`Kerala Model' driven up the wall by Gulf reverse-rush, say State's Planners

Written by M Sarita Varma | Thiruvananthapuram | Updated: Feb 20 2009, 06:27am hrs
Kerala, where India's biggest per capita consumer lives, will have to rethink on its famed `Kerala Development Model', if the reverse migration from Gulf continues, its planners have realised. 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 Kerala's past development strategy - exposure to world economy - will now paradoxically hurt the State, says 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', cautions Economic Review-2008.

"Anticipating a phenomenal increase in the returning Gulf immigrants, we will ready an NRI package in the State budget. The package will include immediate redressal and rehabitilation to ensure livelihoods of the Gulf returnees. This support for the NRI diaspora was sorely missing in the Centre's 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).

Chief Minister VS Achuthanandan says that the harshest aspect is that out of the 22 to 25 lakh Keralites sending home about Rs 30,000 crore per year the lion's share comes from blue-collar workers in Gulf. And the silver lining is that banks are yet to feel any lull in the NRI deposits. "This could, however, be a deceptive lag in impact," warns a spokesman of State-level Bankers Committee.

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 United States, adds 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 arecanut has found demand in world market ebbing. Prices are yet to fall below costs of production, but this likely to happen soon, cautions State Planning Board.

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 frowns deeply at the Centre's 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" and might as well be called public investment, it says.

Given the letdown in Gulf inflows and cash-crop forex, 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.