The consecutive second term for the LDF government in Kerala provides a rare opportunity for continuity in policy and a chance to complete the agenda for transforming the economic base of the state. There is a growing realisation that the redistributive strategy of development had reached a dead end and could be further pursued only by rapidly modernising the base into a high productivity knowledge-skill-service based economy that will generate quality jobs for educated unemployed youth.
The redistributive strategy of development has ensured a much higher quality of life and welfare to the people in the state. In the SDG achievement ranking, Kerala tops in India with a score of 70. In the world ranking, while India is way below at 117, Kerala’s score would give it a rank equivalent to 73. The state is poised to reach the SDG goals by 2030 in most of the sectors, particularly in health, education, hunger and poverty. Kerala can now put forth the agenda to eradicate absolute poverty by providing every family housing, electricity, drinking water, sanitation, at least minimum food, education and healthcare.
The local governments play a key role in the provision of the above basic needs and protection of livelihoods at the local level. During the past 25 years, after the launch of People’s Plan Campaign, Kerala has consistently been the front-ranking state in devolution. Even the Reserve Bank of India, in its State Finances Annual Report 2020, deemed it fit to laud the role of local governments in Kerala’s Covid response success. They provide a broad platform for people cutting across political divides to cooperate in addressing local problems. The outcomes so far have been encouraging enough to make the state recommit itself to strengthening the democratic decentralisation process further.
High budgetary expenditure in social sectors has been at the expense of capital investment. Kerala has for a long period been one of the lowest capital expenditure-GDP ratio states in the country. As a result, it is woefully backward on infrastructure development, whether it is roads, bridges, public buildings, electricity, railways or industrial parks. This has been one of the factors holding down private investment along with a low rank in ease of doing business. The last government put forward a new strategy of mobilising resources outside the Budget through Kerala Infrastructure Investment Fund Board (KIIFB) for infrastructure investment.
The KIIFB is on the same model as the Development Financial Institution (DFI), which has been set up by an Act of Parliament recently to raise Rs3-4 lakh crore for infrastructure investment. The major difference between the two is that the Central government intends to privatise the DFI after a period while KIIFB will continue to be a public entity. The latter would be open to CAG’s or any investigative agency’s scrutiny, unlike the DFI. It must have been the success of KIIFB that prompted the opposition to hatch controversies. They have all died down since the elections. The completion of Rs60,000 crore projects being financed by KIIFB will enable Kerala to overcome its infrastructure handicap within a few years.
The next challenge is how to leverage the new infrastructure to transform Kerala’s economic base. The last Budget laid down a clear road map for this purpose. Thus, for example, KIIFB finances the K-fone project to provide assured broadband internet connectivity to all institutions and households as well as electricity projects to overhaul the transmission and distribution lines. Their completion will create the preconditions for Kerala to reap employment opportunities that are being opened for working from home in the digital world. Before Covid, around 50 lakh employees were working from home. Now the number has increased to more than three crores. It is expected to rapidly expand to 18 crores in another five years. A massive digital skilling programme for the educated unemployed and educated women who have withdrawn from the labour force into household chores will be launched. A new institution, K-DISK, is being readied for this purpose. It will also negotiate with global employers for hiring the skilled whose details would be provided on a digital platform. Their social security burden will be borne by the government of Kerala. The target is to secure employment for 20 lakh people in digital home work. This programme would make IT the most important employment sector in the state.
A massive programme for the promotion of start-ups and private investment into knowledge-, skill- and service-based industries also will contribute to the transformation of Kerala’s economic base. The transition to the knowledge economy would also entail restructuring of higher education by setting up autonomous centres of excellence in the university system and a large-scale postdoctoral program with generous monetary benefits. The expatriate Malayalees working in outside universities, labs and research institutions will be playing a very important role in this process.
Today, Kerala presents a picture of high social achievements on a weak economic base and unacceptable levels of unemployment. The case of Gujarat may be a picture in contrast—a rapidly industrialising and growing state but very poor social attainments and deprivation for the poor. Of course, there are the BIMARU states that have neither growth nor equity. Kerala is on a course to create an economy that ensures high growth and equity. We call it Nava Kerala or the New Kerala Model. This is the agenda for the new government.
T M Thomas Isaac
Finance Minister in the outgoing Kerala Cabinet