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Reviewing Public Sector Employment in Kerala

The Public Sector is no longer the primary employer in the organized sector.

I had written an article on Swarajya almost a month ago, about PSUs in Kerala and how Public Sector Employment is viewed in the state. I had briefly reviewed the burden that is being created on the state for the unreasonable number of ‘employment opportunities’ that were being ‘created’.

After the release of Kerala’s Economic Review for the last Financial Year (2015–16), one can have a more through review of Public Sector Employment in Kerala, and how it will come to affect the state in the coming years.

Kerala, as noted in the Economic review itself, has an unreasonably high Unemployment rate (12.5%) compared to All-India Unemployment Rate (5%). As we all know, 30 lakh Kerailates work in the gulf, providing the state with around a third of its GSDP.

For what might be the first time in Kerala’s history, Organized Private Sector Employees now outnumber Public Sector Employees, as shown in I.1.

I.1: Employment in organized sector

This is a positive sign, The organized private sector employment rising dramatically over the course of the last 5 years. I would attribute this rise to a multitude of factors, the first of them being investment in real estate and service sectors by NRKs. As the money raked in by them reach a tipping point, those ‘money orders’ that flew in from the gulf changes into investment in the state. These can be illustrated with the Lulu Group, RP Group investing in Retail and Hospitality and Shobha Group investing in Real Estate. All these groups were established by NRK Businessmen, and made their initial investments and began in the “Gulf”, so to speak. Now these organizations are the prominent private sector employers in Kerala as well.

What is telling in this particular scenario is that their investments are limited to the Service Sector, which already plays a dominant role in the state. No NRK or any other private sector has invested in the industrial sector in the last 10 years. Secondly, the state (or rather, the previous UDF Government) had, in a positive step, encouraged Start-ups and tech entrepreneurs. This as well as the growth of IT Parks has lead to this positive growth in this sector.

But what remains, in my opinion a negative for the state in the long run is the stable nature of the employment in the Public Sector Employment, as evidenced in I.1, as well as in I.2, one can see that the number of Employees have not declined.

I.2: Employment in Public Sector

This has shown that the state is not in the best position to witness a surge of pensioners in the coming years, almost 20,000 pensioners being added every year, and pensioners already outnumbering the employees of the government. This will lead to a pyramiding effect, where the states burden will increase as the years go by, and consequently, the taxpayer’s burden increases as well.

The state shelled out 8,000 crores as pension in 2011–12, having only seen it to have increased to 11,000 crores in 2014–15, and for 2015–16, 15,000 crores. This will only increase in the coming years.

Does the state have plan to tackle that? Especially with increasing debt levels? I feel that this aspect has not been thoroughly put through the Government’s formulations.

Men also outnumber women in Public sector Employment; 67.5% of employees in the sector are men.

I.3, Breakdown of Public Sector Employment

As a true welfare state, the majority of Public Sector Employees are in the Social and Personal Services. The number in this sector has not declined, keeping with the general trend of employment. (I.3). The relative share of the Sector, as a result has increased from 44.7% in 2005 to 49.6% in 2016, while that of the agriculture and allied industries fell (from 7.5% in 2005 to 5.6% in 2016), fingers can be pointed to the state’s ever declining agricultural sector.

I have already covered the problem with the rate of employment in KSRTC. While I do not advocate the KSRTC be fully scrapped, considering the essential role it plays in the transport sector in Kerala. But there are many other PSUs and entities that are loss making that I would rather see scrapped considering the burden that they are on the tax payer.

The current Government being a Communist one though, I expect none of them to be closed, and anticipate the launch of two or three more PSUs.

Will Public Sector Employment come down? In all likelihood, it will not. The nexus that exists between employment opportunities in the Public Sector and Political appendages to it. Besides, considering the unemployment rate as well as other factors, the government is under pressure to create more opportunities, as well as cater to the needs of returning NRKs.

The State has responded by putting an extraordinary amount of funding and resources at the disposal of the statutorily constituted Kerala Infrastructure Investment Fund Board (KIIFB), to invest in everything from Elephant Rehabilitation Centers to Palaces.

Enough of that, that is an article for another day.

The idea of the Government to ease pressure of is to firstly provide a cushion for investment in the IT sector so more investment will flow in, as well as to spur growth is “to provide high class infrastructure facilities”. (In a later article, I’ll cover that as well).

In conclusion, Public Sector Employment is a very important source of employment in the State. But to what burden to the tax payer is the question that needs to be asked. and answered.


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