Kerala, long admired for social indicators on a par with developed nations, now faces the challenge of navigating a huge financial crisis. A recent Reserve Bank paper notes that Kerala is one of the slowest-growing states in the country. What can the government do to get the state out of this morass? Dhanam spoke to a string of senior business leaders in Kerala. We have compiled their responses and boiled down their ideas into 20 major points.
These 20 points offer a broad range of actionable strategies to address Kerala's financial and developmental challenges.
A common sentiment among many is that the government should not take on too many responsibilities. As one perspective goes, it is not enough to formulate policies; these policies must be implemented efficiently. "Private investment will come, and the state will develop," is the belief echoed by many within the business community when asked about the government's role in fostering Kerala's growth.
While some argue that government intervention is unnecessary, others advocate for a more active role in addressing the state's challenges. Kerala's development momentum is driven by key assets such as a highly educated population, abundant skilled youth with global experience, and good infrastructure. The question now is: how can the government best harness these resources to propel the state forward and build a more inclusive future?
Kerala's progress thus far is commendable, but it will not be enough to sustain future growth. The state needs fundamental changes in vision and project implementation to remain competitive globally. Two areas that require immediate attention are:
• Clean Kerala: A robust system for the scientific segregation and disposal of waste should be established.
• Safe Kerala: The state must become a haven in all respects—safe travel, food, drinking water, and protection from natural disasters.
The state must focus on attracting more profitable enterprises that can create high-paying jobs. Profit, far from being a dirty word, is necessary to generate high-quality employment that will prevent Kerala’s educated youth from seeking opportunities elsewhere. At present, Kerala has between 36 to 40 lakh migrant workers from other states working across Kerala, yet the youth unemployment rate within the state is high. The government needs to create an environment conducive to attracting such businesses, ensuring suitable jobs for the educated workforce.
3. Private sector involvement
There is no need for the government to undertake everything on its own. Success stories like TCS’s involvement in passport services demonstrate the private sector's potential. In the past 30 years, private enterprises have made significant contributions to the country’s development. More sectors should be opened up to private companies to enhance Kerala’s growth prospects.
The prevailing mindset that what is retained in the public sector is inherently good, and what is transferred to the private sector is bad, needs to change. Both the public and private sectors must work in synergy to ensure the state’s long-term development.
Micro-enterprises, particularly in rural Kerala, should be nurtured. These small businesses, often run from households, create two to three jobs per enterprise. Panchayats should establish common facility centres to support the production and marketing of these enterprises' products, thereby providing them with the necessary resources to grow.
Thousands of young women and men from Kerala are seeking employment abroad, with many heading to countries like Israel for jobs in elderly care. The government should provide proper awareness, guidance, and legal protection to prevent these workers from falling prey to fraud and exploitation while seeking better wages and living conditions abroad.
Every panchayat in Kerala should have a master plan based on a long-term vision for local development. Panchayat members need to be trained and guided to understand the issues at hand and make informed decisions for the growth of their respective areas. The financial resources allocated to panchayats should be invested in a phased manner for comprehensive local development, rather than being spread thin across various wards.
The government should introduce a public-private partnership (PPP) model, similar to that of Cochin International Airport Ltd (CIAL), for implementing projects at the panchayat level. By combining the efficiency of the private sector with government systems, project implementation costs could be reduced, often by half or two-thirds of the current allocations.
To ensure better wages for artisans and revitalise sectors such as handloom, the government should seek new approaches by partnering with experts who have already created successful models. Additionally, the practice of selling Kerala’s handloom fabrics at a discount should be reconsidered. The value of these fabrics can be enhanced by promoting the stories of how they are woven, adding cultural value and attracting a premium price.
Ideas, while important, are not enough. The key challenge lies in the timely and effective implementation of these ideas. The government should form coalitions across sectors, identify growth areas, and develop a clear, actionable plan. The progress of these projects should be evaluated periodically to ensure they are on track.
While government projects often begin with sincerity and passion, their momentum wanes as time passes. The government must create an efficient framework for project implementation and transfer responsibility for execution to the private sector where possible. The e-governance system must be implemented effectively to streamline processes and ensure transparency.
Kerala’s greatest strength lies in its human resources. The state is home to a wealth of talent and innovation across its industries, academic institutions, and research bodies. Rather than instructing people on what to do, the government should present challenges and motivate the population to address them, treating these issues as projects that can be worked on collaboratively.
One area where Kerala lags is in the logistics sector. Currently, the Kerala Headload Workers Act impedes flexibility in unloading goods at business premises. This outdated legislation should be repealed to allow businesses to operate more efficiently and with greater ease.
The land reforms in Kerala were implemented to provide land to the landless, but the agricultural landscape has changed. Agriculture today does not provide reasonable income for landowners, and many are not employed in agricultural activities. There needs to be a system and laws in place that allow agricultural land to be used productively to meet market demands, increasing Kerala’s agricultural income and creating jobs.
Kerala is borrowing heavily, much like India was in 1991. At that time, the country underwent significant economic reforms, which not only improved its financial standing but set it on a path of accelerated growth. Kerala must undergo similar reforms to improve its financial health and ensure long-term prosperity.
The lack of ownership of industrial land is a major barrier to industrial growth in Kerala. Industrialists are often forced to pay land premiums that constitute up to 40-60% of the project cost. The current leasing system has made it difficult for industrialists to sustain profitable operations. The government should address this issue by allowing industrialists to own land or by offering more reasonable lease terms, which are essential to encourage industrial growth.
The high wages of Malayali workers have made local industries less competitive, leading small and medium-sized entrepreneurs to depend on guest workers. These workers send most of their earnings back home, preventing money from circulating within Kerala’s economy. The government should focus on encouraging Malayali youth to work in the small and medium-sized sector, thus reducing the dependency on guest workers and fostering a more robust local economy.
The stagnation of industry in Kerala is not due to the lack of laws but rather the misinterpretation and inefficient enforcement of these laws by officials. It is essential that government officials, entrusted with the implementation of laws passed by the elected assembly, execute them effectively and without unnecessary delays.
With artificial intelligence (AI) transforming industries worldwide, Kerala must create a dedicated department for AI. By investing in AI, Kerala can enhance productivity, streamline government services, and create new opportunities for its workforce.
To fully benefit from AI, the government should conduct studies to identify sectors in which AI can be effectively integrated. By creating an environment that supports AI investment, Kerala can attract private investment, boost its revenue, and create new jobs. Far from eliminating employment, AI will open up new avenues for skilled workers. The government should implement skill development programmes to prepare Kerala’s youth for the jobs of the future.
Kerala stands at a critical juncture, grappling with a financial crisis that demands swift and strategic action. The state’s strengths—an educated population, skilled youth, and strong infrastructure—provide a solid foundation, but unlocking their full potential requires a transformative vision and bold reforms. By embracing private sector collaboration, nurturing micro-enterprises, and fostering technological advancements like AI, Kerala can chart a sustainable path to prosperity.
Crucially, timely implementation of well-crafted policies, coupled with a shift in public attitudes towards economic and industrial growth, will be key to success. With decisive leadership and collective effort, Kerala can turn its challenges into opportunities and set an example for inclusive, future-ready development.