KERALA- A GREECE IN THE MAKING IN INDIA

When a big tree fall the ground shakes, so goes the saying. Also going to be applicable to some satellite economies hitherto dependent on the big oil countries.  The state of Kerala in India is a similar case. For close to two decade the wealth in the state was all from the expatriates living in the GCC. Both the ‘left’ and the ‘left of the Centre’ governments used to take credit for the better human development indices the state was enjoying. World renowned economists many often praised the Kerala Model of Development.

But in actual terms all of those were the ‘trickle down’ effect from the revenue flow from the rich expats in the GCC. Now with all those economies going to have tough time due to low oil price, revenue for the state is going to be a trouble.

Unfortunately the political brass is like the musicians on the deck of sinking Titanic. Still dolling out goodies for the population.

Serious problems ahead for the state

·         Remittances to the state are going to be a trickle now due to the serious financial trouble in the oil economies. All those countries themselves will struggle with their budget deficit. This will have a cascading impact on the several livelihoods, direct and indirect in Kerala.

·         The revenue for the state will further chill down due to the reduced real estate and other ancillary activities.

·         The fall in income from the gulf cannot be substantiated from the now increasing keralites opting for Europe and ANZ. This is creating a reverse flow of capital from the state. The second generation is completely shifting to these countries selling off their properties in Kerala.

·         Government will find it very difficult to manage the various social spending wisely and unwisely started over past one decade.

·         There is a huge middle and lower middle class now coming back from impacted countries. And there are others who lost their livelihood due to this impact, like the taxi drivers who used to ferry these past rich NRI’s. They will start soon burning in their mind.

·         Social tensions will increase between the classes and castes in state. The impacted population will not like the govt spending on other listed castes and categories. Hitherto no serious issues were in state due to seemingly unending money flow from the GCC. This helped the large part of population who were not in government spending schemes.

·         It will be like burning at the two ends of a candle since the rubber prices are also down and not going to increase in the near time, again due to the oil related issues. Synthetic rubber will be cheaper than the natural rubber.

·         A huge number of small and medium startups in the state, which are still in the nascent stage like the kudumbashree projects also, will fail due to the demand dampeners mentioned above.

·         India seems to be a bright spot in the world but unfortunately Kerala will not get any dividends from the India growth story. Also remember the state did not suffer in last five years when it was a painful time for Indian economy. Kerala has since long disconnected from the rest of India and is part of the world economy now.

·         All this really do not mean that people are going to be poor all on a sudden. Over the past two decades there is a full generation who got wealthy and can withstand many bad years. But very soon the poorest man in the state is going to be the government. A poor state housing some of the wealthiest people in the country.

·         In other way Kerala is going to be the Greece of India...


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