In 2001, Kerala’s largest industrial unit, Mavoor Gwalior Rayon (now part of Grasim), shut its plant in Mavoor town in Kozhikode district amid allegations of polluting the Chaliyar river. Earlier, the factory—set up in the 1960s—had already halted operations in 1985 following labour unrest, with trade unions demanding higher wages. Owned by the Birla group and located on the banks of the Chaliyar, the plant once employed nearly 5,000 people across communities, classes and linguistic backgrounds.
More recently, in 2018, Synthite Industries faced labour protests after its managing director Viju Jacob transferred 18 employees to different locations. The strike was led by the Centre of Indian Trade Unions (CITU).
There have also been missed industrial opportunities. Congress leader Shashi Tharoor has claimed that during Oommen Chandy’s tenure as chief minister, BMW had considered setting up a manufacturing plant in Kerala but backed out because a statewide hartal coincided with the agreement-signing day.
Kerala has long carried a reputation for frequent labour protests, hartals and stringent environmental compliance. By some estimates, a single statewide hartal can cause economic losses of up to ₹1,500 crore. While such strikes—including the Bharat Bandh on February 12—still occur, there is growing pushback from the business community over the economic costs.
A shift towards startups
In recent years, however, the state’s business environment has begun to change. The Kerala government is increasingly focusing on creating a conducive ecosystem for knowledge-intensive industries, particularly in artificial intelligence and emerging technologies. Through its nodal agency, Kerala Startup Mission (KSUM), the state is actively identifying and nurturing startups capable of building high-end technology products for global markets, leveraging its strong STEM talent pool. Kerala was also the first state in India to launch a startup policy in 2014.
Companies such as Genrobotics, Netrasemi, IROV Technologies, VConsol and iHub Robotics are part of this growing ecosystem, many operating in AI and robotics. According to KSUM, the state hosts over 8,000 startups, supported by a large network of incubation centres, with total funding of around Rs 6,000 crore raised so far.
Rajesh Ganesan, CEO of ManageEngine, says: “We have seen breakthroughs in deep tech, AI and robotics from Kerala startups in recent years. Innovators are able to attract investors, aided by supportive government policies. Along with the strong talent pool, these are key ingredients of a thriving startup ecosystem.”
Funding remains a challenge
Despite this progress, concerns persist. Access to capital, particularly for deep-tech ventures, continues to be a major hurdle. Venture capitalists have previously noted that such firms struggle to raise Series A and B funding—an issue that is even more acute in Kerala, where the startup push is heavily skewed towards deep tech.
Jyothis KS, co-founder of Kochi-based AI recruitment platform Zappyhire, says: “Kerala has a strong pool of tech talent, but funding is limited. Startups can raise up to $2 million within the state; beyond that, it becomes difficult.”
Jeevan Varghese, partner at Lexfins 360 Corporate Services, points to structural issues in credit access. “Startups often cannot secure loans without collateral, even under schemes like the Pradhan Mantri MUDRA Yojana. Bank officials remain cautious about NPAs, which restricts credit flow to early-stage ventures,” he says.
The MUDRA scheme offers collateral-free loans of up to ₹20 lakh to non-corporate, non-farm micro and small enterprises.
Startups are also calling for greater participation from corporates. Some suggest that large companies allocate a portion of their CSR funds to support early-stage ventures. “If corporates or PSUs allocate even a smaller amount of their CSR funds, it would help startups invest in R&D and ensure timely salary payments,” says Athil Krishna of iHub Robotics.
There is also an appeal to Kerala’s legacy business houses — such as major jewellery groups and financial families — to back startups. Joy Sebastian, co-founder of Techgentsia Software Technologies, says: “Kerala has cash-rich traditional businesses. Instead of competing with startups, they should support them with capital and trust.”
Techgentsia’s product, VConsol, gained prominence during the Covid-19 pandemic after receiving a government award for video conferencing solutions. Competing with global platforms, it is now used by several High Courts, including those in Karnataka, Kerala, Bombay, Telangana and Himachal Pradesh.
Sebastian adds that investors in India often prioritise short-term revenue visibility. “Deep-tech ventures require patience—returns can take seven to eight years,” he says.
Government push and ecosystem building
Some startups are beginning to scale. Genrobotics, founded in 2017, is close to closing its Series B funding round with investors from outside Kerala. The company recently secured a contract from Singapore’s Public Utilities Board to deploy AI-powered robots for cleaning sewage systems and water bodies. It has also expanded operations beyond Kerala.
KSUM CEO Anoop Ambika says the agency is working to build stronger investor networks. “We are reaching out to second-generation leaders of legacy businesses, who better understand deep tech,” he says.
KSUM is also considering appointing film personalities such as Mammootty, Fahadh Faasil and Nazriya Nazim as brand ambassadors to attract investments.
“This transition will take time. Kerala historically had a service-oriented mindset, but that is changing,” Ambika says.
The agency is also exploring equity participation in startups and plans to increase grant limits — from Rs 3 lakh to Rs 5 lakh for idea grants, and from Rs 12 lakh to Rs 25 lakh for maximum grants.
Persistent friction points
Despite improvements, some legacy challenges remain. Labour issues, though less frequent, still surface. For instance, iHub Robotics faced disruptions from labour unions while unloading specialised equipment, leading to minor losses.
“There is a need to sensitise workers and build a more harmonious environment,” Ambika acknowledges.
Land availability is another constraint. With a geographical area of just 38,863 sq km — bounded by the Arabian Sea on one side and the ecologically sensitive Western Ghats on the other — land is scarce and expensive.
Startups say this affects expansion. “Land costs in cities like Kochi and Thiruvananthapuram are high. Subsidies or concessions would help,” says one founder. Delays in infrastructure support, such as power connections, also remain a concern.
However, KSUM maintains that land subsidies are not feasible. “We have limited land availability. Our focus is on promoting high-value, low-footprint manufacturing,” Ambika says, citing companies like Holmarc Opto-Mechatronics as examples.
What lies ahead
KSUM is now shifting its focus from increasing the number of startups to scaling quality ventures. “We aim to build around 110 companies with revenues exceeding Rs 100 crore,” Ambika says.
The agency is also working to create angel investor networks across districts and channel diaspora funding into startups. Additionally, it plans to support companies with proven market demand through low-cost funding and feeder funds.
Kerala’s startup ecosystem is clearly in transition. Whether policy support, capital access and cultural shifts can align will determine the state’s next phase of growth.