A new book, 'Kerala Club: Keepers of the Flame,' co-edited by former Union Cabinet Secretary KM Chandrasekhar, offers a critical examination of Kerala's economic trajectory. While the state is often lauded for its high literacy and human development, retired bureaucrats contributing to the book argue that certain policy decisions have severely hindered its economic growth, particularly highlighting the destruction of its once-robust cashew industry.
How Policy Decisions Undermined a Thriving Industry
The cashew industry in Kerala was once a vibrant network of profitable private factories, providing substantial employment, especially for women. However, according to T. Nandakumar, a former IAS officer and contributor to the book, government intervention, purportedly for 'farmer welfare,' drastically reshaped this landscape. The state introduced monopoly procurement, took over private units, and established two state-run entities: the Kerala State Cashew Development Corporation and the Kerala State Cashew Workers Apex Industrial Co-operative Society. These were intended to process locally grown cashews.
Nandakumar asserts that this restructuring primarily catered to the demands of labor unions rather than genuinely supporting farmers. Consequently, many efficient private factories were forced to close, with some relocating to neighboring states. Over time, the focus shifted from aiding local cashew growers to ensuring the happiness of factory labor, even if it meant importing raw cashews and incurring enormous annual losses for the state-run facilities. Local farmers, once central to the industry, became peripheral.
The Irony of Imports and Losses
In a striking example of this policy shift, a Kerala minister reportedly requested farmers in Andhra Pradesh and Telangana to grow cashews to supply Kerala's processors. The state also explored collaborations with African countries to purchase raw cashews, further highlighting its disconnect from local production. These strategies, aimed at keeping factories operational, only compounded their financial losses each year, a stark contrast to the initial intent of supporting a domestic industry.
Broader Economic Concerns
The decline of the cashew industry is presented as a symptom of broader economic issues plaguing Kerala. The book also points to the state's failure to create robust infrastructure despite a significant influx of remittances from the 'Gulf Boom' between 1977 and 2007. Instead of investing in transformative economic assets, successive governments reportedly directed these funds towards welfare programs and government office construction, contributing to wage inflation and making labor unaffordable for many economic activities.
Furthermore, the book criticizes the proliferation of unprofitable Public Sector Undertakings (PSUs), established ostensibly for employment and growth, but often harming the private sector. Kerala is now among India's most indebted states, with significant liabilities hidden within these PSUs, leading to a 'heavily stressed' fiscal situation, as noted by the Comptroller and Auditor General (CAG).
Ultimately, the former bureaucrats argue that Kerala has missed its demographic dividend, aging rapidly before achieving true prosperity, with many young people migrating due to a lack of viable economic opportunities within the state.