Friday, December 01, 2006

Kerala Economy: Is development sustainable?

The state of Kerala in the southern tip of India has always been lauded for its developments in social infrastructure like hospitals, schools, etc, which in turn develop social capital. Though Kerala has been able to achieve the standards of developed countries in relation to human development, the physical infrastructure and the manufacturing sector is more or less stagnant. This calls for effective and timely government intervention so as to increase infrastructure which will in turn promote investments in the state.

This article tries to bring to the fore a few of the issues the state of Kerala encounters.

On Education
According to the Sixth All India Educational Survey conducted by the NCERT in 1993-1994, in Kerala 90 per cent of the population had a lower primary school, 67.5 per cent an upper-primary school and 62 per cent a secondary school within 1 km. Public spending on education in Kerala has been one of the highest among the states both as a share of state budget and NSDP. School education accounts for more than 80 per cent of education expenditure in Kerala as compared to just around 65 per cent for the country. [Kerala Public Expenditure Review Committee, May 2006]

Education is one of the areas where Kerala deserves praise, though there is a long way to go. College education and higher education is extremely scanty in the state. There are a number of engineering colleges in the state, which lack quality infrastructure. This results in majority of students seeking higher education in other states; they tend to seek employment in other states too.

On health
The achievements of Kerala in health sector are even more spectacular than in education. Health indicators like life expectancy and infant mortality in the state are comparable to those in developed countries. These are the outcomes of investment in health infrastructure in all sectors, public, private and co-operative, along with people’s awareness of their health needs. While the public sector offers accessibility and choice, it is not highly rated in terms of perceived quality. As a result the private sector has established parallel institutions to take advantage of the potential demand for quality health care. [Ibid]

Though Kerala has a rich middle class who have enormous purchasing power with them, there survives those who cannot afford expensive health care. This prevents them from going to private hospitals which is analogous quality health centers. Thus they are deprived of quality health care.

Though the rhetoric of competition is that it will bring down the prices in Kerala, they fail to deliver low cost services to the poor. This is where the government needs to step in; government hospitals needs revamping and restructuring.

On Fiscal Deficit
Kerala was asked to reduce its fiscal deficit by a directive of the 12th finance commission. Further, the post-TFC target for the fiscal deficit at 3 percent of GSDP is actually more lenient than the 2 percent of GSDP prescribed under the Kerala Act, and here again there is a permissible extension of the eventual target year to 2008-09. [Ibid] This poses further burden on the State economy, as its financial resources are further constrained. This directive has been issued so as to reduce the deficit the Centre is facing.

The reason for including ‘fiscal deficit’ in this article is to state that, as the government tries to bring down the deficit without carrying out alternative processes to tap resources, the government expenditure on Education and Health will deteriorate.

On Trade Unionism
The reason prospective investors give for not investing in Kerala is the high incidence of ‘Labour Unions’ or ‘Trade Unions’. Trade unions are said to reduce the inequalities of income and wealth. Whether there exists a strong correlation between high trade unionism and low inequality is a moot point.

Labour laws need to witness a drastic structural change in order to promote investment.

The government of Kerala ought to improve the quality of health centers and also revamp the labour laws which make it difficult for investors to start new ventures.

Grants for setting up educational institutes on excellence in various disciplines need to be provided along with an agreeable pay scale for lecturers and teachers.

Ensuring rural connectivity is crucial for development. People should be able to migrate easily from rural to urban areas. The government needs to provide a conducive atmosphere for private enterprises to take roots in rural areas.

HDI improvements with low GDP is almost as unfit as high GDP with low HDI. The latter is evident is the case of India.


Mind Curry said...

you have given a good general perspective of some indicators of kerala's future.

i personally feel the government is focusing its energies always on the wrong things, whether it be education, healthcare, industries or labor laws. more than governance, we have pure politics.

the vizhinjam port is one such example. instead of trying to see the port come up, the government has been playing its cards here too. when the central ministry opposed the clearance for the port as the promoters were chinese companies, instead of calling for a retender, the government simply tried to for clearance for their chinese bhais. the reason the ports minister cited for NOT ordering a retender was "heavy loss due to delay in implementing the project if a retender process is done". now after 6 months, we neither have a retender or a green signal for the port. but we have meeings everywhere about the port.

similar is the case of the smart city project. instead of creating jobs, the government has delayed the prospects of a growing industry in kerala. i spoke to some of the people of kakkanad where the smart city is/was supposed to come a few months ago..they said, only because of the IT industry the desert like land there has had some form of growth..and now the government is spoiling it all.

healthcare: instead of focusing on improving the facilities of its general and district hospitals, government is out to "regulate" the private hospitals. regulation in plain terms involves "oiling the system".

education: nothing constructive has come out of any discussions, strikes or courtcases.

trade unions - what really happens in these unions? union leaders take money from the management to ensure that "work" continues. when they dont get money, they create an issue and go on strike. its as simple as that. the unions we see in kerala atleast, are not for the welfare of the employees or labourers, but only for the welfare of the leaders. there may be odd cases where unions have genuinely been able to help workers or employees, but generally its just a shameful disease thats plagued keralas prospects.

conclusion: there is only so much the government can do - so much of good, and so much of bad. beyond that, its up to us, the people, to take responsibility. and feel ownership for what happens around us, and in our state. and the time to do that has come.

quills said...

I agree with the conclusions you have reached here.

But like Mindcurry pointed out, each of us citizens should take an active interest in implementing or atleast initiating these efforts. Sadly we cannot depend on the government and that says a lot about the state of governing, and the amount of trust we have in people we elect to power.

I am proud to be a Keralite and see it being lauded for the many feats it has achieved. But we cannot rest upon our laurels and turn a blind eye to many of the issues that plague the state.

For eg, Chikungunya highlighted once again the pitiful lack of hygiene/cleanliness in most parts of our state. Immediately there was a big hue and cry about it, and big roadshows and other attention seeking efforts undertaken. All good. But will the spoken word translate into action, will the "clean-up" actually happen? That is what i would like to see. Or will this just fade away, and become just another platform on which a few politicians got some public coverage.

The other day I was just thinking, if each and everyone of us take a pledge to keep our immediate local public areas clean ( be it around our house or business) from filth, won't it make a difference?

Anyways, I am deviating from the topic here and I apologize. :)I am glad this blog is bringing out people like you and other practical thinkers to voice your opinions on how to bring about development and more importantly sustaining it.

Anonymous said...

Mindcurry and Quills, yes, you are right in pointing out the importance of being responsible and socially aware citizens, equipped with a zeal to change things.

In a Democracy, it is the rule of the people, the masses; but when there are many factions within the denizens, then a consensus is hard to achieve.

In kerala and elsewhere, people bring forth rhetorics without actually implementing them.

In fact, most states have various acts to deal with most issues. They are flaccid in nature. They dont get implemented.

We need to see more people not just discussing about such issues, but trying to contribute to development and more importantly in sustaining what we have achieved so far!

Incresed people participation is what is necessary, like you said MC and Quills.

Babin said...

Alex, nice post man.
Quality, flexibility and jobs are the weaklinks in kerala's development environment. Its a challenge to inject these concepts in our economy. Improving quality invariably requires more resources pumped into respective sectors, be it in health care, education, infrastructure, law enforcement or charity, as the way of increased userfees/tolls/tax or by attracting private capital. This is a simple logic but a must do if kerala is gona move on to the next level of development. But unfortunately, the resistance to this idea come from the large number of people who think, doing so will destroy existing kerala model of development!. this is a totally unfounded belief. Just because, govt privatize part of higher education doesn't mean all government colleges are going to be closed from now on. Similarly, one expressway with toll doesn't mean all the roads in kerala will be tolled from now on. Collecting higher fees in medical colleges from middle class doesn't mean poor will not get free health care..
The point I am making is that liberal economic policies will only add on to kerala model of development, not destroy it. I hope more people will realize it.
I think this is where the major challenge lie for kerala economy, convincing orthodox believers of kerala model to agree to take it to the next level without hurting the existing model!

Vinod/Kakka said...

I cannot understand how we can take the expenditure under a particular department and link it effectiveness.
The problem in this approach is that most of the money supposedly spend on education is spend on paying salaries for teachers: An increased spend therefore might not be an indicator of either quality or effectiveness.
The same is the case with the public health sector. The problem with everything public in Kerala is the attitude of the people working there. For me, it is a bit personal too: I lost both my parents and a sibling to terminal illnesses in the past 10 years: Both my parents were 62, my brother 33. The quality of care was abysmal, patient care nonexistant. In theory, Dr Shenoy is the best medical gastroenterlogist in Trivandrum: In practise he would pump steriods into a patient with a failed liver and diabetes, to show that he is trying all that he can and pocket money on the side. With
WebMd and all the second guessing that go on with caring or being with terminally ill family, I have finally come to the conclusion that medicine is not a very exact science.
Our health system is all wrong: At one time we were paying a bunch of money for a deluxe payward in Medical College in Trivandrum. We would have gladly paid for better nursing and clinical care, but the governement acts like it does not need my money.
The same is true for education. Some of the best schools in Trivandrum are government run: Taking a fees from those who have money is no evil.
The apparent "free" education and health care only frees the employees from responsibilities. The fiscal burden is still borne by tax payers of all hues.
In the 1950s and 1960s, free education and health care were a must. In the 1970s, we should have become aware of their flaws. In the 80s, we should have tried to fix them in the current form. Now, the time is well past the point where changes, and drastic ones, are required.

Sasi Kumar said...

In Kerala neo socialism seems to have reached its feverish pitch.

Anonymous said...

We have to prioritize the education sector. The current importance given to the primary education is laudable with certain flaws. For the sake of improving the working condition of thousands of teachers, the goverment started paying the teachers directly, treating them on par with the goverment employees while leaving the right to appoint them to the managments. The quality deteriorated at the same time it spread the availability of schools to every nook and corner of the state. Then came the spread of Unaided English medium schools in late 80s and early 90s. Further competetion caused better delivery and quality of the Aided/Goverment schools though not upto the mark.
Similarly the higher education saw unprecedented growth in late 90s and early 2000. Here again the goverment played spoil sport. Instead of meaning ful regulation, goverment want to play the role of a regulator as well as beneficiary(By starting the so called self financing colleges by IHRDE, CAPE etc.) The higher education should be brought under a separate regulatory mechanism san goverment involvment if we have to sustain the momentum.

Tinkerbells said...

Have been a regular reader of this blog. I like the content here and the intentions...would like to know if I contribute to this blog?

Ajith Prasad Balakrishnan said...

After having lived for sometime outside Kerala, I would say, the health care sector is perhaps Kerala's best achievement compared to other states , though we have a far way to go...Education-wise, yes, making the mass populace literate is certainly a big step, but awareness about duties is low and higher education is not great out there..

abhishek said...


Always looking for fresh contributors. Please email your post to Looking forward to hearing your views.

Jiby said...

alex, this is a good post. being an economist, i would like you to take a look at a new phenomenon taking place in kerala these fixed income groups like govt. servants and marginalised groups like small farmers are feeling left behind as wage earners, IT-professionals and businessmen are increasingly upward mobile due to rising salaries, wages and booming consumer goods, real estate sales, etc, is changing the dynamics of the kerala economy.

i think this is a good topic someone on the Save Kerala team should take up.

Anonymous said...

Yes Jiby,
I will be taking that up. The situation which you just now mentioned is prone to increase in the future years. It would definitely constraint the government
Thanks for the insight.

Anonymous said...

In my humble opinion, there are only 2 option for Kerala now.
1. To get distroyed, then start from scratch. (remember US & Europe have experienced this in the past)

2. Attitude of people have to be changed.


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Anonymous said...

glad to see that a lot of discussion has gone in this blog.
what i felt is that many of us have been focusing a lot on education, health care and trade.
But I doubt if we missed the focus on agriculture, which is the life thread for many of our rural class.

We have to find out a permanent solution to this problem.We should follow farming techniques which are suitable to our geographies, should cultivate crops which have a good prospects.
Agricultural dept must atke a initiative in this area and must promote reasearch and development in this field rather than just giving subsidies and freebies to the farmers.

Kerala has been doing well in many fronts but failed badly in producing employment for the youths there.

what I feel is that it is not just the labour rules and regulation that stand as hinderarnce to industry sector in kerala. Kerala is a very densily populated state ,so it dont have many free open space to set up manufactoring industries. Because such industries pollute the area around (Eg: Gwalior rayons, Mavoor calicut), so such industries need huge open space around.
But kerala can easily accept service based industris like IT industries.This is one best option to bring back our very rich resources working outside.
So the idea is to ponder on the this matter and invite suitable industries to kerala.THINK AND ACT we can avoid tragedies like Mavoor Gwaliyoor Rayons.

Also though kerala has been a fore-runner in educational sector but has failed to build good higher educational institutions. We have to give due importance to this area also if we want to keep our prestige as best educated community.

Hav a lot more to say.. but bye for now.


Paro said...

As you pointed out, we do have a long way to go, but there have been some instances where things have started turning out right.

Anonymous said...

It is time kerala is liberated from the petty potitical quagmire.A large percent of the population in Kerala had to migrate to other parts of the country and the world in search of their livelyhood mainly for the reason that Kerala did not offer a conducive environment for realising their aspirations.Politics of selfishness,psudo ego,excessive cynicism, and above all total apathy to social and civic values have become the hallmark of Kerala. People are worried about their own personal matters only and in their quest for achieving their narrow objectives they unscrupulessly exploit even the life and resources of the generation to come. Its time for the right thinking young generation to take charge of the reins of this state.Do not expect a messiah to take birth to do this for you.

Greenday said...

I appreciate all the efforts for this initiative.

With all HDI index high breakin the laws of economic GDP is still low.

I think government should let others to invest more in kerala and stop the biggest enemy - Brain-Drain.


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