The Hindu Business Line : Kerala must look to services, manpower for growth: Study

THE age of remittances and consumption spurring economic development is behind Kerala. The State will have to forge new models for sustaining growth in the 21st century.

"The future growth pattern should be based on a combination of export of services and export of skilled manpower," a study by the Centre for Development Studies, Thiruvananthapuram, has said.

Kerala's lopsided development - human development before economic development - has been characterised by steady economic growth since the eighties with further acceleration in the nineties, the study `Remittances, Consumption and Economic Growth in Kerala: 1980 - 2000' by Mr K. Pushpangadan has said.

The leading source for this growth was the services sector instead of the conventional agricultural and industrial sectors. Further analysis showed that transport, trade, hotels and restaurants, telecommunications and other services were the primary engines for this growth.

The flow of remittances resulted in a surge in demand, which resulted in an increase in demand for durable goods. In the absence of major industrial production centres, this was accompanied by a surge in demand for trade and transport.

The surge in demand for telecommunications threw up some strange causes. The study concluded that the demand for telecommunications came mainly from `spouses away households' and from `elderly living away households' in the State, for keeping in touch with their near and dear ones - living within and outside the State.

But the real expenditure comes from long-distance calls made by spouses living away and elderly living away households.

The combined effects of forward and backward linkages in the growth of tourism, trade and transport had resulted in the mushrooming of hotels and restaurants in the State.

The growth of private institutions in health and education also contributed to the overall growth of the services sector during the period.

Sadly, commercial banks have not played any significant role in the intermediation of the huge surplus generated by foreign remittances. As a consequence, the credit-deposit ratio of the State has continued to decline, the study pointed out.

But bankers like Mr T.R. Madhavan, Managing Director and CEO of Dhanalakshmi Bank, say that this is mainly due to the absence of viable proposals from the State. He said that the rate of rejections for credit from Kerala is substantially lower than the rejections for proposals from other States.

This consumption-led growth cannot be sustained unless new markets for skilled labour are explored globally and also by providing world-class training centres for these skills. This alone will sustain migration and accelerate the pace and tempo of remittances in future.

The traditional growth avenues based on labour-intensive and land-intensive traditional agricultural commodities could prove redundant in Kerala's context, the study said.

The linkages of the tourism sector should be further explored and exploited by bringing in greater volume of domestic tourists into the State.