Kerala 2005 - of Planning Commission

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Another encouraging trend is the considerable presence of
female entrepreneurs, of which some instances have already
been given (See Box 5.1). Higher educational levels of
females have helped them to start their own ventures, both
in related areas of family businesses as well as new ventures.
Production of readymade garments is one industry where
we find evidence of this. Knowledge intensive industries
like production and assembling of electro-mechanical
components, used in electronic, communication, data
processing and defence sectors, have seen female-headed
units thrive well.
Other sectors too have witnessed changes basically driven by
higher educational attainments. However, these changes were
manifested differently in the services sector and agriculture.
While in agriculture, it resulted in the diversification and
introduction of new crops like vanilla, in the services sector,
proliferation of activity centred on the tourism and hospitality
industry. This created an advantage in terms of non-tradeable
goods in the economy, the competitive advantages of which
could be sustained, as these were location-specific unlike in
the case of tradeable goods.
It should be noted that investment (in terms of gross fixed
capital formation at current prices) 6 in the major sectors of
the Kerala economy and in general did show promising
rising trends, especially during the 1990s. Specially striking
was the steep trend in the investment behaviour in the two
productive sectors of the economy. And, this goes well
with their output growth behaviour, which we have found
earlier to be impressive.
2.3 Education and Growth
From the perspective of new growth theories, the link
between human development and growth has to be drawn
through the human capital route. In the Kerala context,
it is not human capital – in the sense growth theorists
will incorporate it in growth models – that has propelled
growth. It is rather the outstanding achievement in
human capabilities, specifically basic education that has
created a variety of opportunities for the people of Kerala,
particularly in the present context of an increasingly
integrated world. Complex linkages seem to exist between
early achievements on the human development front,
seeking opportunities in the labour markets outside Kerala,
and remittance-driven growth in consumer demand that is
behind the service sector growth. Expansion of the goods
producing sector depends on comparative advantage
vis-à-vis other states, but services are ‘non-tradeable’ and
therefore expand as local demand increases. The domestic
economy has largely failed to reap the benefit of high
levels of human capital in the direct manner as suggested
by the growth theories and the experiences of the high
performing countries of East Asia. Hence for Kerala, the
human capital-based growth seems to have followed a
rather different, indirect trail.
3. Dissonance?
3.1 Infrastructure Development
vs. Industrialisation
It is generally said that Kerala is in the grip of a low
investment syndrome thanks to irresistible labour
militancy and inadequate economic infrastructure, for
example power. The former stands to mark a higher
stage in the historical development of the economic and
political consciousness of the labour, which in-itself is
valuable, though Kerala is often unique in the excesses
in its instrumental value (Box 5.2). 7 Given the ideological
and social-cultural tradition of participation through
organisation and mobilisation in Kerala, 8 this, however,
appears inescapable. Against this, the inadequacy of
economic infrastructure felt in the State as a constraint
on investment initiatives is generally attributed to
budgetary discrimination followed for a long time by
the Governments, as a result of prime ‘priority and
precedence’ being given to the development of social
infrastructure. Ingrained in this is a tendency to view
economic infrastructure ‘as competitive, rather than as
complementary demands in development planning’. 9
Thus, to the extent that a development planning exercise
presupposes such a complementarity condition and to
the extent that the State was actuated by a development
perspective, infrastructure development in general could
not be discriminatory.
That Kerala ranks high in the infrastructure indices among
the Indian States itself is an effective counter to the general
belief that it has neglected economic infrastructure and
focused resources on social ones. It indicates that it has
fared better in many of the economic infrastructure as also
in the social ones (see Chapter 2).
6 The data is from the Bureau of Economics and Statistics, Thiruvananthapuram.
7 For some case studies in the power sector of Kerala, see Kannan and Pillai (2002: Chapter 5).
8 See Kannan and Pillai (2003a and b).
9 CDS-UN (1975: 153).