The Kerala model of development seems to be failing. As per a report titled ‘States of growth 2.0’ by ratings agency CRISIL, the gross state domestic product (GSDP) of Kerala grew at slowest pace among 17 large states of the country. The growth rate of 5 percent is lowest among the 17 states which are in non-special category. The rating agency used the data by Central Statistical Office (CSO) to prepare the report on state GDP growth. The study left out only Goa from non-special category given that the size of the state is very small.
The GDP growth in Kerala was lowest for the fiscal year 2017-18 despite the fact that Consumer Price Index (CPI) inflation touched 6 percent in the state. The public expenditure of the state was also high with fiscal deficit at 3,700 crore rupees (3.4%) of GSDP of Kerala which is 7, 47,945 crore rupees. Under the leadership of Communist leader Pinarayi Vijayan who was chosen as chief minister by Left Democratic Front (LDF) after the 2016 state assembly election, the percentage of capital expenditure in overall budgeted expenditure declined substantially. The decline in capital expenditure led to slowdown of GDP growth in last two and a half years of Vijayan rule.
Kerala was also among the bottom 3 states which grew at the lowest rate between fiscal year 13 to fiscal year 17. The average GSDP growth in the state was 5.8 percent compared to 9.9 percent in Gujarat. The celebrated economists from left side of political spectrum like Amartya Sen and Jean Dreze like to pitch ‘Kerala model of development against the Gujarat model of development. But as the report by CRISIL suggests, Kerala is way behind Gujarat in generating economic growth.
The Kerala model even fails to create jobs in employment intensive sector despite the fact that employment generation was being pitched as a major benefit of this model. The average year on year growth from FY 12 to FY 18 in employment-intensive sectors was 5.4 percent compared 11.5 percent in Gujarat. The growth in employment-intensive sectors was almost 1 percent higher to average GDP growth while in Kerala it was 0.2 percent lower to average GDP growth. This data busts the myth that Kerala model is better in employment generation compared to Gujarat model.
The Gujarat Model of development was being criticized by left-leaning economists like Amartya Sen and Jean Dreze but it was appreciated by center-right economists such as Jagdish Bhagwati and Arvind Panagriya. The Kerala model of development was pitched against the Gujarat Model but many economists of the right said the Communist state Model is not sustainable as it depends on remittance money rather than its own resources and industries. Recently when oil prices started falling, the Gulf countries have had massive cuts in their workforce, which forced several Malayalis to shift back to Kerala. A model which runs on the shoulders of others is not sustainable for a long period of time, and will be vulnerable to external factors.
