The incongruence between Kerala’s social and economic development has been a part of discourses on development trajectories. Until recently, the dominant narrative has been the inability of the State to provide a suitable investment climate, especially in the industrial sector. Kerala was often touted as a hostile investment destination with active trade unionism regularly supported by pro-labour policies. This perception seems to be fading away, as Kerala has been attracting investments in the industrial sector. A combination of right policies, institutional support and the ramping up of necessary infrastructure could mark the beginning of a new Kerala story — that of a State pursuing late industrialisation.
Analysis of data published by the Annual Survey of Industries for the period 2009-2019 reveals that Kerala has made strides in the growth of industrial factories and fixed investments. It registered a compound annual growth rate of 2.55% in the number of factories during this period, which is modest when compared with the all-India figure of 4.07% and Gujarat’s growth rate of 5.64%. However, in comparison with other leading States in industrial performance, such as Maharashtra and Tamil Nadu, which witnessed growth rates of 2.53% and 3.43% respectively, Kerala’s growth is conspicuous. The State’s performance in terms of fixed capital invested in these factories was spectacular during this period; Kerala registered a growth rate of 12.82%. This stands out in relation to the all-India growth rate of 7.33% and Tamil Nadu’s and Karnataka’s growth rates of 6.24% and 6.33% respectively. Even if we account for the base effect, with Kerala having low levels and other States having higher levels to start with, this growth in fixed capital is a clear indication that the State is slowly shedding its image of a hostile investment destination. It is important to note that investment flows were observed despite changes in political regimes. This is a sign of policy continuity and stability.
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