Kerala 2005 - of Planning Commission

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2. Growth Pattern of the Kerala Economy
2.1 Two Phases of Growth
The long-term growth analysis of the Kerala economy
reveals two distinct phases in its economic development.
A graphical analysis of the path of the Net State Domestic
Product (NSDP) since 1970-71 at constant prices shows
a significant turnaround in the trend around 1987-88
not only of the aggregate NSDP (Figure 3.1) but also
of the three broad sectors. The first phase, i.e. prior
to 1987, is characterised by near stagnation of major
economic indicators and the next, the post-1987 phase
by significant growth. It should be noted that despite
stagnation, human development, in terms of education
and health indicators, continued to improve during the
first period.
2.2 From Stagnation to Revival
A comparative picture of Net Domestic Product
(NDP) for Kerala and all-India for the two time periods
reveals that annual growth rate of NSDP of Kerala
increased from 1.9 per cent to 5.8 per cent over this
time span. It is also interesting to note that the growth
rate, which was nearly half the all-India figure in the
first period, caught up with it at almost the same level in
the second period. These figures suggest that the Kerala
economy has gradually emerged out of the situation
of high social sector development with low economic
growth. In fact, the late 1980s witnessed a slight
improvement in growth performance, but evidently
not enough to recover from the slow growth syndrome.
It can thus be considered that the 1990s constituted
a phase of growth momentum of the Kerala economy
(Table 3.1).
Table 3.1: Sectoral Growth Rate of
Net State Domestic Product (1993-94 Prices)
Sector Kerala All India
Period 1 Period 2 Period 1 Period 2
Primary Sector -0.14 2.90 2.69 3.47
Secondary Sector 2.38 6.13 5.02 6.53
Tertiary Sector 3.28 7.55 5.19 7.48
Aggregate 1.89 5.79 4.08 5.98
Per capita
SDP/GDP
0.52 5.03 1.87 4.01
Note: Period 1 = 1970-71 to 1986-87 and Period 2 = 1987-88 to 2002-03.
Source: Estimated from CSO, National Accounts Statistics, different issues.
2.3 Per Capita SDP
During the stagnation phase, Kerala’s average annual
growth rate of NSDP was too low to cover even the
population growth rate, while at the all-India level,
it was 1.53 per cent above the population growth rate.
What is significant is that the Kerala economy overtook
the all-India per capita SDP growth rate during
the second phase. It may be noted here that this
growth in per capita income in effect also represents
a complementary effect of human development
through the demographic transition; it is the drastic
fall in population growth rate that partly explains the
significant rise in per capita income.