'Kerala model' driven up the wall by Gulf reverse-rush, say state planners

Written by M Sarita Varma | Thiruvananthapuram | Updated: Feb 21 2009, 05:20am hrs
Kerala will soon have to rethink on its development model if the reverse migration from Gulf continues, say planners of the model.

The model of high HDIs (Human Development Indices) led by early investment in education and health and backed by expat sendhomes, had long been a posterboy of low-cost development in international welfare economics discourse.

The key element of Keralas past development strategyexposure to world economywill now paradoxically hurt the state, said Economic Review-2008, brought out by state planning board.

With oil prices crashing to $35 per barrel, oil producers have been hit. This will dry up remittance inflows and accelerate reverse migration amounting to an import of distress.

Anticipating a phenomenal increase in the Gulf immigrants, we will ready an NRI package in the state budget. The package will include immediate redressal and rehabilitation to ensure livelihoods of the Gulf returnees. This support for the NRI diaspora was missing in the Centres Interim Budget, although the emigration fees kitty culled from Kerala alone was as high as Rs 10,000 crore, state finance minister TM Thomas Isaac told FE.

The emigration department shows 40% fall in applicants setting off for Gulf in January 2009. In 2007, 8.9 lakh Keralites have returned, as per statistics available with the non-resident Keralites affairs department (Norka).

Kerala chief minister VS Achuthanandan said the harshest aspect is that out of the 22 to 25 lakh Keralites, sending home about Rs 30,000 crore per year, the lions share comes from blue-collar workers in Gulf. The silver lining is that banks are yet to feel any lull in the NRI deposits.

The inflow of foreign tourists to the state is equally feared to dry up soon. Kerala, is perhaps the most vulnerable among all Indian states to the financial crisis in the US, as per the Economic Review. The study was tabled in Kerala Assembly on the state budget presentation eve on Thursday.

The state, a major exporter of primary commodities like coir, cashew, rubber, pepper, spices and areca nut has found demand in world market ebbing. Prices are yet to fall below costs of production.

At Rs 3,367 crore, revenue deficit for 2007-2008 has fallen 0.25% over that of the previous fiscal. Meanwhile, the fiscal deficit in 2007-2008 has shrunk by 2.3% over previous year. Economic Review explains the revenue gap with increased developmental spending.

Kerala Planning Board, led by vice-chairman Prabhat Patnaik, also objected at the Centres emphasis on mega-projects through public-private partnerships. Rural infrastructure too should be adequately built up. Besides, in the current depression, private investment is hardly forthcoming.

Given the slowdown in Gulf inflows and cash-crop forex, the state planners have found self-prescription in ramping up paddy production through food security schemes.

But then the welfare-burden from Gulf influx remains the main food for thought for the resource-starved state government.