Redirecting money from the Gulf

Kerala has an overdose of mansions and cars; what it needs is investment in job-creating ventures

October 14, 2019 12:15 am | Updated 12:26 am IST

Thiruvananthapuram, Kerala 07/05/2019:: People buying Gold Jewellary at a shop in the city on the occation of  'Akshaya Tritiya, in Thiruvananthapuram on Tuesday.... .......Photo: S.Mahinsha/The Hindu.



Thiruvananthapuram, Kerala 07/05/2019:: People buying Gold Jewellary at a shop in the city on the occation of 'Akshaya Tritiya, in Thiruvananthapuram on Tuesday.... .......Photo: S.Mahinsha/The Hindu.



‘Drop your plan to buy a new car. Avoid eating out. Only buy things you absolutely need. Make do with public transport. Go to government hospitals, not to expensive private ones.’ These were the highlights of a WhatsApp advisory sent out by a Gulf-based organisation two months ago. The advisory targeted the families of non-resident Keralite workers based in the Gulf countries, against the backdrop of the creeping economic slowdown in India. The final advice on the ‘things not to do’ list was that those who were employed in the Gulf countries should never give up their jobs, even if they didn’t get paid on time, “for, there are not many jobs to go around back home because of the economic slowdown.”

The advisory was interesting for two reasons: first, the fact that the diaspora community had sensed, ahead of most people in India, that a slowdown in the Indian economy was imminent; and second, the delayed realisation that non-resident Keralite families must curb certain consumerist habits that were a result of the massive amounts of remittance money they were receiving.

Consumerist economy

A recap of the contours of Kerala’s demographic and economic profile is in order here. Roughly a tenth of Kerala’s 34 million population works abroad — a huge majority of them in the Gulf countries. Kerala’s economy is a consumerist one that has, for decades, been propped up by the massive remittances from non-resident Keralites. Exact numbers are hard to come by, but one estimate is that non-resident Keralites pump close to ₹200 crore daily into the State. Kerala gets roughly a fifth of all NRI remittances to India.

For all its natural resources, impressive literacy and highly evolved State welfare system, Kerala produces very little of its daily needs, including foodgrain and vegetables. Manufacturing contributes less than 10% to the State’s GDP. Agriculture’s contribution is a little above 10%. The unemployment rate is very high. Yet, Kerala’s per capita income is above the national average. Modern mansions can be seen dotting both sides of the road across many parts of Kerala. High-end cars and boutique jewellers’ shops are also common.

This is because of remittance money. Ever since the labour migration to the Gulf started in the 1960s, enormous sums of money have flowed into Kerala. One estimate is that since the beginning of the 21st century, some ₹10 trillion has arrived in the State, including from the UAE, Saudi Arabia, Kuwait, Qatar, and Oman. But almost all this money has gone into consumption and unproductive investments in land, real estate and gold. Why did the non-resident Keralites fritter away their hard-earned money this way, rather than put it into productive ventures? There are many reasons, including systemic rigidities, trade union overkill, lack of imaginative investment avenues, and the absence of a visionary policy framework.

Invest or perish

The WhatsApp advisory might have appeared counterintuitive as macroeconomists say that curtailing consumption will accelerate the slowdown. However, the unstated subtext is that Kerala has enough mansions, cars and jewellery to last another generation. What it lacks is jobs — for residents of the State who are unemployed as well as for non-resident ones who cyclically lose their Gulf jobs and are forced to return home. Had the non-resident Keralites invested even 1% of the massive amount they pumped into Kerala over the past two decades in job-generating ventures, the next generation would have been spared the need to hunt for jobs in the Gulf.

K.P.M. Basheer, formerly Deputy Editor, The Hindu, is a Kerala-based independent journalist

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