Text: Firdouz Hameed Photos: Various Sources
DESPITE HAVING SUCH A HIGH HUMAN DEVELOPMENT INDEX, KERALA LACKS WAY BEHIND WITH ITS COUNTERPARTS WHEN IT COMES TO MANUFACTURING. HERE WE TAKE A LOOK AT SOME OF THOSE REASONS.
Kerala is known around the world for its beautiful green landscapes, sandy beaches, and sublime backwaters. Kerala is different from any other state of India with comparatively fewer people below poverty line, women outnumbering the men, no caste politics, and a very high human development index. That is not all, though. Kerala has the lowest infant mortality in India, highest life expectancy, and lowest school dropout rate in the country. These are all qualities par with that of a developed country. The low population growth rate in the state competes with even Europe and the US.
Despite all that, Kerala has a laggard economy which depends heavily on tourism and the money from the Gulf, sent in by 2 million of Malayalis who work abroad.
Lack of job opportunities is a huge concern in the state. There is not much of a manufacturing base to this state. So job opportunities in Kerala are far lesser compared to other states like Maharashtra, Andhra Pradesh, Uttar Pradesh, West Bengal, Tripura and Delhi—where there is a lot more manufacturing competitiveness.
Kerala has the highest rate of the suicide rate in the country. Kerala has India’s highest per capita alcohol consumption. People from Kerala are forced to migrate because there are no jobs at home. “Manufacturing in Kerala is a sector which is almost dead. This state is too focused on the service industry, such as tourism etc,” said Alex K. Babu, MD of Hedge Equities Ltd. There are so many factors which make Kerala lag behind other states of India when it comes to manufacturing.
Land for Industrial
Purpose Finding the appropriate land for industrialization is a problem that exists in the state. Kerala has a dense population that finds it difficult to satisfy the land needs of even the most deserving categories and development initiatives. It is the most invaluable resource as far as the state is concerned. According to the data available with Department of Land Resource, the total wasteland available in Kerala in 2458.7 hectares.
Money shortage
What is surprising is that Kerala has met most of the UN’s millennium development goals. “Unlike many East Asian states, social development has not become an instrument in triggering economic development in Kerala,” says economist Joseph Tharamangalam.
The state has little money to build hospitals or educational institutions which resulted in many expensive, private hospitals, schools and colleges that the poor cannot afford to go to. Just like the Philippines and Sri Lanka, Kerala is also a “money order economy” which depends on remittances from its expatriates. There is not a base here for manufacturing.
Failure to capitalize
The urban-rural gap is the lowest in Kerala. To say the least, this is a state that once benefited from informal international trade with the Dutch, English and places from West Asia. Yet it has failed to benefit from the economic liberalization at home. But the biggest irony is the fact that Kerala has still not benefited directly from the rise of tourism, which is her biggest service industry. This is because service tax is a federal tax that first goes to Delhi, and then distributed amongst different states.
Kerala can’t even benefit from its high literacy. It seems like this advantage has rather become a strange liability as a majority of the educated people can’t find suitable jobs at home, and their unemployment has made them look for opportunities elsewhere. Economic experts say that having fulfilled all millennium development goals, Kerala has no money left for higher investments. They are on the opinion that the central government is busy tackling poverty and illiteracy in most states and, so doesn’t have time or money for Kerala. They also feel that successive governments in Kerala have not been able to take it forward.
Over-politicized
Some analysts say that the problem starts from the fact that Kerala is an overpoliticized and “over-extended state”. They debate that radical unions, encouraged by successive communist governments, have acted as “pressure groups advancing particular vested interests”. Amartya Sen, Nobel laureate economist says Kerala has to “learn from the world”. Its famed model of development, which is still hyped as the most inclusive one, appears to have hit the buffers. Economists say that the Kerala model is grinding to a halt because the social and political groups having fulfilled their original agenda now have no new agendas. Society has lost its capacity to set collective goals.
Power
The state has very deterrent power supply which can be an issue for the industries in Kerala. There is currently no policy to improve the power generation or for the industries to purchase power from other private companies or neighboring states. Kerala State Electricity Board is the sole distributor of the electricity for everywhere in Kerala except for Thrissur Corporation and Munnar where the distribution is managed by City Corporation and Tata Tea Ltd respectively.
Environmental Issues
The State is known for its greenery. The pollution in the state is far lesser than many other states of India. There are a lot of emphases given to nature preservation that most of the regulations can’t be met by certain industries that release pollutants. These regulations also delay the process of environmental permits for new units.
Nature of Industries in Kerala
Micro, small and medium enterprises (MSMEs) sector contributes significantly to the manufacturing output,employment and exports of the country and is one of the major contributors to export marketing and foreign exchange earnings by producing a variety of products ranging from traditional to high-tech. The State government has some special agencies to facilitate industrialization. Here are a few of them
Kerala State Industrial Development Corporation (KSIDC)
KSIDC is a wholly maintained company of Government of Kerala set up for the promotion and development of medium and large scale units in the State. It acts as the nodal agency for foreign and domestic investments in the state by providing comprehensive support for investors, besides processing various incentive schemes and facilitating constant interaction between the government and the industrial sector.
Kerala Small Industries Development Corporation Ltd. (SIDCO)
SIDCO is a promotional agency set up as a Public Sector Undertaking by the state government for providing assistance to small-scale industries (SSI) such as providing infrastructure facilities, distribution of essential raw materials, marketing of the SSI products, undertaking civil and electrical works etc. The agency also becomes as a nodal body for supplying Bitumen to local Bodies as nodal agencies and Paraffin Wax to Small Scale Industries.
Kerala Industrial Infrastructure Corporation (KINFRA)
KINFRA aims at uniting all the suitable resources available in the state and developing infrastructure to boost industrial growth in the state. It has 12 well-defined industrial parks of which many are functional and some are in the launching phase. Each of these parks offers comprehensive infrastructure and support services to the clients. The most enthralling feature of KINFRA is that it offers single window clearance facilities, along with attractive incentives and excellent opportunities for expansion and diversification.
Kerala Financial Corporation (KFC)
Kerala Financial Corporation was established by the State Government with the objective of allowing rapid industrialization of the state by extending financial assistance to Micro, Small and Medium Enterprises in manufacturing and service sectors.
Infrastructure Kerala Ltd. (INKEL)
Infrastructures Kerala Limited is a company promoted by Government of Kerala and prominent global investors and industrialists for conceptualizing, developing and operating projects across sectors including SEZs, industrial parks or estates and physical infrastructure. It acts as a key link between the State government and private sector, thus maximizing investments by promoting and facilitating major infrastructure projects in the State.
Kerala Bureau of Industrial Promotion (K-BIP)
K-BIP was established as an autonomous body under the Industries Department for the promotion of potential business opportunities in the state. It works in close coordination with other promotional agencies of the state for the improvement of the industrial development giving specific attention to the strategic advantages of the state. K- BIP acts as an interface between prospective entrepreneurs and other State agencies. In the near future, Kerala will have to look beyond service industries and make way for industrialization if it is to make a progress in all quarters. We have to look at models set by other countries like Malaysia, who have similar geography like Kerala. The Malaysian government gave special attention on the use of its natural resources through processing industries. Their first stage was to build a platform for Research & Development, and that helped them towards the transfer and adoption of technology. Most countries/states have achieved industrial development through Science and Technology with the support of their universities and research institutes. This is what
Kerala should focus on also.
Increasing Productivity
We should give good incentives for direct foreign investment and for manufacturing industries that are interested in setting up their base over here in the God’s Own Country. There should be an effort on increasing productivity in existing major industries of Kerala like the food processing industry, Handloom industry, Coir Industry (Kerala accounts for 95% of the total coir and coir products in India), Powerloom Industry and Electronics. Labor relations should also be improved across all industries.
Providing resources
Often small and medium-sized enterprises will be functioning with limited resources. They would have the potential to increase their productivity immensely if given support. The government should give technological and financial support for these enterprises with possible infant industry protection. Steps should be taken to promote linkages between SMEs and MNs
Emphasis for Research and Development (R & D)
Asian countries like China and Japan are one of the top spenders for R & D. We all know that they have benefitted from it largely. Kerala should take a leaf out of their book. Kerala more than has the talent that it takes to make a progress to this direction. Quality improvement and technology adoption is also just as important.
Emphasis for utilization of local raw materials
The State is endowed with a variety of mineral resources but, there is not an abundance of it to boast about, however. What needs to be done is make sure that these are utilized well and not to waste an opportunity.
Infrastructure development
Infrastructure development is an essential requirement to create a conducive atmosphere for rapid industrial development. The efforts now put on the state is all on improving the connectivity of the state. In fact, more is spent on infrastructure than ever before. There has been a tectonic shift in the mindset of the politicians in that aspect. But we need more than just good railroads to attract industrialists to the state. There should be an improvement in healthcare, energy, communication, food and agriculture and civic infrastructure. Concentrating on all this will definitely transform Kerala’s economic and social landscape.
Importance of Science and Technology
Application of science and technology should bean essential part of Kerala’s development plan. Kerala has earmarked a little over Rs. 153 crores for science and technology, this year. Investing on science and technology is a vital plan for any developed country that relies on industrialization. If Kerala is to better its economy then we need to push in all directions and manufacturing within the state is something we can’t shy away from. A transformation in that sense will take a long time to come. It is almost taboo to talk about manufacturing in Kerala, today. That needs to change. And hopefully someday it might.