Economists and leaders predict that the 21st century will be India’s century. McKinsey CEO Bob Sternfels recently said that it would not just be India's decade, but India's century. He highlighted three reasons for this – (1) India will be the talent house for the world, with 20% of the world’s talent in India by 2047, (2) India will benefit from the growing geopolitical tensions that are remapping the supply chains from China to other countries, and (3) India will leapfrog with its high level of digitisation in a growing digital economy.
In this exciting journey ahead, where will Kerala stand is an important question. Despite the significant advancements that the state achieved in the early decades of independence, Kerala missed out on opportunities, and today its economic and social prognosis is not great.
The socioeconomic prospects of a place can be predicted using three distinct measures. One, the flow of people or migration; two, the flow of capital or investments; and three, the flow of goods and services (production vs. consumption, leading to trade deficit/surplus).
On all three accounts, Kerala is at a dangerous inflection point.
Migration: Economically advanced countries attract and retain talent and outsource low-end tasks to other countries. Kerala’s case is exactly the opposite. Our educated youth are migrating out en masse, replaced by migrant laborers from other states. By 2030 the migrant workforce will grow from the current 32 lakh to 60 lakh and become more than 1/6th of Kerala’s population.
Surveys indicate that the youth have no aspiration to stay in the state for various reasons, but the most damaging reason is their belief in the gloomy future of the state. This unhealthy migration will cause serious economic deterioration and social imbalances soon.
Investments: We need capital to create meaningful jobs in Kerala. In the past 2.5 years from Oct 2019 to March 2022, India received $142 billion in external investments and Kerala’s share was a paltry 0.42 per cent ($0.6 billion). It means that Kerala is still assessed as an investment unfriendly place by investors. This will impact meaningful job creation.
Trade surplus/deficit: In FY 2022, Kerala imported Rs 1.5 lakh crore worth of goods and services from other states and exported just Rs 55,000 crore to other states, highlighting a trade deficit of Rs 1 lakh crore. If we discount the exports from the Cochin oil refinery and other central PSUs, Kerala’s trade deficit will be even more alarming. This will affect the finances of the people and government.
How to stop this slide?
There are three fundamental changes needed to make a big difference to the future of Kerala.
Political Model Change
Kerala follows a political model, which, though proven for the parties, has been counterproductive, if not destructive for the state. We follow a disruptive, all-opposing, and protesting approach than a positive, merit-based, and constructive approach focusing on the developmental needs of the state. The victims of these disruptions are the citizens and enterprises, which have nothing to do with the issues. Political debates are totally on party-line and not on the merit of topics.
Parties need unions and employees for staging these disruptions and therefore they promote the public sector and government jobs to enroll and grow supporters. This model is choking the state and youth leave Kerala en masse because they see no future here. This is a sad fact.
All parties are similar on this account. It does not mean that our parties or politicians are bad, it just means that we follow a system to establish democratic governments, which is counterproductive and must be changed.
Paradoxically, the purpose of all this disruptive drama is to communicate to the citizens that ours is a better party than others.
Parties must realise that the world has changed and there are better and more effective methods (deploying technology) now available to communicate with the electorate than such antiquated methods. Parties and party leaders should learn and reform themselves, seeing it as an opportunity for the state, their parties, and for themselves. Such a change will bring prosperity, and soon.
Service Model Change
India’s future is in its enterprising people. Public sector enterprises cannot unleash this potential, as the case studies repeatedly prove. We should create and support more private enterprises to utilise the potential of our people. Learning from what is practiced in advanced nations, the philosophy should be:
- Owned by Government / operated by private - for government utilities
- Laws by Government/compliance monitoring by reputed private companies
TCS managing passport services on behalf of GoI is a brilliant case in point.
Government’s Role Change
Government should involve in activities that only governments can do, such as law and order, basic education, healthcare, and infrastructure.
Government should not be involved in businesses other than for facilitation. Public sector companies will be always loss-making unless they are made monopoly or sole suppliers to the government.
By liberalising and privatising loss-making PSUs and by having more PPP models in citizen services, the government can save losses and provide better services to people.
(The author is the Executive Chairman of the IBS Group)
