Bold Roadmap To An Economic Dawn In Kerala

God's own country should harness its strengths in education and health to foster a knowledge-driven economy. Doing business must be made easier and the investments protected

- SHASHI THAROOR

Kerala, long celebrated as God's own country, is today grappling with an economic paradox that belies its natural beauty and human development achievements. While the state boasts of high literacy rates, robust healthcare systems, and a globally admired social model, its economic underpinnings are alarmingly fragile.

The state's unemployment rate stood at 9.6 percent in 2022-23, significantly higher than the national average of 4.1 percent. The industrial sector remains stagnant, contributing only 23 percent to the gross state domestic product, compared to the national average of 29 percent. Meanwhile, Kerala's public debt has surged to ₹3.57 lakh crore, exacerbated by declining central transfers and fiscal constraints. The state government spends more every year on debt servicing than on development—and it ends up borrowing more to pay off the interest on its past borrowings.

Kerala's economy has long been buoyed by remittances from its diaspora, but this over-reliance on external inflows—which once accounted for nearly 30 percent of Kerala's economy—has left the state vulnerable to global shocks. The pandemic-induced disruptions exposed the fragility of this model, with remittances declining and unemployment surging.

The unemployment rate remains stubbornly high, the industrial sector stagnant, and the fiscal health precarious, with mounting debt and dwindling revenues. Meanwhile, the state's industrial sector remains woefully underdeveloped, hamstrung by bureaucratic red tape, outdated labour laws, and an aversion to private enterprise. The agricultural sector, once a cornerstone of Kerala's economy, has also suffered from declining productivity and climate-related challenges.