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C.J. Punnathara

Kochi , Dec. 29

THOUGH the Kerala model of development has put human resource development and quality of life improvements at the forefront of policy imperatives, Dr P. Nandakumar, faculty at the Indian Institute of Management, Kozhikode, has said it "did not have elements inbuilt to create consensus in the wider society, among all the players in the economy."

This, according to Dr Nandakumar, was because the model failed to deliver in terms of growth and employment generation. It also did not relate social spending by the government to revenue generation. It also failed to create a favourable climate for private investors and the much-needed investment funds did not materialise, flowing instead to neighbouring States, with lower wage rates and a greater degree of labour union docility.

In a recent article in the magazine Spandan, Dr Nandakumar has argued that the Kerala model did not have elements inbuilt to create a consensus in the wider society for sustained growth in the long run.

The widely analysed and much-lauded Kerala model put the State on a par with the finest achievers in the world in terms of human development and quality of life indicators.

It took Kerala's old economy to the threshold of the IT era, which included the initial conditions of a highly literate workforce with excellent healthcare and housing, derived from specifically earmarked public investments. Yet this attractive model failed to deliver in terms of growth and employment generation.

Dr Nandakumar advocated that the well-oiled collective bargaining process on the lines of what is witnessed in Scandinavian countries alone will protect the interest of the unionised labour, even as it sets the stage for added investment and growth. Based on theoretical and empirical studies, he said the IIM, Kozhikode, can take the lead in isolating the factors that ought to come into play, and working out a framework for such bargaining process.

However, he cautioned that Kerala should not fall into unbalanced growth scenario of isolated expansion of the new economy, which could have overall harmful effects. He cited the case of California, where he said the burgeoning wage rates in the IT sector had pushed up the cost of living and lowered the real income of the relatively unskilled labour.

There have also been apprehensions that the growth of the new economy sectors could lead to a process of the Dutch Disease, a process of decentralisation which leads to lowering the profitability in the old world manufacturing sector.

Taking cognisance of this phenomenon, Dr Nandakumar has said only a system which incorporates the high employment potentials in the old world economy will work in the case of Kerala.

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