Understanding Kerala’s Unique Political Economy | Latest India News


When EMS Namboodiripad of the Communist Party of India (CPI) was elected Chief Minister of Kerala in 1957, he became the first Communist leader in India to rule a state. With the Communist Party of India (Marxist) or CPI (M) having lost power in West Bengal and Tripura – two states where it has ruled uninterrupted for decades – Kerala is now the last place in India where a Communist Party is ruling a elected. government.

The CPI (M) and its partners from the Left Democratic Front (LDF) rightly trace their heritage back to the era of the SME. But the challenges facing the current IPC (M) are very different from those faced by EMS. The reason is that Kerala’s political economy has undergone a drastic change over the past six and a half decades, and particularly in the second half of this period. The Communists seized power in the state defending the policy of radical land redistribution and improvised on its economic benefits with rapid progress in the social sector, especially literacy.

Today, agriculture has a negligible role in the state economy. The state’s demographic profile is most skewed in India towards people of the older age groups. It also means that unskilled workers earn far more than their peers earn in any other Indian state. Much of the state’s well-being and its growing consumerism is supported by remittances abroad, especially from oil-exporting countries in West Asia. These characteristics make Kerala a unique outlier in India’s political economy landscape.

1. Kerala is among the most equal farms in India, but there are hardly any farmers now

The concentration of agricultural land, seen by the size of operational farms, is among the most equal in Kerala. According to the latest available data (2012-13) from the National Sample Survey Organization (NSSO) report on household ownership and farms in India, the Gini coefficient for the size distribution of farms in Kerala was 0.342 (0 and 1 represent perfect equality and inequality) against an average of 0.516 for India as a whole. Only four states, West Bengal, Jammu and Kashmir, Odisha and Himachal Pradesh, had a lower Gini coefficient than Kerala.

However, what separates Kerala when it comes to agriculture is the fact that there are hardly any farmers in the state. The NSSO report found that Kerala had the smallest share of households engaged in cultivation. Even among households engaged in cultivation, Kerala had the highest share of households where no other member other than the head of household was part of an agricultural activity. This means that not only does Kerala have the lowest dependence for employment on agriculture, but it also has the lowest rate of what is often referred to as disguised unemployment in the country. Agriculture.

2. Kerala has the highest unskilled wages in the country due to its aging population.

The leftist political culture in Kerala also means that the state is witnessing a large number of political protests and closures. Even when things are normal, unions are an influential player in Kerala’s economy. One of Kerala’s most infamous union practices is what is called Nokku Kooli, a Malayalam word which literally translates to “pay to watch”. This implies that unions charge fees to “supervise” loading and unloading activities in residential or commercial enterprises, if the wages demanded have not been accepted. While the prevalence of Nokku Kooli has declined in the recent past and attempts to end it have received bipartisan support, Kerala still has the highest wages for unskilled workers in India. Kerala’s wage advantage is only expected to increase in the future due to the aging of its population. The share of people aged 50 and over was 38.7% in Kerala as of March 1, 2021 according to the projections of the Technical Group report on population projections of November 2019. This number was only 28.2% as of March 1, 2021. level of all India. This means that blue-collar unions no longer need to resort to heavy-handed tactics to preserve their material interests in the state.

3. History of Remittances in Kerala Economy

Kerala is the only Indian state to have four functioning international airports: Thiruvananthapuram, Cochin, Kannur and Calicut. The massive demand for international air travel must be seen with widespread international emigration from Kerala, mainly to the oil-exporting countries of West Asia. A 2020 article in the Indian Journal of Labor Economics by KP Kannan and KS Hari estimated the number of emigrants from Kerala abroad, with an identifiable household to report in Kerala, at 2.12 million in 2020, this that the authors noted, “represents a little over 6% of the population but 17-18% of its workforce.”

A steady increase in international emigration from Kerala has also resulted in an increasing flow of remittance income. Kannan and Hari estimate that the share of remittances in Kerala’s state net domestic product (PNDS) fell from almost nothing (0.57%) in 1972-73 to almost a quarter in the first and second decade of the century.

Although that number has since declined, it was still significant at 13.3% in 2019-2020, the latest period for which data is available. The article also constructs something called Modified State Income (MSI) to account for the positive impact of remittance income on the official NSDP, which the authors say does not properly capture the positive impact of remittances. remittances. The paper argues that the additional income from remittances led to a reduction in the propensity to consume and an increase in the propensity to save.

The savings have been mainly directed towards building housing, investing in gold and financial assets, the authors note. Kerala had the highest construction share (13.7%) in its gross value added among the Indian states in 2018-19, the latest period for which data is available for all states in the Indian database. Center for Monitoring Indian Economy (CMIE). The share of all of India was only 8% in 2018-19. It’s ironic that the last surviving Communist stronghold is a state where labor is scarce and remittances are a key driver of the economy.

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