It’s not very often that one hears positive news on Kerala’s economy. This week happened to be one such instance when the Gross State Domestic Product (GSDP) data showed that the state’s economy grew by a robust 12% in 2021–22, its fastest growth in over a decade. True, the growth figure came on a low base of -8.43% in 2020–21 and 0.9% in 2019–20 when the state economy was rocked by the after-effects of the pandemic and lockdown restrictions.
A closer look at the GSDP figures showed interesting data points. The growth was led by tourism-related sectors such as hotels and restaurants and air transport, which grew by 114% and 74.94%. The easing of travel restrictions and the waning of the pandemic helped the tourism sector, which constitutes over 10% of Kerala’s GDP, and reportedly contributes around 23.5% to the total employment in the state. In comparison, agriculture, forestry, and fishing, which grew by 4.64% in 2021–22, now contribute only about 8% of the state’s economy, a decline from 17.8% in 2012–13. Likewise, the share of the manufacturing sector, key for job creation, is just 10.53% as per the latest figures. To be sure, servitisation of the economy is the way forward for Kerala given its fragile ecosystem, which offers no place for smokestacks, unlike, say, in Gujarat, UP, or Maharashtra.
While the economic growth rate for 2021–22 offers a glimmer of hope, the state’s finances are still on shaky grounds. Early this week, Kerala Finance Minister K N Balagopal met Union Finance Minister Nirmala Sitharaman and urged her to help the state tide over the financial crises by releasing the
pending GST compensation of Rs 1,548 crore and special assistance of Rs 3,224.61 crore for capital investment, and extending the period of GST compensation by another five years. While this may ease the finances for the short term, the government needs to fix the noticeable fault lines in the economy for a long-term sustainable solution. One is the substantial committed expenditure of over 70% going into salary, pension, and interest payments. This is unsustainable. And next is the immediate reform in the hugely loss-making Kerala State Electricity Board (KSEB) and Kerala State Road Transport Corporation (KSRTC) through streamlining the bloated staff structure and reducing unnecessary costs.
The Left government, which won the second term in office in 2021, has the mandate for some hard measures. The question is, will it bite the bullet?