Kerala scores high on many parameters of social development and governance, and its per capita income is one of the highest in the country.
Kerala scores high on many parameters of social development and governance, and its per capita income is one of the highest in the country. The coastal state, however, faces the issues of very high unemployment rate and below-potential economic growth. It is still to remove the perception of not being investor-friendly, with reports of frequent hartals and trade union militancy. Chief Minister Pinarayi Vijayan spoke to FE’s KG Narendranath on the side lines of the recent ASCEND 2019 held in Kochi to showcase steps undertaken by his government to promote entrepreneurship and improve ease of doing business in the state.
Hasn’t this investor meet, the first by your government, come a bit late in the day?
In the past over two-and-a-half years, we have taken several legal and administrative steps to facilitate investments into the state and improve ease of doing business. These include an omnibus legislation amending seven existing Acts and a common application form for as many as 14 departments, both aimed at ensuring time-bound, hassle-free clearances, besides the proactive steps to make land available to units in industrial clusters at affordable rates. In all, over 100 reforms have been carried out, solely with investor interest in mind.
The message has gone to all stakeholders including the bureaucracy that entrepreneurs must be treated as valued partners in the state’s development. There is a need to find more employment for the state’s youth here itself. This conference (ASCEND 2019) marks a culmination of a series of investor-friendly steps taken by us since assuming office.
While a few global investors may have set their eyes on the state given its abundant human capital and resources like a long coastline, domestic corporate groups aren’t viewing Kerala as an investment hotspot yet…
Over the last few decades, apart from other factors, direct or tacit prodding by the Central government has influenced Indian corporate groups’ decisions on project sites. These groups don’t always take independent calls on where to invest. Unfortunately, Kerala never got the benefit of such government involvement in investment decisions by the private sector.
Do you mean such prodding by the Centre has had a political content?
Politics cannot be wholly separated from it. We are not getting due share of public (Centre/CPSE) investments either; even the commitments made by the Centre are not often getting fulfilled. In case of central transfers, the criteria being evolved tend to militate against us; we are sort of penalised for our relative success in many areas.
Kerala’s economic growth is below potential. GST hasn’t bolstered the state’s tax revenue buoyancy, and non-development expenditure remains high, leaving very little for capex. Isn’t the state of the economy a cause for concern?
It is true that the state’s economy and fiscal situation are not exactly in a very good shape. We are making efforts to address the situation and these are yielding results on the ground. There are signs of investments picking up in a big way. Relationships are being forged (with investors). Savings of non-resident Keralites have become a major source of investments.
Why should an investor prefer Kerala to other states?
The firms that are already here have only good things to say about the state. Their experiences are what we can use to invite others to the state. People are our greatest strength. Kerala’s labour quality is the best in the country, the state’s social and cultural milieu will enthuse investors, along with its fully-digital status, rich biodiversity and impressive travel connectivity by road, rail, sea and air.
The PPP model has hit hurdles in the country, necessitating changes in concession terms and more sops to industry. Kerala seems to have tried its hand in certain PPP financing structures…
There are many types of PPPs we are employing to boost investments. The Kerala State Industrial Development Corporation has made headway in forging JV units with the industry. Another model is that of CIAL (Cochin International Airport Ltd) where the government retains the leadership role while HNIs and others have equity participation. The state’s cooperative sector is very robust and resource-rich to harness private capital for development projects.
Hasn’t militant trade unionism been the biggest hurdle to Kerala’s development?
It is only propaganda, not the reality any more. No industry that has set up shop here would say trade unions have been a problem for them.
But frequent, ‘lightning’ hartals have dented the state’s image as an investment/tourist destination…
That is another issue. There is a general agreement among all quarters in the society that hartals at the drop of a hat should be avoided. We cannot, however, subscribe to the view that hartals should be banned as they have a utility as a mode of agitation; hartals may be resorted to at a certain stage (to mark protest). We are going to convene a meeting of all stakeholders soon and, possibly, a consensus might emerge on how to proceed on this matter.
There is a view that Kerala’s social development and needs are not exactly compatible with many central schemes. Is there laxity on the part of the state as alleged in implementing such schemes?
We are getting a tiny share from the Centre to implement various social sector schemes, less than 10% in many cases. For instance, we have a pension scheme that benefits 42 lakh families and costs `7,000 crore annually, which is run with practically no contribution from the Centre. With the reduction in the Centre’s share in such schemes, we are being forced to find alternative resources and this has put a burden on the exchequer. As for welfare schemes, Kerala cannot be treated at par with other states (that are socially less developed) as our needs and priorities are different.
The spirit of cooperative federalism is not being upheld by the NDA government and there is an undue further concentration of power at the Centre.