Kerala's Economy -- A Crouching Tiger?

 In a Facebook group, I was asked by some one for the factors that may have contributed to the phenomenal success of the "Kerala Model". Here is my quick response (No, I am not a professional economist! More qualified people are welcome to correct my errors!):-


There are numerous studies done on Kerala's success story, including by academics in the US. I recently read the book titled, "Kerala's Economy: Crouching Tiger, Sacred Cows" co-published by The Stanford Center for International Development.

http://scid.stanford.edu/publicationsprofile/1925

[One of the editors of this compilation is Arun M. Kumar, who has been recently nominated by President Barack Obama to a key administration post to take charge of international trade at a critical juncture when the US is looking to increase its export.
http://articles.economictimes.indiatimes.com/...]

A quote from the Introduction to this book by Arun M Kumar:-

"Kerala has quietly but clearly moved from being a laggard to a leader in economic development, building upon its historical lead in social and human development Indices. Kerala's per capita income is 60% above the national average today and the state leads the country in per capita consumption expenditure. The state has created 12% of all new non-farm jobs in India over the 1998-2005 period, no mean achievement for a state that is home to only 3.5% of the country's population"
..
"That was Kerala of the past, the Kerala that could only export its workers and had not much more to offer them than a ticket to better prospects elsewhere.

Today, Kerala has a strong base to build upon. It is well known that Kerala leads the country in literacy, 87.8 per cent compared to the all India average of 54 per cent., and human development indicators like life expectancy, 74 years compared to the country's average of 65.3 years. Its Human Development Index, at 0.638 surpasses all other states in the country and the national average of 0.472. The state's poverty ratio is now 12.72 per cent, down from 60 per cent in the early seventies."
....
"After trailing the India average in GDP per capita until six years ago, Kerala's picture has changed. The state's GDP grew by 9.2% in 2004-2005! Its per capita income, at Rs 22,000, exceeds the national average. .... If remittance income is included, per capita income is 60% above the national average."

Okay, now for the reasons that may have led up to the Kerala story:-

"It is generally thought that economic growth precedes human development. In contrast, Kerala saw high human development in a background of low growth from the 60's through the mid 80's followed by accelerated economic growth over the last twenty years. "

The authors suggest that the linkage is that human capital development resulted in migration that brought in remittances to the state which in turn facilitated economic growth.

Which shows that the policies of the 50's and the 60's -- land reforms, heavy government spending on education and healthcare etc., helped to first raise the Human Development Index. In turn, this led to increased capacity of the ordinary person on the street to travel to and work anywhere in the world that offered best exchange value for his or her skills. The subsequent remittances appear to have boot-strapped the Kerala Economy -- so much so that this is now seen as a "crouching tiger"!

Original Link: http://creative.sulekha.com/kerala-s-economy-a-crouching-tiger_609766_blog



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