Kerala 2005 - of Planning Commission

CHAPTER 8
LOOKING AHEAD: POSSIBILITIES AND STRATEGIES
127
New initiatives call for the deployment of more public
resources apart from appropriate policy initiatives and
institutional mechanisms. The fiscal capacity of the State
has witnessed a secular decline since the early 1980s as a
result of unsustainable revenue and fiscal deficits.
issues will continue. At the same time, developing
countries will have to strengthen their national space to
confront globalisation in a way that will enhance their
efforts at economic development. Given the earlier
record of human development and the subsequent
record of economic revival in Kerala, this Report feels
that Kerala, despite being a regional economy, has
certain strengths in confronting globalisation and align
it with its goal of long-term economic development.
But before discussing the possible strategy, it is important
to underline some of the reasons underlying the failures
detailed earlier.
Despite its relative success in the provisioning of social
services, Kerala’s record in creating and maintaining
economic infrastructure has not been noteworthy to
say the least. In particular, there has been a marked
failure in sustaining public utilities and public-sector
enterprises in an efficient way, leading to the drain of
scarce public resources that could have been utilised
for productive investment and/or enhancing the quality
of public services. The failure is particularly marked in
land and water management and development, and in
the supply of adequate and quality power.
Kerala has been proactive in initiating and creating
conditions for industrialisation and thereby increasing
employment and income. However, for a variety of
reasons, the share of modern industries in the State income
continues to be small. A good part of the industrial base is
still accounted for by agro-processing (as well as natural
resource based), the foundations for which were laid during
pre-Independence times. Given the low technological base
of these industries and increasing competition from those
located outside Kerala, they have remained vulnerable for
quite some time.
But in the context of the remarkably high levels of human
development, especially in the creation of an educated labour
force, reasonable degree of infrastructural development,
a fairly long period of economic growth and, above all,
a people with rising levels of expectations on economic
development, Kerala needs to articulate a possible strategy
for further development that will have to address the
twin issues of efficiency with equity. This is all the more
necessary given the context of globalisation. The fear among
a good section of the population in Kerala is that the current
process of globalisation may adversely affect the gains in
social development because of a possible downsizing of the
role of the State. The fear is about increasing competition
for Kerala’s products coupled with low levels of investment
thus further constraining the options for economic
development. So far, such fears have no empirical support.
In fact, the Kerala economy has done well since the late
1980s, resulting in a secular increase in consumption and
savings. But the fears could become a reality if Kerala does
not prepare itself to confront globalisation in a creative way
and turn its dependence on the rest of the world to one of
interdependence. This calls for an active developmental
state and not a passive one as advocated by the drivers of the
current process of globalisation.
To advance the process of economic development in the
context of globalisation, Kerala needs to focus on a shift
from quantity to quality. This is because the quantitative
achievements in many areas of development are impressive
and the objective conditions have become ripe for a shift
to quality that alone will give a further impetus to its quest
for development. As will be explained later, this is as true
in the area of employment as in elimination of absolute
poverty. Given this paradigm shift in focus, this Report
highlights three major areas. These are: (a) economywide
technological change and innovation to enhance all
round productivity, irrespective of sectors (agriculture/nonagriculture)
or ownership (private/public); (b) enhancing
the quality of infrastructure, and (c) enhancing the quality
of governance.
Before elaborating on this line of argument, it is important
to examine the nature of favourable objective conditions
currently in Kerala.