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December 14, 1998


Business Commentary/ Rajeev Srinivasan

Kerala: India's future California

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No, I am not kidding. It is true that today just about the only things that California and Kerala have in common are the following: a southwesterly physical location in their respective countries, and a population that is approximately 30 million. Maybe also that both produce a lot of high-value agricultural products, and both have lots of sunshine. Otherwise, there is pretty much no comparison. But that -- if N Vittal can help it -- may be about to change.

The Information Technology Advisory Council for Kerala, under the chairmanship of the irrepressible Vittal, met recently and made a number of recommendations. The former Union secretary of electronics and telecommunications and present chief vigilance commissioner seems to believe -- he does concede that he is an optimist -- that if these recommendations are followed through, Kerala will indeed become a high-tech power.

IT has become a critical part of the future for Kerala. For one thing, there is the element of competition: every other southern state, namely Karnataka, Andhra Pradesh, Tamil Nadu and even neighbouring Maharashtra, has latched onto IT as a generator of prosperity for their burgeoning populations.

The high-profile Nara Chandrababu Naidu -- who picked up yet another encomium as Technology Man Of The Year at the Comdex India technology fair in New Delhi -- has energised the region after explicitly identifying IT as a core competency for his state. In Tamil Nadu, too, which was hitherto viewed more as heavy-industry location, former Union industries minister Murasoli Maran has taken on the mantle of local champion for high technology.

Karnataka, with its critical mass of technology industries centred around Bangalore, and Maharashtra with the weight of its industrial complex in Bombay and Pune, are already acknowledged centres of IT. That leaves little Kerala as the country cousin, and that probably means Kerala simply will have to try harder -- it is hardly known for technology.

What Kerala is famous for, of course, is natural beauty, and in turn, tourism. In the short span of ten years it has evolved a remarkable campaign centred around the themes of heritage tourism and ayurveda. Helped to some extent by the troubles in Kashmir which have decimated the tourist traffic to that state, Kerala (with its clever advertising positioning as 'God's Own Country') has suddenly emerged as a major tourist destination.

Everything is not hunky-dory, alas, even in tourism. Instead of attracting the free-spending, affluent, environmentally conscious visitor from overseas, Kerala has largely attracted the backpack crowd -- thus Kovalam, one of the most beautiful beaches in the world, sometimes feels infested with penurious European kids who spend little, go on drug binges, and are general, undesirable riff-raff. The pristine nearby Varkala may, sadly, follow the same path.

Yet, the interesting thing is that Kerala identified its unique and sustainable advantages -- the lovely backwaters that make for unforgettable trips in refurbished country-boats, ayurveda techniques to rejuvenate tired bodies, the martial art of Kalari Payat that is the ancestor of Karate, Judo etc, old wooden taravad houses that have been converted into spartan ethnic lodges serving up traditional cuisine and medicinal massage, and the ancient dance forms of Kudiyattam, Mohiniattam and Kathakali.

Just as Rajasthan has successfully promoted its variant of heritage tourism, with the splendid palaces, the tradition of chivalry, and the colorful Pushkar Fair, Kerala has highlighted its more humble country homes, the tradition of herbal medicine, and the re-staging of a Trissur Pooram-like event with caparisoned elephants. Even though purists may complain that Kerala, like its look-alike Bali in Indonesia, is prostituting its culture for a few tourist dollars.

Another area where Kerala demonstrated vision was in the early establishment of Keltron, the state electronics development agency, in an attempt more than twenty years ago to bring the manufacturing of electronic equipment into the state as a small-scale, even cottage industry, that would take advantage of its competencies. Alas, Keltron, for reasons that are not clear to me, has run into financial difficulties.

Thus, there are areas where Kerala has been far-sighted and visionary. That's the good news. The bad news is that the Kerala pattern of income redistribution and reform has run into a brick wall. This experiment, much beloved by development economists, has transformed Kerala through thorough-going land reform and citizen empowerment.

As widely quoted, for example by Professor Amartya Sen, Kerala has managed to reach first-world levels of human development and a physical quality of life at income levels that are a mere one-hundredth of the West. This has been achieved essentially through ensuring that whatever wealth is generated in Kerala is made available to all sections of the populace. Thus there is little of the grinding poverty seen elsewhere in India; neither is there the unbelievable opulance.

I have some statistics (these numbers are a little dated) from the Food First Institute of San Francisco, in their 1989 publication Kerala: Radical Reform as Development in an Indian State by Richard Franke and Barbara Chasin; their later papers on the topic are available on the Web. These numbers indicate the tremendous achievements made through redistribution as a development strategy.

Comparison of quality-of-life indicators, 1986

Indicator    Kerala 	India  	Low-income  USA

Per capita
GNP in $       182       290	    200	    17,480

Adult literacy
rate in pc      78       43	    N/A     96
Life expec- tancy (years) 68 57 52 75
Infant mortality per 1000: 27 86 106 10
Birth rate per 1000 : 22 32 43 16

More recent figures indicate that the literacy rate has inched up closer to 95 per cent, the life expectancy for women in Kerala is slightly higher than that for white women in the US; infant mortality has fallen; and the birth rate is about 15 -- the state has reached zero population growth. It is also likely that the per capita GNP is probably an underestimate, as the average Keralite expends considerable ingenuity in avoiding the eagle eye of the tax collector. After all, Kerala accounts for the highest (per capita) sales of all sorts of consumer goodies.

But Kerala is now beginning to run against what I suppose is a fundamental law of economics: there is no more wealth to redistribute. The state has little by way of productive industry; its traditional agricultural strengths (again millennia-old: the Roman Pliny complained that all the gold of Rome was going to Kerala to buy black pepper) are being undercut by high factor prices and poor resource management.

Kerala is sustained primarily by its exports of human capital: the educated manpower that streams out of the state to the rest of India, the Middle East, formerly to Singapore, and now to North America, sustains the state with very large external remittances (more than US $ 10 billion in 30 years) that exceed the state budget, I am told. This is not exactly a healthy state of affairs, and the state government runs a persistent deficit in any case.

Alarmingly, the hard-fought gains in the Physical Quality of Life Index are now beginning to dissipate -- it is believed that unemployment is at about 12 per cent and that fully one-third of the population may be technically below the poverty line. Thus, it is imperative for Kerala to concentrate on wealth creation.

One of the best solutions appears to be IT -- after all, it does not need great amounts of capital, it is non-polluting, and Indians in general seem to be fairly good at it. The level of human capital in Kerala is adequate, even though educational attainment levels are only average. The state's service sector is already 43 per cent of the economy: the highest level in India.

Furthermore, the infrastructure in Kerala is astonishingly good in patches -- it is the only state where there is a 2 megabyte fibre DoT connection to practically all locations, a happy consequence of the long, thin geography. Of course, this is an under-utilised resource, but it could form the basis for wiring the place for fast Internet access.

One of the possibilities in Kerala is the creation of Internet content -- given the large numbers of educated but underemployed people, it might be feasible to put them to work doing the boring but necessary activity of turning paper documents into electronic content. And this could even be done at home, assuming the last-mile problem is addressed.

Since Kerala is in any case the biggest consumer of information in India, this possibility is not all that remote. Already, there are some IT-based services operating out of Kerala, even though they are not very high-tech: for instance, medical transcription, legal transcription, etc. This is not very profitable work, but it could employ quite a lot of people.

An example of good, creative content is a CD-ROM I came across recently, Kerala -- The Green Symphony from Invis Multimedia ( of Trivandrum. (Disclaimer: I have no personal financial interest in this product or company). Beautifully designed and easy to use, this CD-ROM is also well-written, and provides a wealth of information about the state's extraordinary natural and cultural inheritance; it is reasonably priced at Rs 980 or $ 25.

Even if you are well-informed about Kerala, this CD, which was sponsored by Kerala's Department of Tourism and the Technopark, will provide new insights. I would especially recommend it to diaspora Malayali children, for it gives bite-sized information, never pedantically, about the land, the heritage, the history and places of interest in this, India's Emerald Coast.

I have some minor cavils about the CD -- I do believe the video and audio clips from films could have been chosen more judiciously; in other words, they did not put in my favorite film songs. Sigh! But the background music compensates for that, with traditional tunes and themes, for example the Vadakkan Pattukal (Northern Ballads). My other problem is that the CD is mildly addictive -- I spent three hours straight with it when I first got a copy.

All in all, however, the CD is a synthesis of high-tech and "high-touch": precisely what Kerala hopes will be its unique competence. The Technopark in Trivandrum is another example of this synthesis. Kerala's boosters never tire of pointing out that it is the lowest-cost IT location in the country, with a fully loaded cost at only $ 8/hour, as compared to other locations which may be as much as three times as expensive. Doubtless this gladdens accountants' hearts.

The Technopark has the usual techno-gobbledygook -- a captive power plant, a satellite earth station, access to an international airport, and so on. But what it has that no other site offers is an utterly stunning physical location atop a hill. If you look around, there is nothing but coconut palms and, on the horizon, the cobalt-blue Arabian Sea; Kovalam is a mere five miles away. Come to think of it, I wonder how anybody gets any work done there.

I am told quite a few companies, mostly small businesses and start-ups, have set up shop at the Technopark. Housing and other costs are also low: in 1997-98, Trivandrum had an inflation rate of 8 per cent in the consumer price index, as compared to say, Delhi, with 14 per cent, according to recent figures. There is also an adequate flow of fresh engineers from the state's several schools.

There are a couple of flies in this ointment, however: one, the issue of money for investment; the two, the issue of labour intransigence. On the first point, the IT Council suggested that 3 per cent of the budgets of all departments be set aside for computerisation; if this money comes from the government, it is likely that the private sector will chip in, assuming there are profits to be made.

Labour intransigence is a bigger problem. And a corollary is the feeling that the Marxist government in Kerala is likely to be generally anti-business. In both cases, to be quite honest, the issue is more perception that reality. Officials reel off figures that show that the Kerala worker has shaped up, and is not prone to strikes and industrial action any more -- they have seen too many factories down their shutters and leave the state.

As for the Marxists, they seem to have come to the realisation that they have to attract investment and support entrepreneurship. Despite occasional tantrums, the Marxists are indeed adapting. There may yet be hope.

In sum, if all these plans come together, and brave entrepreneurs can be found, Kerala might yet confound the nay-sayers and become a high-tech state. 'God's own computer country' doesn't quite have that certain ring to it, but who knows? Watch out, Silicon Valley!

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