Economic Review paints a remarkable industrial revival in Kerala

The Economic Review 2019, which was tabled in the Assembly on Thursday, has suddenly lit up what was till now perceived as a dark gloomy space.

Here is the big surprise: The secondary or industrial sector has recorded the highest growth in Kerala for the first time in history. The secondary sector, which consists of manufacturing, construction, power, gas, water supply and other utility services, had grown at a record 8.8 per cent. This was higher than the 8.4 per cent growth achieved by the tertiary or the services sector, considered Kerala's mainstay.

In 2014-15, the share of the industrial sector in the state's GSDP (gross state domestic product) was 9.8 per cent. In 2018-19, the Economic Review 2019 notes that it had shot up to 13.9 per cent. Kerala's share in India's factory production was just 1.2 per cent in 2014-15. But in 2018-19, it has swelled to 1.6 per cent.

This dramatic revival of industry is a puzzling phenomenon, too. The boom has happened in spite of demonetisation, the sloppy roll out of the Goods and Services Tax regime, and also two back to back floods. After demonetisation, Kerala Planning Board itself had done a study that concluded that the note ban had devastated the state's industrial sector.

Finance minister T M Thomas Isaac said he was not able to fully account for this turnaround but said this should be seen as a “new trend”. Planning Board vice chairman V K Ramachandran, too, said it was a “very important phenomenon”.

He also could not put a finger on how this sudden industrial buoyancy came about. “Something is happening,” he said, as though industrial growth was an awe-inspiring cosmic phenomenon. The vice chairman said growth was seen mostly in micro, small and medium industries. “The production of dental prosthetics and blood bags in Kerala, for instance, is the highest in Asia,” Ramachandran said.

Agro-based, herbs-based and foundry-based industries were doing well in Kerala, he said. “One of the biggest foundry-based industry, R K Foundry, is in Kerala,” the vice chairman added.

According to Isaac, the growth in the secondary sector can be chalked up to the commendable performance of public sector units in Kerala. “From a loss of Rs 200-odd crore, they have now clocked a profit of Rs 102 crore,” Isaac said.

He also said there was a spurt in small industries. “In 2018-19 alone, 13,826 micro small and medium units were set up in the state. It had employed close to 50,000 people,” Isaac said.

When he was asked why consumption and demand had not picked up even after such an industrial boom, Isaac said he was also trying to reconcile the slide in revenues and the commendable growth in manufacturing. “This needs to be studied,” the Planning Board vice chairman said.

Despite its dull macroeconomic indicators, the Economic Review shows Kerala growing at a pace faster than the national average during the last three fiscals. It goes without saying, therefore, that the average income in Kerala is considerably higher than the national average. If Kerala's average GSDP (gross state domestic product) growth in the last three fiscals was 7.2 per cent, the national average was 6.9 per cent.

According to quick estimates for 2018-19, the per capital income of Kerala is Rs 1.48 lakh. The national average is Rs 93,655. In other words, average income per person in Kerala was approximately 1.6 times the Indian average in 2018-19.

A dismal aspect is the negative growth in the agriculture sector. The Economic Review attributes this mainly to the floods and the major slowdown in mining and quarrying.

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