The Approach to Kerala’s 12th Five-Year Plan

Presented at the CM's Meeting with Economists

16 November, 2011


I am grateful for having been invited to present my views in this forum presided over by the Chief Minister (spoken in Malayalam). I would like to start by thanking the Kerala State Planning Board for inviting me for discussions even at the stage of drafting of this Approach Paper.


     While I am in the broad agreement with the objectives stated in the Draft outlines of Approach paper -“in the attainment of a productive, inclusive and sustainable economy” - I believe that the strategy could be better specified. Quite simply, what are the means to be adopted to achieve these objectives. From the quantitative point of view, we would want to know what is the level of investment needed to attain the projected rate of growth. And how is this level of investment to be financed? This is a trivial exercise, and the KSPB is fully equipped to undertake it. Only, we would want to know this information before judging the plan for its realism.


     Let me now steer the discussion towards an appreciation of the strategic factors at stake when planning for a growing Kerala economy. One of the objectives stated in the Draft Approach Paper is to lessen the dependence of Kerala on the rest of the world, particularly the Arabian Gulf region for employment. The problem of unemployment is also mentioned in Shri K. M. Mani’s most recent budget. This is an entirely laudable objective. However, we must realize that the demand for labour is a derived demand, ie, it presupposes that there is a prior demand for Kerala’s goods. Kerala’s is a regional economy. For there to be demand for its goods, they must be competitively priced. The single most important determinant of this price is the productivity of labour. But labour is not fully in command of its productivity. Labour productivity is related to the levels of education and the physical infrastructure. In the provision of both of these government has a major role. In fact, from the history of development globally, the experience of Kerala and from economic theory generally we know that here the role of government is greater than that of the private sector. To discharge that role the government in Kerala would have to strengthen its public finances and greatly improve the functioning of the machinery of government. The relative importance of financial heft and smart governance would vary across segments of the economy. For example, in higher education financial resources matter far less than would governance. However, in the sphere of physical infrastructure the need for funds is likely to be far greater.


     In planning for the future of Kerala we should set our sights high. I wish to give 2 examples. The 3 ports of Kerala – Kozhikode, Kochi and Kollam – are older than that of Singapore. But today Singapore ranks as one of the great ports of the world while our own ports languish. (It may be pointed out that ports are a Central subject. This may be so, but then we must impress upon the Central government the need to invest in our ports). My second example in the context is from education. There are at least 3 government colleges in Kerala that are one century old. They are older than Delhi University, but none of them figure in the All-India rankings. We must reflect upon this. I repeat my claim that to improve higher educational standards in Kerala better governance can go a long way. In fact, it is the single most important ingredient. Higher education itself is important as the university is a potential source of ideas on the future of a society.