Study paints rosy Kerala industrialization scene midst dull reality

Kerala attracted Rs 91575 cr investment projects in the last five fiscals creating about 5 lakh jobs, says MSME study which leaves economy observers baffled
Investment in Kerala
Investment in Kerala

# Ajayan

A recent MSME Export Promotion Council study in collaboration with the Confederation of Organic Food Producers & Marketing Agencies sketches an optimistic portrait of Kerala, which can become another shot in the arm for the public relations exercise by the Kerala Government. Surprisingly, the study indicates that over the five-year period from fiscal 2018-19 to 2022-23, Kerala has drawn in new investment projects amounting to over Rs 91,575 crore. Additionally, completed projects valued at Rs 33,815 crore have been reported, generating new job opportunities directly and indirectly for approximately 5 lakh people.

Observers familiar with the industrialization landscape in Kerala over the past few years may approach the report with skepticism. As acknowledged by economists, any notable development in the MSME sector seems to have been primarily concentrated in the plywood, furniture, and iron and steel forging industries. The broader industrial scenario in the State may not be as robust as the report implies.

The study ‘Kerala Investment, Growth & Development 2018-19 to 2022-23’ says the total investment projects outstanding in 2022-23 were worth Rs 403770 crore and under implementation worth Rs 277957 crore. Once these projects get completed, direct and indirect new employment opportunities are expected for 7 lakh people. The study says pending projects worth Rs 12240 crore were revived during the period.

There appear to be notable discrepancies in the study, as it indicates that new investment projects announced by the private sector over the five years amounted to Rs 23,232 crore, with completed projects worth Rs 9,590 crore. It also mentions data from CMIE indicating that during the fiscal 2022-23, the private sector announced new investment projects worth a modest Rs 398 crore, completed projects valued at Rs 1,825 crore, and revived old projects worth Rs 3,216 crore.

It is apparent that the inclusion of trading establishments, small service centres such as mobile phone repair shops and roadside eateries under the MSME category for promotional purposes may not align with the government's claims of fostering new units. These instances raise concerns about the accuracy of government announcements.

If startups are included as part of the MSME sector, there are optimistic indicators in Kerala.

The true essence of MSMEs lies in their role as ancillary job works of the subcontracting type, primarily serving large industrial units. The success and growth of MSMEs are often closely linked to the presence of numerous manufacturing industries. The classic case is that of Coimbatore, where a multitude of MSMEs effectively caters to the needs of large industries.

Leading economist Jose Sebastain underscores that, considering the success of MSMEs is contingent on their relationship with larger manufacturing enterprises, Kerala's lack of significant large manufacturing industries raises questions about the viability and success of MSMEs in the State.

MSME Export Promotion Council chairman DS Rawat, who recently unveiled the study in New Delhi, highlighted that Kerala, with 2.8 per cent of the country’s population and 1.2 per cent of its land area, contributed more than 4 per cent to the GDP. The State boasts a per capita income 60 per cent higher than the national average, fueling internal migration, especially for low-end jobs. While a significant number of Keralites had traditionally migrated to Gulf countries since the 70s, there has been a decline in this trend, with Europe, Canada, and Australia becoming new migration hotspots. This drift of Keralites has over the years contributed to the shortage of labour in the State, leading to increased domestic migration, particularly from the Eastern and North-Eastern parts of the country.

The study highlights that Kerala has been a frontrunner in promoting, adopting, and utilizing information technology, becoming home to over 250,000 IT professionals in 2023, a substantial growth from 78,000 in 2016. However, it is acknowledged that, despite this progress, Kerala has not kept pace with other States in the IT revolution. Given the limited land resources and population density in Kerala, governments over the years could have prioritized and focused more on the IT sector to maximize the State’s potential for economic development.

There is a discernible shift in the approach of the LDF Government, as it now claims to support entrepreneurship, though critics argue that there is a lack of concrete actions to substantiate this stance. According to Jose Sebastian, the Left, after a prolonged hiatus, seems to acknowledge the urgency of catching up with the missed opportunities in industrialization. And that is indeed a BIG difference noticeable over the last six years.

He has a note of caution and feels that even if the LDF Government aspires to alter the mindset of the general public and bureaucracy towards entrepreneurs and the self-employed, the deep-seated perception that entrepreneurs are exploiters remains a big challenge.

Drawing from his experience of having worked earlier in Ahmedabad, Jose Sebastian highlights contrasts and points out that, in Kerala, individuals entering business are often perceived as those who have failed to secure a government job or other safer alternatives. Interestingly, even the offspring of successful entrepreneurs may not be interested in inheriting the family business, often opting for professional careers instead. This trend contributes to the succession problem, and a substantial number of successful MSMEs face closure due to this challenge.

“Young people are now going to Europe and other countries and working in restaurants and care homes to change the diapers of the elderly there. Self-esteem is something that a society cultivates over generations. Sadly, we have lost it,” he laments.

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