State's growth defies conventional logic

By Our Special Correspondent

THIRUVANANTHAPURAM, FEB. 21. Kerala's economy in the post- liberalisation era has been displaying a curious tendency to defy the conventional logic which holds that growth buoyancy will depend on how well the industries perform.

The post-reforms period is witnessing a revival of economic growth in Kerala after a long phase of stagnation. However, this buoyancy is inspite of the sluggish performance of the industries. It is happening on account of a steady growth in the service sector.

This interesting finding comes in a paper titled `Industrial Growth in Kerala: Trends and Explanations' authored by Dr. K. K. Subrahmanian and Dr. E. Abdul Azeez of the Centre for Development Studies (CDS). They have selected for their study the performance of the State's economy during 1981-82 to 1990-91, representing the pre-reforms phase, and 1991-92 to 1997-98, representing the post-reforms phase.

The analysis has been carried out by them in a comparative framework, with the growth of the State economy being evaluated against the performance of the neighbouring Karnataka and Tamil Nadu and also the nation as a whole.

During the pre-reforms period covered by the study, the annual growth rate of net domestic product (NDP) of Kerala had been 4.83 per cent against a more impressive Karnataka growth rate of 5.39 per cent, Tamil Nadu rate of 5.35 per cent and an all-India rate of 5.36 per cent.

During the post-reforms period, the State's NDP had been growing at a faster rate than Karnataka's and also the nation's as a whole. This period witnessed 6.05 per cent annual growth of NDP in Kerala, compared to Karnataka's 5.46 per cent and the nation's 5.64 per cent. Tamil Nadu's performance, with a 6.26 per cent NDP growth rate annually, has been better than Kerala's.

The rate of growth in absolute value of State NDP has a limitation in giving the real picture of the economic progress of a region, since it is not adjusted for the size of the population. A clearer picture of the growth behaviour can be obtained from how the per capita income has performed. When this criteria is taken into consideration, Kerala's economic growth can be seen to be more impressive than either of the two neighbouring States and also the nation as a whole, Dr. Subrahmanian and Dr. Azeez analyse.

During the pre-reforms period, the annual rate of growth of the per capita NDP of Kerala had been 3.39 per cent against 3.51 of Karnataka, 4.37 of Tamil Nadu and 3.23 on the national level. After the economic reforms of 1991, it has climbed to a spectacular 5.10 per cent in the case of Kerala against 4.02 of Karnataka, 4.90 of Tamil Nadu and 3.80 on the national level.

Tracing the sectoral contribution to the total NDP in Kerala, the researchers say that during the pre-reforms phase, agriculture and allied activities had accounted for 31.87 per cent of the overall growth in Kerala, with industries accounting for 17.43 per cent and the service sector, 50.70 per cent. The sectoral contribution after the reforms came down to 29.27 per cent and 11.68 per cent for agriculture and industries respectively, while it went up to 59.05 per cent for the service sector.

The study says that the service sector in Kerala has been growing at an annual rate of 7.91 per cent during the post- reforms phase, which is considerably higher than the 6.47 per cent growth at the national level. Before the reforms, the growth rate in this sector was 4.35 per cent in the State against 6.38 per cent at the national level. The post-reforms growth in service sector of Kerala is higher than that of Karnataka (5.79 per cent) and Tamil Nadu (7.60 per cent). The researchers say that the Kerala experience does not provide empirical support to the growth stimulating effect in the industrial sector generally expected of the ongoing reform- process. And, given the general character of the State, a shift in policy to give a higher priority to what is called `servitisation' of the economy can bring better dividends in the post-reforms environment.

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Section  : Southern States
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