money that comes from outside India. Actually I feel that the government is promoting people to go outside and work. I can give a simple example for this. From Kerala per year at least 15000 engineers pass out of the technical institutions. Out of that 80% will go out of the state to work, because they won’t be getting any job in the state. This percentage could be more also. The total number of keralites working in other states of India will be more than 2 million. These people contribute to the GDP of the respective state where they work, but not for their parent state. I am not blaming the people, but blaming the government for not making these many people work in their own state by bringing in more investments, creating more jobs. Now people of Kerala are very much aware of the fact that, if they have to get some job they have to either go to other state or go out of the country and government will be happily sitting on the top of the money which these hard working people send to the state. Think of a situation, what if the people stop sending money to state? It will be a catastrophe to the economy.

What can be done to improve the situation? The government has to take stiff decisions. But I don’t think this communist government will be able to do that, they are still ruling as if year is 1970s. Even though china and the communist government in West Bengal started to revive their policies on investment and capitalism, this Kerala Communists still believe in the Utopian Communism which everyone in this world knows that it’s not possible (The fall of USSR is the great evidence for that). But why don’t they change with time. Reason is very simple; this is what they do for a living. When the communist comes to power, the so called communist followers or party member will be having a harvest season. They will try to reap in the most during this time. They are sure that next term they won’t be in power and will be coming back to power after that. So earn for two terms in a single term. Other than this they don’t do anything. They don’t have to take stiff decisions or make some policy changes to bring in investments or create work for the unemployed. The government is very well aware and encourages the fact that mallus will be going out of the state, if they need a job. There should be a big change for this attitude of government.

I think in the past few years things are changing a bit. At least the government is thinking about bringing some investment, like the smart city etc. But this is not enough to achieve high rate of growth. The government has to think big. They have to explore all possible ways of improvement and investment. After all Kerala which is having a very high percentage of skilled people should use their skills to propel its own economy and not to fuel other economies. Let’s hope that one day we will be able to work in “Incredible Kerala” and be a part of its development.