Kerala needs to focus on investments conducive to its conditions

The hullabaloo over the decision of Kitex Garments Ltd. to invest in Telangana following a public spat with the Kerala government has turned the spotlight back on the state’s business-friendliness, or lack thereof. True, Kerala ranks way below other states in the ease of doing business rankings. It is also a fact that Kerala has historically been a laggard as an investment destination — with a bad name acquired over many decades.

The state, once infamous for strikes and violent hartals enforced by trade unions, hasn’t been able to shed the baggage ever since. While political parties have woken up to the need for big investments and private capital, the bureaucracy has been reluctant to mend ways. A lot of things have changed for the better and a lot more needs to be done for Kerala to rid itself of red-tape — however, is it really fair to make a comparison between Kerala, a state with a fragile ecology and unique topography, with the larger states as a big business destination?

Kerala has topped the Sustainable Development Index ever since it was initiated by the Niti Aayog in 2018. The coinage ‘Kerala Model’, a reflection of the state’s achievements on a variety of social indices comparable to western countries with a lower per capita income, is testament to its uniqueness. That this level of human development indices was achieved in a developing country without industrialisation is even more remarkable.

It was expected that social development would gradually lead to a higher level of economic development but that hasn’t really happened. Instead, the high levels of education in Kerala have only ended up in brain drain — due to the lack of good employment opportunities in the state.

The government definitely needs to address that. But, before venturing to fix this anomaly, a few things need to be put in context. Today, Kerala is home to more than 5 million inter-state migrant workers who are primarily engaged in blue-collar jobs. Among other factors, this is because of the dearth of Keralites to engage in manual labour in the state. This being the case, it would be pertinent to ask whether more factories and heavy industries would facilitate jobs for the residents of the state.

According to the Economic Review 2020, services sector alone employs more than half the total work force in Kerala with its sectoral distribution of Gross State Value Added (GSVA) amounting to 65 percent. As for women, almost two-thirds of the female workforce in Kerala is employed in the service sector. The government needs to intervene in this sector to facilitate the creation of high-end jobs to cater to its skilled workforce.

Keralites form a disproportionately high number of techies employed in Bengaluru and other metros in India. Given a choice, a vast majority of these skilled workers could move back to their home state. The government needs to roll out more Information Technology Parks on the lines of the government-owned Technopark, Infopark and Cyberpark in Thiruvananthapuram, Kochi and Kozhikode respectively to address this.

That is not all. The state government needs to roll out the red carpet and ensure that every big company in the fin-tech sector sets shop in these hubs. As of today, these three government-owned IT parks employ more than a 100,000 employees. Perhaps the government can set up one of these IT parks in each of the 14 districts. Along with attracting investments (and thereby revenue) it would also boost the employment rates of graduated youth in the state.

Being an ecologically fragile city-state, with the Western Ghats on one side and the Arabian Sea on the other, this kind of a development model would be ideal for the sustainable development of Kerala. Also, it helps that trade unions affiliated to political parties don’t exist in the IT industry.

This doesn’t mean that Kerala has to turn its back to other industries. The automobile sector, which has a good offtake in Kerala, among other sectors, could be given additional focus. Also, a new paradigm needs to be developed for the tourism sector, which has the potential to single-handedly transform the state’s economy.

Along with better waste management practices and improved road and rail connectivity, such interventions could turnaround the state’s economic fortunes and joblessness. The state government needs to assess its priority sectors and chalk out a plan for facilitating the kind of industries it can sustain in the long run than compete with other states.