Letters 26 July 2021

Letters 26 July 2021
New manufacturing growth in Kerala

The article by Jayan Jose Thomas (The Achievements and Challenges of the Kerala 'Model') has analysed well the unusual and interesting trajectory that the economic development of Kerala took, as a result of deliberate public policy.

The basic premise of the article is that the developmental path taken by Kerala in the first few decades after 1955 took the State on a course that was quite different from that pursued by all other States. This resulted in the State achieving ‘developed country’ HDI levels at ‘developing country’ incomes.

In the discourse about alternative paths to development in India, what is lost sight of is that it was precisely this path that was pursued with such success by the East Asian ‘tigers’, that enabled them to fully exploit the opportunity provided by globalization in the last two decades of the last century. The East Asian countries were able to cash in on the foreign direct investment (FDI) that went searching for low cost manufacturing locations in the 1980s, and moved to the next orbit in terms of industrial, and thereby, economic development. Kerala was unable to take advantage of this opportunity, since economic policy was a matter for the Union Government to decide, and that was slow in coming.

It is however interesting that when the economic policy changed in 1991, and the opening up of the economy started to happen, the performance of Kerala in comparison with the other states has been quite good, with the state’s economy growing faster than the national average, and better than most states. This happened despite big ticket investments not coming to the state, which was probably due to the perception that Kerala had militant trade unions and an unhelpful industrial ecosystem.

However, the development of several manufacturing companies that started as ‘startups’ and have grown into successful businesses operating at a national and even global scale during the past three decades, points to an interesting development that seems to have passed below the radar of observers. These companies operate in diverse fields including spice oleoresin and extracts, medical devices, electronics equipment, hi-tech rubber products, steel castings, medical diagnostics, dental prosthetics and implants, garments, and so on.

The startups emerging from the incubators in the state are attracting growing interest from private equity and venture capital investors, and these investments have grown from less than $10 mn in 2014 to $100 mn in the first six months of the current year!

These success stories were enabled more by an unusual combination of factors that have created an ecosystem suitable for medium, small and micro enterprises (MSMEs), that does not exist anywhere else in India. This ecosystem is characterized by almost universal literacy with no gender bias, good health outcomes again with no gender bias, harmonious social structure, good communications and transportation, most sections of society participating in and enjoying the fruits of development, high and well dispersed urbanization, and a high disposable income based on inward remittances from skilled people working outside the State.

It is interesting that, while manufacturing as a proportion of GDP has been falling at the national level, in Kerala, after falling to below 8% of GSDP by 1980, it started to rise again and is today over 13%. For the reasons set out earlier, and outlined by Jayan Jose Thomas in the article, it can be said that manufacturing will continue to grow steadily, with more start-ups and MSMEs setting up operations in Kerala, and growing due to the helpful ecosystem that is available here.

C. Balagopal, Thiruvananthapuram
High energy conversion of livestock

An important biological fact about livestock is that they are the most efficient energy converters (Is it a Case of 'Meat-versus-Planet'? Lessons for the Global South). They convert hard indigestible plant cellulose in to high quality protein and milk. Pigs convert garbage into high quality protein. Such efficient energy conversion is not possible with todays technology. This important role of livestock is often overlooked.

Dr. Amalorpavanathan, Chennai
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