Friday, March 11, 2011

Kerala is actually no. 1 as per GDP

Mahesh Vyas: Kerala is actually no. 1
Its per capita income for 2009 stands at Rs 63,000 — the highest in the country
Mahesh Vyas / New Delhi June 28, 2010, 0:12 IST

The state of Kerala is fascinating in many ways. This lush green coastal beauty is deservingly called God’s Own Country. A drive through the state almost never shows any distinction between urban and rural regions. The houses generally reflect a good standard of living and even the cities do not seem to have beggars on streets.

The good standard of living and the scenic beauty of the state do not seem to motivate Malayalis in general to work hard in their own state. They stopped cultivating labour-intensive rice paddy and shifted to coconut and rubber plantations long ago. Like Punjab, Kerala imports farm labour from Bihar.

Kerala has succeeded in keeping most industries out. It never joined the rat race that Maharashtra, Gujarat and Tamil Nadu indulged in to attract investments. Neighbouring Karnataka’s extraordinary vigour in wooing investments in recent months indicates that it has taken some serious lessons from Gujarat. But not Kerala. On the contrary, the state seems to be quite content with not attracting any new industrial investments. It ranks 14 out of 23 states in terms of outstanding investments.

States attract investments to ensure employment and growth for its citizens. Kerala solved this problem in a different way long before others even thought about it. If the Andhraites and the Kannadigas discovered the advantage of exporting software engineers in the 1990s, Kerala had discovered the advantage of exporting its labour to the Gulf in the 1970s.

Kerala has been ahead of the curve in globalisation. While the North battled with intruders, Kerala quietly incorporated first Christianity and then Islam and enhanced its trade with the rest of the world. There were no famous battles in Kerala. It is just a story of seamless and peaceful globalisation over time without much ado. Today, Kerala exports its labour to the world and also imports labour into the state. This is globalisation at its best.

When the time came, Kerala embraced communism too. But the Malayali communist does not bring the rest of the state to a halt when the government raises oil prices. Kerala has less of state bandhs compared to West Bengal and it has no Nandigrams.

It is interesting to note that today the country’s top administrative official, the cabinet secretary, is from Kerala; so is the home secretary, the principal secretary in the Prime Minister’s Office and the national security adviser. Yet, there is no chest-thumping about it. Kerala’s history has no wars and, therefore, the state does not believe in heroes. To put it simply, it has simply progressed to become the most literate state of the country.

The popular perception of Kerala outside of Kerala does not reflect this tranquillity and progress. Correspondingly, most Malayalis do not have a great opinion of the rest of the country.

Official statistics do little justice to Kerala’s prosperity. Kerala was ranked ninth in terms of net state domestic product (NSDP) among 22 states in 2008-09. This is a reflection of its small size. It ranks higher at the sixth position in terms of per capita NSDP. Goa, Delhi, Haryana, Maharashtra and Punjab (in that order) beat Kerala in terms of per capita NSDP. But, this does not do justice to the state.

Per capita NSDP is a poor estimate of the well-being of the people of a state because it is a measure of the income generated in a state and not the income accruing to the people. Thus, globalised Kerala, whose households receive a lot of remittances from Malayalis working in the Gulf and in other regions, suffers because NSDP does not reflect these remittances in the income of the people.

The official statistical machinery does not measure the income of households. It estimates the income of households along with that of the not-for-profit institutions that serve the households at the all-India level. Even this combined estimate is available only at the all-India level. There is no estimation of even this indicator at the state level. Therefore, commentators are forced to use only NSDP in their analysis.

The Consumer Pyramid put together by the Centre for Monitoring Indian Economy (CMIE) bridges this gap. And, in the process, it amends our (mis)understanding of Kerala. According to the Consumer Pyramid, Kerala ranks first, and not sixth, in terms of per capita household income.

Kerala’s per capita income in 2009 at Rs 63,000 was the highest among all states in the country. It is way ahead of Delhi (Rs 55,000). Punjab is a distant third with Rs 42,000. The official per capita NSDP understates the income of Kerala households by 22 per cent at Rs 49,000. It also overstates the income of Delhi households by a massive 65 per cent at Rs 90,500. Punjab is overstated by 22 per cent.

Delhi generates a lot more income than Kerala does. But the income of Delhi does not accrue to the people of Delhi. Therefore, the purchasing power of consumers is much lesser in Delhi. Kerala does not generate much income, but its households receive a lot of transfers in the form of remittances from its people working outside. These transfers raise the purchasing power of Kerala households substantially.

Kerala is correspondingly a big spender. As a result, its household savings rate is close to the all-India average. This is also the case with Delhi and Punjab. Ownership of assets such as household appliances and entertainment devices is high in Kerala, but the ownership of transport equipment is low. This explains the clean air in Kerala.

Given the excellent transfers, the Malayalis do not find it necessary to pollute their land by having scooters and industries. They do not even find it necessary to work hard in God’s Own Land. But it’s not that the Malayalis are lazy. Their excuse for taking it easy is that they have worked hard elsewhere. They work hard elsewhere and transfer part of the income back to Kerala where they build a nice home and spend a relaxed life.

Kerala is also the land of India’s best-known rationalist, Abraham Kovoor.

The author is managing director and CEO, CMIE

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