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Kerala: The “Money Order economy”, indeed.

But what if the money order never got through?


Kerala’s Economic growth since the late 80s has been the product of a remittance economy.

As I have discussed multiple times on social media, Kerala’s economy is an unstable one, composed as it is, primarily of remittances sent in to Kerala by Non Resident Keralites which totaled over ₹71,000 crores in 2013. As I had calculated, 36.3% of Kerala’s economy is derived from remittances. This is why Financial Express famously described Kerala as a “Money Order economy”, and it truly is. The Question remains, however, is whether such an economy is stable – or a model that can be replicated. The answer of course, is self-evident.

The Economic Effect

The Macro Economic effect that it causes to Kerala is huge. Kerala’s economy is more or less driven by this remittances, especially household remittance, which increases the spending power manifold. There has been a very steady increase in the amount of money that has been remitted into Kerala, which has in fact outpaced has outpaced domestic growth. From ₹43,288 crores in 2008, total remittances grew to ₹49,695 crores in 2011 and then to ₹71,142 crores in 2014. The growth of remittances in the 2011 -14 period is rather unique; the number of Non-Resident Keralites increased by only 6% compared to the previous 3 year period, Yet the growth of  remittances increased by 43%. A starker increase can be seen in the amount sent to Kerala by way of household remittances to Kerala. Household Remittances were a mere ₹8,000 crore in 2003, ₹12,000 crores in 2008, to ₹15,000 crores in 2011 and then increasing to ₹25,000 crores in 2014. ( all figures approximate)

All these statistics lead us to one and only one conclusion; that the Kerala is no economic model to be followed. A social development model, yes, but the underlying economic model is unstable. Kerala is living on borrowed time. Economic and Social development are related to each other, One is necessary for the other, one cannot exist without the other.

If the Kerala Economy collapses tomorrow due to the “Gulf imploding” for the innumerable reasons it could, the gains of social development across the years would be lost in a single swoop.

A consumerist, communist state


A paddy field in Kozhikode. Paddy production has declined by more than half since the 1980’s in Kerala. (Credits: Ajeeb Komachi)

The only reason that the Kerala Economy has sustained itself is due to the gulf boom over the course of the last 20 years, the gains from which has allowed the state to achieve such a high HDI. Kerala has no industry or agriculture;its service sector (the largest of the three) is propelled by spending of the NRK households. Most of the agricultural produce consumed in Kerala come from outside the state; there is not one consumer good produced in the state in major quantities. Kerala is a state where Communists dominate the political arena, yet ironically, the state itself is a wholly consumerist one.

The state  has the highest number of Public Sector Enterprises, almost all of who which  run record losses, yet cannot be shut down due to the welfare employment and political compulsions. It takes an industry 120 days to get an Non-Objection Certificate from the Pollution Control Board, 90 days for a layout approval, 30 days to get consent from the Fire & Rescue authority, and so on and so forth. How can anyone hope to  start anything in this state? This is not to mention the external political barriers that exist in running a factory or business, with the ability of trade unions to regulate and control with the help of usual suspects at influential posts.

The most alarming problem with the economic situation is the lack of an honest debate in a public forum. While the state government has more or less come clear with the fact that they face a “dire” financial situation (putting it mildly, of course), the rot runs deeper than what the the government has “revealed”.


Kerala Economic Survey, 2016

Kerala Migration Survey, 2014

KSIDC Report on Ease of doing business in Kerala, 2017

#Analysis #Economy #Kerala #KeralaModel

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