Kerala 2005 - of Planning Commission

CHAPTER 5
HUMAN DEVELOPMENT AND ECONOMIC GROWTH
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2.2.3 Investment Initiatives
Yet another contribution of the economic reforms was to
removing a number of minor and major constraints on
investment and import of technology and raw materials.
Along with market-determined exchange rate, this set of
reforms was to provide a far more favourable climate for
investment, given the availability of investible resources
in the State. Kerala was, however, unlucky to have any
initiatives come up in the large-scale industrial sector, in
the face of her image problem as an ‘investor unfriendly
State’. But it did some wonders in the small and mediumscale
industrial sector, where a newly emerging class of
entrepreneurs, with superior educational skills and exposure
to the global markets, were able to successfully make use
of the industrial and agricultural climate by taking on the
challenges posed by the economic liberalisation (Box 5.1).
And this explains the revival in the two productive sectors
of the economy, though this was not as impressive as the
revival in the tertiary sector.
Traditionally an industrially backward State, devoid of heavy
industries, Kerala has witnessed a spurt in industrial activity in
recent times driven mainly by small and medium industries.
This is evident from the sheer increase in the number of
factories as reported by the Annual Survey of Industries.
From 1990 to 2000, the number of factories increased from
3484 to 4853, a whopping 40 per cent increase. But if one
examines the average capital employed per unit, there is a
tendency towards small and medium units.
An examination of the success stories of more than 100
industrial units spread across different industries reveals
that the educational attainments and the spill-over effects
from integration with the world market contributed
considerably to their success. The units include stateowned,
co-operatives, partnerships and single management
enterprises. Their activities encompass both the ‘new’
as well as the ‘old economy’. Apart from the traditional
industries, like coir and cashew, production of high
value-added products, drawing up resources from the
agricultural sector has been a new tendency. Quite often,
the technology levels are high in these new units, which
have accessed foreign technology without inhibition. It
should be emphasised that the educational attainments of
the workers and managers have shortened their learning
curves. Imported technologies are often adapted to local
conditions, as in the case of food products, to suit local
conditions and demand. In the new economy, activities
for which human capital is of importance, information
technology (IT) has been the major activity.
Box 5.1: The Entrepreneurial Revolution in Kerala
IT has been recognised as a thrust area of development
by the Government of Kerala since the state has
a reserve of educated and technically qualified
manpower. Spread over 156 acres, and about
1.5 million sq. ft. of built-up space, Technopark in
Thiruvananthapuram hosts over 55 IT and ITES companies
employing over 5000 IT professionals, including five
Capability Maturity Model (CMM) Level 5, two CMM
Level 3 and several ISO 9001 certified companies.
Technopark offers a unique confluence of advantages
like high quality physical infrastructure, power and data
connectivity; highly trained technical manpower; most
flexible regulatory framework; highest incentives; and
the best law and order environment in India.
Some units including female-headed firms have
earned a reputation in this field. These units show
excellent performance in the programming of
software solutions, some of which could even
co-ordinate all the activities including harvesting
and marketing in plantation sector. This ‘seed to
sale’ package got worldwide attention and was
selected as the best software solution among those of
856 companies from 76 countries. It was the first
Indian firm, which got the “back office logo” from
Microsoft. It is interesting to note that these successful
entrepreneurs have post graduation and even PhD
as their educational qualification. Organisation of IT
courses is another important field of this fast growing
sector, through which vast employment opportunities
have been created.
These new units established by the newly emerging class
of entrepreneurs, with superior educational skills and
exposure to global markets, have been able to make use
of the industrial climate successfully by taking on the
challenges posed by the economic liberalisation.
Diversification of activities has been another feature of this
new entrepreneurship. Quite often, they get into related
areas, reaping economies of scope. This is mainly driven by
the discovery of new markets for their products. The extent of
diversification is the highest among entrepreneurs who started
food processing units. The discovery of the Middle East/Gulf
market has helped them raise enough financial resources
and technical know-how to start new ventures. These can
be viewed as the direct evidence of spill-over effects, which
could be reaped only with high quality human capital.