What ails Kerala’s economy?

In the 2018 fiscal, Kerala’s real growth rate was a lowly 5 per cent even as Bihar topped the list with 11.3 per cent growth, followed by Andhra Pradesh (11.2 per cent) and Gujarat (11.1 per cent).

Published: 23rd January 2019 04:00 AM  |   Last Updated: 24th January 2019 12:23 PM   |  A+A-

In the 2018 fiscal, Kerala’s real growth rate was a lowly 5 per cent even as Bihar topped the list with 11.3 per cent growth, followed by Andhra Pradesh (11.2 per cent) and Gujarat (11.1 per cent). The only other state to clock a two-digit growth was Telangana at 10.4 per cent. Among the 17 states featured in the ‘States of Growth 2.0’ report by Crisil Research, Jharkhand was the only state to fare worse than the 16th positioned Kerala, with a growth rate of 4.6 per cent. To put things in perspective, Punjab that occupied the 15th slot grew at 
6.2 per cent.

Curiously, unlike the other states, the fiscal woes for Kerala have not accrued as much from primary deficit which has dipped from 2.2 per cent in the 2013 fiscal to 1.4 per cent over five years. The fault lines have emerged more on account of nominal growth, which dropped from 13.3 per cent to 11.3 per cent. Consequently the state’s debt ratio ran amok, rising from 26.7 per cent to an alarming 31.6 per cent. And this definitely is in contrast to the national trend where most states have been hurting on account of their primary account deficit.

The expenditure pattern of Kerala shows its priority areas are education and health and the low focus areas are urban development, housing, roads, bridges and irrigation, providing a rational explanation to its high performance on certain fronts and its laggard status on some others. The biggest worry though is its runaway consumer price inflation, the highest in India. In other words, Kerala has emerged as the priciest state to live in, real estate cost apart. Sure, the manufacturers of a good number of white goods, lifestyle appliances and automobiles keep looking at Kerala to test the consumer waters. But that alone cannot be a major consolation as Finance Minister Thomas Isaac gets ready to present the state Budget in less than a fortnight’s time. 

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