Industrialization of Kerala: The Insiders’ Perspective

Industrialization of Kerala: The Insiders’ Perspective

                                     

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Abstract

The industrial scenario of Kerala has been changing rapidly in the past couple of years. The economy has also received huge benefits from its blossoming industrial sector. The state’s opportunities in its traditional industries have provided millions with their livelihood. The strategic location of this coastal state had attracted foreign traders in the past centuries for setting up their trade centers. Kerala with all its limitations is putting every effort for the speedy industrial development of the state.   The state Government’s past industrial policies had helped for the industrial growth of the state to some extent especially in the field of IT sector, electronics industry and tourism sector. Now the traditional industries of the state are facing extinction due to the ongoing economic reform process of the Central Government. In this backdrop, the present study has been done to trace the industrialization process in Kerala and to find the views of the entrepreneurs for the reasons for the backwardness of industrial growth of the state. Thus the main theme of this article is to understand the industrialization process in Kerala and to frame suggestions for promoting the overall industrial growth of the state.    

Keywords: Kerala economy, Industrial growth, industrial policies, constant price method and current price method, inclusive economic growth, single window clearance mechanism, PPP Mode – Public- Private- Partnership Mode.

1. Introduction

Kerala, the progressive land with immense opportunities for investors, bestows an investor-friendly environment with well-structured policies and pioneering initiatives, good infrastructure and the support made way for successful ventures. Among the leading commercial and trading centers of India, Kerala offers good environment for setting up any industry. Finally creating centers of educational excellence, harnessing the multiplier effects of IT - related investments and high value service sector activities will enable both employment generation and capitalize on its comparative factor advantages. Kerala, notwithstanding its breathtaking scenic beauty, skills of its people and high quality of human resources, is nowhere near realizing its full economic potential.

In Kerala, the Department of Industries and Commerce is responsible for promoting/sponsoring, registering, financing and advising industries in the state. The department and its agencies also guide the entrepreneurs in the selection of appropriate trade ranging private, public, joint and cooperative sectors. Kerala's position is 12th in the industrial ranking among the major 16 States in India (State Planning Board, 2013).  

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2. Methodology of  the Study

For the study, the researchers   have used the qualitative as well as exploratory data collection methods.  The primary and secondary data needed for the study have been collected by the above methods. The primary data have been collected by interview method from a sample of 25 respondents of industrial promoters situated in Trivandrum district. The secondary data have been collected from journals, websites, articles, books, Govt. publications and Govt. policies. The researchers have done a well preparation for making the interview success. The gist of questions used for the interview consisted to bring out   the views of the entrepreneurs regarding the problems faced by them and their suggestions for better industrial growth of the state. The collected data have been suitably compiled, edited and analysed to bring out the views and comments of the respondents. Based on the findings of the survey suggestions are included for making better industrial growth of the state.  

3.     History of Industrialisation in Kerala

 From the days immemorial, traditional industries like mat 'weaving handlooms, bamboo products etc. were popular in different parts of Travancore, Cochin and Malabar. It was in 1884 the Quilon Spinning Mills started under the European management. Punalur Paper Mills started in Quilon district in 1887. Subsequently, coir factory was started in Alleppey then coir, tea and rubber factories flourished in different parts of Kerala. In the 19^th century itself hand weaving units were established at Kottar, Balaramapuram, Chiranyinkil and Pandalam.

 The beginning of an attempt to organise industries in the state dates back to the year 1918. In that year, a separate department for industries was started by the Travancore State Government. During 1920–21 an Economic Development Board was constituted with the objective of developing the economic resource of the state, establishing new industries. Though there were some registered factories, most of the industries were in unorganized sector.

 With the organisation of Industries Department in Travancore under Dr. S Becker, the industrial climate changed. Many new schemes were taken up and encouraged by Economic Development Board. The result was that a good number of the existing large scale industries came up in the subsequent years. A sugar factory was started in Thuckala (now in Tamil Nadu) in 1931–32. It worked for about 12 to 13 years and later closed down with the coming up of a bigger unit at Thiruvalla.   

  The golden era of Kerala’s industrial development was the ten year period ending 1947, when Sir C.P. Ramaswamy Iyyer ruled the state of Travancore as its Diwan. He realised the fact that capital and skilled labour are not sufficiently available in Travancore or nearby states and hence he invited outsiders to start industries in Kerala. Even foreign companies reacted favorably to the call given by him. For instance ‘Alakan’ a Canadian Company expressed their willingness which led to the starting of ‘Indian Aluminium Company’ at Eloor.

The other major industries started during the days of Sri C.P. Ramaswamy was Travancore Sugars and Chemicals Limited, Ogale Glass factory, Fertilisers and Chemicals Travancore Limited (FACT), The Indian Rare Earths (IRE) Travancore Rayon’s, Travancore Titanium Products Limited (TTP), Travancore Cements, Travancore Electro - Chemicals Industries, The Punalur Paper Mills, Kerala Ceramics, Indian Aluminium Company, Luxmi Starch western Indian Plywood etc. The important industries flourished in Cochin State were Coconut oil and Textiles. One of the important textile mills in Cochin State was Pushpagiri Weaving Mills started at Trichur in 1908, the present Sitaram Textiles.

Just like Cochin State, Malabar also earned good amount of foreign exchange from the export of coconut oil. Another important industry popular in Malabar was soap industry. While tracing the industrialization of Malabar or even North Kerala, the works of Basel Mission deserves special reference started only by the middle of the 19th century.

4. Industries in Kerala

The traditional industries of the state are handloom, cashew, Coir and Handicrafts. Other important industries are Rubber, Tea, Ceramics, Electric and Electronic Appliances, Telephone Cables, Transformers, Bricks and Tiles, Drugs and Chemicals, General Engineering, Plywood Splints and Veneers, Beedi and Cigar, Soaps & Oils, Fertilizers and Khadi and Village Industry Products. The traditional industries form the back bone of the industrial development of Kerala providing employment on a massive scale with minimum capital investment. Here the persons employed are from weaker sections of the community. These industries are facing a host of problems like low productivity, non – diversification, lack of professional marketing, poor technology, low quality and high cost of production. This has resulted in high unemployment, poverty and social problems. Immediate attention of the policy makers is required for the revival of these industries.      

The modern industries in Kerala are Metal, Shipping, Software, Electronics, Automobiles, Real Estate, and Tourism, etc. There are a number of manufacturing units for production of precision instruments, machine tools, petroleum products, paints, pulp paper, newsprint, glass and non-ferrous metals. Principal export products are Cashew Nut, Tea, Coffee, Spices, Lemon Grass Oil, Seafood, Rose Wood and Coir.

The small-scale Industry has emerged as a major determining factor in the growth of the state in terms of employment generation. The sector contributes maximum production for domestic and export markets and produces variety of products ranging from traditional to high tech.

The land of Kerala is endowed with a number of deposits of good quality china clay and beach sands containing a variety of valuable minerals. Heavy mineral sands and china clay contribute more than 90 percent of the total value of mineral production in the state. Kerala possesses one of the world class deposits of mineral sands in the coastal tracts between Neendakara and Kayamkulam. Gold occurs in Kerala both as primary and placer deposits and the known occurrences are mainly in Wayanad and Nilambur regions.

4.1.Public Sector Enterprises in Kerala

The Public Sector Undertakings are administered by Industries Department of Government of Kerala. The situation that prevailed in many of the PSEs were pathetic resulting in disgruntled workers, abysmally low productivity, severe liquidity crunch, unprofessional management, corruption and nepotism. Growth and development of PSUs are taken as the essential part of struggle in the present policy period. Public Sector Enterprises, both at the Central level and at the State level have played a very important role in the industrialisation and the overall development of the state. State Public Sector Enterprises are one of the largest employers in the organised sector in the state. There are 44 PSUs as on 31^st December 2013 under the Industries Department, of which 37 are in the manufacturing sector and 7 in the non-manufacturing sector. (State Planning Board, 2013)

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4.2.           Joint Stock Companies

The total number of joint stock companies in Kerala as on March 2013, is 21990 of which 93% are private limited and 7% public limited. During 2012-13, 2729 companies were newly registered (2680 private and 49 public) and 262 companies were wound up. Seven public companies were converted to private companies and 13 companies were converted from private to public. (Registrar of Companies, Kerala, 2013)

4.3. Micro, Small and Medium Enterprises (MSME) / SSI Units

 The number of New Enterprises registered during the year 2012-13 was 13,043 which are 18 per cent more against 11,079 of the previous year. Investments on the sector decreased by three per cent from Rs 190, 642.75 lakhs of the previous year   to  Rs 185, 074.41 lakhs in 2012-13 while employment generated increased by about four per cent from 79,181 to 81,964. The value of goods and services produced in 2012-13 has been increased by six per cent i.e., Rs 621,424.55 lakh over Rs 584,985.35 lakh in the previous year. (Govt. of Kerala, 2013)

 The total number of Small Scale Industries (SSI)/Micro, Small and Medium Enterprise (MSME) units registered in Kerala as on 31.3.2013 was 2, 19,444. The number corresponding previous year was 2, 05,987. This indicates a growth of about seven per cent during 12-13. Out of the total SSIs/MSMEs units 25 per cent are run by women entrepreneurs. The total investment was Rs 12,12,674 lakhs in 2012-13 against Rs10,83,169 lakhs in the previous year, with an increase of almost 12 per cent and the total number of employment generated was 11,03,126 indicating more than eight per cent over the previous year which was 10,21,162. (Ibid.)

5.     Major Industrial Locations in Kerala

Most of the industrial and commercial establishments in Kerala are concentrated in the coastal zone. Among the coastal districts, Ernakulam and Trivandrum have fairly large number of industries along the coast, followed by Alappuzha, Kollam, Kozhikode, Kannur, Kasargod and Malappuram. Eloor- Edayar- Ambalamugal area is the major industrial area located in the coastal zone in the city of Kochi in Ernakulam District along the banks of the Cochin backwaters. Major industries in Kerala are

Fertilizer and Chemicals Travancore Ltd. (FACT), Kochi Refineries Ltd. (KRL) Hindustan Organic Chemicals (HOC), Cominco Binani Zinc Ltd. and Cochin Shipyard are located in Kochi availing the advantages of the port facilities.

The world famous Chavara placer deposits of the Kollam district support three major mineral industries in Kerala viz. The Indian Rare Earths Ltd. (IRE), Kerala Minerals and Metals Ltd. (KMML) at Chavara (Kollam), The Travancore Titanium Products (TTP) at Veli (Trivandrum).These units are situated closer to the sea.

The Excel Glass factory situated near Cherthala utilizes the silica sands of the coastal zone of Alappuzha district for the manufacture of glass. Most of the seafood and coir industries in Kerala are located in the coastal area and are concentrated in Alappuzha district. There are 101 seafood factories in the coastal zone with a freezing capacity of approximately 1868 tons per day, of which 47 are approved by the European Union. Besides, there are 210 peeling sheds and 217 ice plants as on 31 – 03 - 2012 (Dept. of Economics and Statistics, 2013).

Cashew processing industries, a traditional enterprise in the state are mainly situated in the coastal area of Kollam district. There are about 300 large and medium scale industries and 1, 66,000 small scale industries, most of them are located in the coastal areas. (Ibid.)

6.     Potential Industries of Kerala

The State is endowed with a variety of natural resources in the area of Agriculture, Information Technology, Bio Technology, Fisheries, Dairy Sector, Forest, Food,  Processing, Rubber and Chemical Industries, etc. Kerala being a consumer State, a number of demands based items having scope for development especially in the field of Electronics, Electrical, Fruit Processing, etc., can be identified for industrial development. Repairing and Servicing Industries are now catching up demand and the economy of the State largely depends on these sectors. Industries in the area of Software development, Biotechnology, Simple Chemical and Engineering goods also can flourish in the State using Modern Technology, skill and quality service to customers. Considering the immense\ potential, resources and infrastructure facilities available, there exists scope for development of a number of industries in the State. The state is endowed with a  large number of Agricultural products like Coconut, Tapioca, Plantains, Cashew, Coffee, Tea, Rubber, Fruits like Pineapple, Mango, Papaya, Spices and Forest products etc. Livestock, Milk and Milk products also can prosper in the State. There has been oft-repeated mention that most of the resources available in the State have not been utilized for industrial purposes to the optimum level due to divergent socioeconomic factors and constraints. Due to improved training facilities available and the better infrastructure facilities for that, there exist prospects for a number of skill-based industries. With the setting up of more industrial parks for Information Technology, Textile, Food Processing, Fish Processing, Coir, Rubber, Electronic, Export Promotion, TV & Video etc., would act as an impetus for healthy and sound industrial growth of the state.

7.  Plan Outlay and Expenditure

The annual plan outlay and actual expenditure during the period 2011-12, 12-13 and 13-14 is given in the above table.

Table 1.

Plan Outlay and Expenditure  (Rs in Lakhs)

Sl. No.	Sector	A   Annual Plan 2011-12		Annual Plan 2012-13		Annual Plan 2013-14
1	Village & Small Enterprises	Outlay	Expd.	Outlay	Expd.	Outlay
I	Small-scale Industries	4060.00	2616.50	5505.00	4604.93	5755.00
Ii	Commerce	10.00	10.00	75.00	75.00	90.00
Iii	Handicrafts	226.00	226.00	300.00	348.25	431.00
Iv	Handloom & Power loom	5767.00	6539.22	6832.00	5645.19	7676.00
V	Coir Industry	8205.00	8734.51	10070.00	9838.38	11137.00
Vi	Khadi & Village Industries	928.00	928.00	1210.00	411.00	1331.00
Vii	Cashew Industry	5200.00	4750.00	6500.00	6121.95	7150.00
Viii	Beedi Industry	40.00	32.27	Nil	Nil	Nil
	Subtotal – VSE	24436.00	23836.50	30492.00	27044.70	33570.00
2	Other Industries	22030.00	15266.12	24067.00	23606.00	23934.00
3	Minerals	162.00	58.22	211.00	187.16	432.00
	Total : Industry & Minerals	46628.00	39160.84	54770.00	50837.86	57936.00

Source: Finance Department, Govt. of Kerala

There was an increase of 17.5% in outlay provided for Industry and Minerals during 2012-13 over the previous year. The total outlay during 2013-14 is 579.36 crores which is 5.8% higher than the outlay in 2012-13. Performance on the expenditure front in Other Industries and Minerals has also been low. (Government of Kerala, 2013b)

8.  Industrial Growth.

The industrial growth of Kerala in terms of GSDP (Gross State Domestic Product) during 2005 – 2006 was 2.08 % while during 2011 – 2012 was 6.39% which shows a substantial increase compared to 2005 – 2006. The GSDP during 2011 – 12 had decreased when compared to 2010 – 11. Kerala recorded a growth rate of 6.39%. Thus it had been a satisfying year for industry and allied sectors in Kerala during 2011-12.  The following table shows the growth of manufacturing sector in Kerala based on constant prices and at current prices methods from 2004 – 2005 to 2011 – 2012.

Table. 2

Growth of manufacturing Sector in Kerala (GSDP)

(Base Year 2004-05)

Year	Growth Rate
	At constant Price	At Current Price
2004-05	1.00	1.00
2005-06	2.08	6.85
2006-07	7.12	12.58
2007-08	17.76	22.67
2008-09	2.1	15.08
2009-10	0.33	1.22
2010-11	8.41	14.97
2011-12	6.39	13.46

                             Source: Dept. of Economics and Statistics

9.     Findings of Entrepreneurs Survey

     The following are the findings of the Entrepreneurs survey regarding the problems faced by them. Majority of the respondents expressed the following opinions.

• Poor support from banks.
• No support from Government for existing units
• Harassment by various authorities like Provident Fund, Employees State Insurance, Pollution Control Board, Weights and Measures, Sales Tax Dept, Income Tax Dept, Local authorities.
• High labour charges in the state.
• Increasing power charges and power crisis.
• Increasing in marketing problems.
• Government’s economic liberlisation policies.  
• Negative approach of the local people.
• Poor investment climate in the state.
• Unavailability of skilled labour force.
• Industrial clusters not working properly.
• Unavailability of land for further expansion. 
• Poor infrastructure facilities.

10.   Suggestions for improving industrial growth

The following are the Entrepreneurs suggestions for making better industrial growth of the state:

·         Good support from banks are required

·          Government support is required for existing units also

·         Provide better investment subsidies and rebate by government for all new units.

·         Take steps to provide uninterrupted power and water supply.

·         Start more industrial parks and allocate the land to entrepreneurs at liberalized schemes.

·         Start entrepreneurship clubs for students starting from higher secondary level.

·         Introduce better liberalized government policies relating to business. 

·         Start industrial clusters among various sectors

·         Take steps to improve investment climate in the state.

·         Provide training to enhance the employability of labour force.

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11.    Suggestions for framing policy initiatives

 The following are the recommendations based on the analysis and findings of the   entrepreneur’s survey:

11.1.        Tapering the negative list

   Take measures to reduce the number of items included in the negative list maintained by the Industries Department of Kerala. This will help the entrepreneurs to start new ventures with the help of Industries Department.

11.2.       Enhanced Support of Banks.

Good support from the banks is required for the revitalization or revival of the existing units; otherwise these units will have to be closed forever creating unemployment and social problems.   

11.3.        Impede harassment.

On one side the government is trying to promote more industries or business to come up but at the same time various authorities like Sales Tax, Income Tax, Central Excise, State Excise, Legal Metrology Department, Pollution Control Board, Factories and Boilers Department, and Local Government authorities are harassing business people or entrepreneurs which creates higher tension among them leaving no time for better attention of the business. Because of this attitude of the authorities many business people has stopped the business or in the verge of closing the business. This negative approach of the various departments has to be stopped with immediate effect. This will pave way for better investment climate in the state.

11.4.        Revival of traditional industries                

Better attention of the government is required for the revival of traditional industries which provides employment to the local people in large scale. The revival areas should include new technology, marketing skills, quality, management skills etc. Since the traditional industries play an important role in the balanced and holistic industrial development of the state, the government should take priority for the revival of traditional industries.  

11.5.        Take measures for more investment in industries 

Take measures for attracting more investment in industries from within and outside the state. This will help in the inflow of investments in the industrial sector proving more employment opportunities and income generation among the people

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11.6.        Educate  the people  for creating better industrial culture 

       Better industrial culture and removal of negative attitude among the people are required for the smooth running of industrial units. This will also create an entrepreneurial culture among the people which fosters the industrial growth.

11.7.        New Industrial Vision  

There is need for a new Vision for promoting industrial growth of state on the direction and pattern based on suitable industry for the holistic industrial development of the state. The new Vision should be able to take full advantage of Kerala’s comparative advantage in knowledge creation and human resources development and on that basis promote knowledge based industries. This will help to transform Kerala as a value added service provider in a globally competitive environment.

11.8.        Design  new investment schemes  

The government should develop new investment schemes to cover all categories of people including gulf returnees for finding suitable income generating ventures in all districts of the states. This will help to highlight Kerala as most investor friendly state and to attract more investments for industries.

11.9.       Project Kerala as a prime destination  for  industrial investments

The Government should take initiatives to project and promote Kerala as prime destination for industrial investments in all core sectors of the economy. This will attract more entrepreneurs to the state generating more income and employment.

11.10.    Establish more micro and small enterprises in rural areas  

Government should take initiatives for the establishment of small and micro units in all sectors particularly in rural areas to achieve employment generation and for the utilisation of local resources to a great extent. This will help to accelerate the rural economy.

11.11.    Streamline Single Window Clearance.

Effective measures are required to streamline the existing single window clearing mechanism since the entrepreneurs are not at all happy with the functioning of the mechanism. Effective single window clearance mechanism will help the entrepreneurs in starting the industrial units by getting clearance from a single point of service instead of running for multiple clearances from various agencies. There should be a web based portal to assist entrepreneurs in this regard. This is one of the important aspects for creating investor friendly state.   

11.12.    Other major areas of suggestions are:

·            Take steps to improve skill development of the people.

·            Accelerate the industrial clusters in the state.

·            Augment services and e – commerce sector to create employment to skilled and semi skilled man power.

·            Include globally accepted standards in technology, quality and management to rejuvenate the traditional industries.

·            Accelerate the growth of Entrepreneurship Clubs among students community.

·            Encourage environment friendly practices in enterprise development strategy.

·            Launch mass media campaign to highlight the benefits of entrepreneurship for the industrial growth of the state. 

·         Set up sector specific industrial parks with incubation centers in all sectors in        distributed location to reach overall development of the society.

·            Develop quality industrial infrastructure in the state through state agencies in  PPP mode  with the participation of Non Resident Keralas’(NRKs) , Non Resident Indians’ (NRIs’), foreign and domestic investors

·            Develop demand based and market driven skill training and entrepreneurship development programme in a mission mode.

12.            Conclusion

      The government should welcome more businesses/industries to Kerala as more entrepreneurs are ready to work hard for the benefit of nation that ultimately results in a better way of life. The study shows the need of more simplified industrial policy for the state for facilitating investment in the state, more employment generation & employability enhancement and to adherence to high quality standards.   Kerala needs to be a better business friendly state to attract more investments. The attitude of policy makers, bureaucrats and the citizens of the state to businessmen and entrepreneurs need a positive change. In Kerala, entrepreneurship should be celebrated or recognized in great deal to promote more business since entrepreneurships is the foundation stone of economic progress.  The implicit suggestion is the need for a new vision on industrializing Kerala. Hence the need to focus on internal growth and development of the state by creating conducive environment through appropriately designed policy interventions focusing on economic growth and industrial development of the state.          

  REFERENCES:

√      State Planning Board, 2013: Economic Review, State Planning Board, Thiruvananthapuram, (2010 to 2013), (http;//www.keralaplanningboard.org)

√      Dept. of Economics and Statistics, 2013: www.ecostat.kerala.gov.in

√    Government of India, 2010:, Economic Survey 2009-10, Ministry of Finance,  New Delhi,   (http://indiabudget.nic.in/es2009-10/esmain.htm)

√      www.lsg.kerala.gov.in/en/PlanningBoard_en.php

√      shodhganga.inflibnet.ac.in/bit stream

√      www.keralaindustry.org/

√      www.dic.kerala.gov.in/

√      Performance of Industrial Clusters Centre for Development studies, Trivandrum

√      www.ask.com/SSI+Industries‎

√      indianresearchjournals.com/pdf

√      www.managementparadise.com/...small-scale-industries-ssi/202524-pr...