Industrialization of Kerala: The
Insiders’ Perspective
.
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).
<
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 19th 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 31st 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)
,,
,
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.
<
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
,
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)
√ shodhganga.inflibnet.ac.in/bit stream
√ Performance
of Industrial Clusters Centre for Development studies, Trivandrum
√ www.ask.com/SSI+Industries
√ indianresearchjournals.com/pdf
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