The state government states that the growth rate of the state has been growing close to nine per cent, and very soon Kerala will become the fastest growing state in the country. C Prathapmohan Nair tells us how realistic the claim is.
According to the Kerala Economic Review 2010, the state's economy recorded a growth of 9.89 per cent during 2009-10. The current regime at the end of its tenure seems to re-emphasise the importance of infrastructure development to work towards improvement of the region. This was evident in the recent budget as Rs 40,000 crore has been dedicated for infrastructure development programme.
The major challenges were the need for an infrastructure development policy, a comprehensive transportation policy for taking care of the states multi model transport options, in-house project development skills, establishment of a PPP division and capacity building for project development and implementation. While these concerns were not properly addressed, a number of projects which were on the cards continued to be rolling.
As foreign remittance and inflow of expats went south as a result of the 2008-9 downturn, Kerala was forced to accelerate the pace of economic reforms to create an enabling environment for development and inclusive growth within the State.
The result of this hastening initiated the completion of a number of projects which had dragged on. The projects were initiated, contributed and developed by the initiative of both Centre and State, amid a lot of push and pull for ownership of the initiatives.
The projects which have commenced operation include the much publicised International Container Transhipment Terminal at Vallarpadam, The new passenger terminal at Trivandrum International Airport, The Kochi International Marina, Vytilla Mobility Hub at Kochi, and Kochi and Kannur Bus Terminal Complex. The projects that have been given a green signal for implementation include the Vizinjam International Sea Port, Smart City at Kochi, Info Park at Kollam, Techno City at Trivandrum, Kannur International Airport, Kochi Port SEZ, District IT Parks at Kannur, Alappuzha and Kasaragod, minor ports at Azhikkal, Kollam and Ponnani, multi-product and services Park at Angamali, Hi-tech Standard Design Factory, Edu-Health City at Malappuram, Advanced Technology Park, Ramanattukara, Oceanarium at Kochi, etc.
Apart from the above projects there are a number of mega investment opportunities lined up for development. These include Kochi Metro, High Speed Rail Corridor, 2,400 MW gas and coal-based power projectâ€”Kasaragod, Electronic Hubâ€”Kochi, Life Sciences Parkâ€”Thiruvananthapuram, Pravasi Gramam, etc. All these projects are under various stages of preparation. On an overall perspective of the State, there is some activity happening all around, which ceased to happen just about four years back.
Apart from these projects, of late Kerala has seen quite a bit of an activity in the Public Sector Units (PSU) front. The State claims the turn around of about 37 of its PSUs to profit, on reality check there are at least 30 PSU on a profit making mode. This is a good sign as far as Kerala is concerned, where the labour unions play a powerful role in the state-run enterprises.
In addition to this, the latest budget has initiated five new public-sector undertakings, which would give a new life to the unemployed in the state.
Hindustan Aeronautics is setting up a new strategic electronic plant in Kasargod, National Institute for Research and Development in Defence Shipbuilding has been established near Kozhikode, Bharat Earth Movers has set up a new unit for manufacture of products for defence, railways and metro, Bharat Electronics is setting up a product support centre at KINFRA Hi-Tech Park in Cochin, Brahmos Aerospace Thiruvananthapuram with an exclusive aerospace laboratory formed by the experts of ISRO and DRDO, Indian Naval Academy at Ezhimala, a world class educational and training facility for the Navy and a rail coach factory at Palakkad have initiated their operations in Kerala.
2011 and ahead
The most important move now will be to keep up the momentum that has come up and ride on the momentum. The outside world and the investor community will be observing the support, assistance and investor friendliness offered by the government towards keeping up the momentum and realisation of the above projects, which will be instrumental in them taking a decision to invest in Kerala.
On a first hand analysis of the infrastructure and development scenario in Kerala, a number of investment gaps were observed. Addressing these gaps clubbed with the current momentum in development would make Kerala an infrastructure major in the country. The following initiatives can address the gaps and be the way towards sustainable and inclusive infrastructure development.
The current pattern of development in Kerala is uneven distribution of benefits of economic development. Kerala needs to have a planned approach and a vision for the next 25-30 years, and also identify projects and strategise for projects on a short term, medium term and long term perspective. This pipeline of projects will help in taking development to people and also attract investors to the state.
Kerala has been successful in developing and managing industrial clusters in India. Given the pool of SMEs in Kerala, thrust shall be extended to the development of a number of new industrial clusters in addition to expanding the size of the existing ones for a balanced and inclusive growth in the State. The clusters shall be in general engineering, agro based, rice mills, food processing, garments, softwood, natural fibre, gold ornaments, diamond, home furnishing, plastic manufacturing, etc. The development proposition may be undertaken in PPP and once operational, this should give about 10 per cent revenues to the exchequer.
Kerala may need to address the challenges in power generation and distribution in the State. The power generation in the state is largely hydro-electric. If Kerala is looking forward to large investment and development, power needs to be coal- or gas-based, or a number of small hydro-electric projects, which will extend sufficient power to run the industrial establishments.
Kerala has a high potential for irrigation projects. They need to extend some serious attention in undertaking and implementing small, medium and large irrigation projects which may facilitate hydro-electric, irrigation as well as agriculture sectors in the state.
Kerala is blessed with a network of backwaters. They may be classified into navigable rivers, backwaters, canals and cross canals, which can invariably be used for transportation. As water transport is the most inexpensive way of transport, especially for cargo, this option may be explored and initiated on fast track not only to decongest the roads but also for an efficient mode of transport for passengers and tourism.
Last but not the least will be the development of the 'High Speed Corridor' or 'North-South Corridor' connecting the Thiruvananthapuram to Kasaragod, which will facilitate all the development initiatives of Kerala as high speed land connectivity is the key for economic development.
While on the positives, Kerala needs to address the challenges it may face in the years to come. This will include a. increased urbanisationâ€”as shift to urban jobs would place immense pressure on urban areas, b. demographic changesâ€”as 20 per cent of Kerala population will be aged more than 60 years in next 15 years c. managing unemploymentâ€”as most Keralites prefer specialised jobs than a blue collar job, creation of jobs shall be addressed adequately and d. skill developmentâ€”as with respect to the changing trends and standards of development and implementation.
Kerala has to address the stiff resistance of the 'labour militancy'. The unions charges a 'looking fee' (fee taken for letting the stakeholder load/unload the goods and for not doing the work) because of which a number of investors have chosen not to do business in Kerala. It's not long ago that the CMD of a well known listed company had to unload the goods for his company, and Sisters of a Christian institution had to unload construction goods to be used for their institution. As the government is trying to put up an investor friendly face to invite and initiate development and development partners to Kerala, these labour related challenges would hamper the efforts and leave the state singled out by investors.
PPP is the order of the day in accelerating infrastructure development to achieve inclusive growth. Private investment constituted about 25 per cent of the total investment in infrastructure in the 10th Plan, while it is 36 per cent in the 11th plan and is expected to rise further to the level of 50 per cent for the 12th Plan. The government needs to create an enabling environment for private investment in infrastructure development and also to create new growth opportunities within the State.
The road ahead
While maintaining the momentum, improvement in labour relations and investor friendliness are the main parameters, the involvement of Non-Resident Keralites (NRK) would extend an impetus to the growth of infrastructure development in Kerala. The most important axiom for Kerala to extend its success of other fields to growth and development is to have a solid political consensus and commitment, for development of infrastructure in the State.
The author is Consultantâ€“PPP for Kerala and Tamil Nadu, Asian Development Bank (ADB). Views are personal.