The early months of this year have been busy for investors. They have been shuttling to attend investor summits in Assam, Madhya Pradesh, Uttar Pradesh, Maharashtra and Kerala. Some of these have had five-star billing, inaugurated by no less than the prime minister, while others have had a more businesslike character.
The one held recently at Kochi belongs to the latter. It, however, managed to signal a renewed interest in the state as an industrial destination. Instead of large industries, the focus has shifted to startups and smaller enterprises—an approach more suitable for states like Kerala that do not have vast stretches of land available at competitive prices. Those who attended the conclave and the media have generally reported favourably about the event’s organisation and results.
Industries minister P Rajeev, who had carefully prepared the ground for the conclave and talked to umpteen investors, was overjoyed.
“As many as 374 companies have evinced interest in establishing, expanding, diversifying and reinvesting, and submitted expressions of interest that will bring about a consolidated investment of `1,52,905.67 crore. Besides, a total of 24 companies expressed interest in expanding operations in the state, bringing an additional investment of nearly `8,500 crore and generating job opportunities for 60,000,” he said at the end of the session.
Such events have been held before in Kerala, but there were a few significant differences in this one. First, it was conducted with little fanfare and, from all accounts, was businesslike. Second, no attempt was made to exaggerate its success. Third, leaders of other political hues—Congress’s V D Satheesan and Indian Union Muslim League’s P K Kunhalikutty—stated unequivocally that the opposition would support all efforts to develop the state.
The intense rivalry between the two main fronts in the state has been the bane of industrialisation in Kerala for many decades. This event should send a message to investors that the political disposition of Kerala is changing. The fact that India’s leading business house, the Adanis, chose to set up shop in Kerala with the promise of even more investments would be another positive signal to investors waiting on the sidelines.
If these promises materialise and the political formations act in unison, there could be significant and lasting change in the political climate of the state. However, growth would be contingent not only on the ease of starting a business, but also on the ease with which it can be run. The most painful period in my career was as managing director of Travancore Titanium Products in Thiruvananthapuram. We had six unions there, each competing with the others to create new issues each day. That was, of course, almost half a century ago, and many industries have evolved thereafter, starting new units in Kerala and abroad.
Hand-holding by the administration would be required not merely at the beginning, but throughout the initial stages until an industry stabilises and takes off on its own. To a great extent, Thiruvananthapuram’s Technopark set the template for industrial growth in the 1980s and 90s. The project was encouraged and supported by successive chief ministers, no matter their political inclinations. Technopark created a model in which the problems of industry, including labour, were handled with understanding by the enclave’s management. Since then, it has expanded immensely, and there is still a waiting list of companies wanting to move in. Phase III is now being planned.
Infopark, Cyberpark and several other such enclaves based on the Technopark pattern have sprung up in different parts of the state. However, outside these precincts, there is still some reluctance to move in because of the high price of land and the failure of the lower bureaucracy to imbibe the spirit of nurturing industries.
The need to spur the secondary sector in the state is clear, as it has remained almost static since 1980-81. Its share in the state GDP was 22 percent in 1980-81, and it was barely 23 percent in 2021-22. During the same period, the share of the tertiary or services sector went up from 33 percent to 56 percent.
Kerala has a well-developed panchayat system. Perhaps, as in China, the local governments can be redesigned as engines of growth. Something can be learnt from Zhiji Huang, Canfei He and Han Li’s paper ‘Local government intervention, firm–government connection, and industrial land expansion in China’, in which they said, “In China, local government intervention is the result of fiscal decentralisation and political centralisation. As a result, local governments hold primary responsibility for urban and economic development in their jurisdictions. At the same time, the tax sharing system has granted local governments more fiscal responsibility.”
A fresh state election is coming up in 2026. Kerala’s voters, with deep connections abroad and familiarity with the living and working conditions there, are clearly hungry for reforms. Reforms must begin at home—in this case, the government, which has to set its house in order. The fact that the central government uses its authority to appropriate the lion’s share of resources cannot be denied. But blaming the Centre will not solve the problem.
The level of indebtedness of the state has gone up to `4.5 lakh crore in 2024-25. The debt increased year by year until the Centre clamped down. Kerala now has a whopping 149 public sector undertakings—collectively, a drain on the state’s slender resources. They need to be ruthlessly reorganised.
According to the national auditor, committed expenditure constitutes more than 90 percent of total spending and capital expenditure is a mere 9 percent thereof, constituting just over 2 percent of total borrowings—showing that most of the borrowings are used for paying salaries, pensions and interest.
The deterioration in the country’s central finances resulted in the 1991 reforms, which made India a fast-growing economy. Kerala is on the cusp of a similar crisis, and the state is desperately looking for fearless political leadership that is free of ideological moorings yet liberal in outlook.
(Views are personal)
(kmchandrasekhar@gmail.com)
K M Chandrasekhar | Former Cabinet Secretary and author of As Good as My Word: A Memoir