Is Kerala business future ready?

How much time do we spend thinking about the future? Do we spend enough time? Thinking about our own future? Do for instance ask ourselves where we will be five or 10 years from now and what we will be doing that will be a very interesting exercise because we will find ourselves forced to consider , a changing reality, that we are ourselves 5 to 10 years older, that our children are 5 to 10 years older, that our needs are very different. In the same way we need to think of the city or state or country in which we live and do our business and work, are not going to remain the same over any reasonable of time, say 5 to 10 years.

Does the discourse about society and the economy reflect the reality in Kerala today? We read and hear that Kerala is missing the bus, that FDI is going to TN and other states, that the public finances are in a mess and that Kerala is in a debt trap, that youth unemployment is the highest in India, that young people are deserting Kerala for foreign shores. The reality is more complex and very different: among the highest per capita GSDP among states, the undisputed highest per capital consumption spending, the highest quality of life, the only state that has wiped out MDP, highest rating among all states for PAI, highest share of high value automobiles and FMCG products, highest mobile and Internet density, highest road density, highest urbanisation, highest GER in higher education, and so on!!

Kerala today has a GSDP of INR 11,00,000 cr ie $140 billion. Based on actual growth rates from 2000 till 2024, it would be reasonable to assume that Kerala GDP would double to $ 280 bn by 2032. Let us now consider what this means in terms of the way we do our business, the planning we do for expansion, and the steps we will need to take to raise capital and other resources needed for that expansion.

Put in another way, we will have to deal with one more Kerala in eight years ! Let us break this down to examine the implications. Population will not grow during this phase which means that per capita GDP will double from the current figure of $ 4200 to? $ 8400! In nominal and forex terms, given the present rates of inflation and currency depreciation, per capita GSDP will be almost $ 10,000. That will place Kerala in the middle income category. That means the disposable income in the hands of the consumers and households will be significantly higher than what it is today. While the total number of vehicles on the roads is not likely to increase, we will see a shift from two wheelers to 4 wheelers during the period. It is also likely that much of this additional number of four wheelers will be EVs.

The biggest change will be that spending patterns will change, and the basket of consumption goods will look quite different. The shift will be away from the necessities to discretionary purchases, with branded products dominating, more spending on clothes and cosmetics, more spending on vacations and entertainment. Spending on consumer products and FMCG products will be for branded items ie ‘better quality’ as opposed to any low cost fridge or washing machine. Instead of basic car models, people will spend on a better car. Instead of basic healthcare needs, people will spend on elective procedures, and will be quite willing to pay more for that at private hospitals. This will have a huge impact on the economy, as consumption is the driver of economic activity. Doubling of GSDP means that another ‘Kerala’ will come into being.

Where will this additional Kerala come from?? One source will be for existing businesses and factories and farms to double their output. T this will mean that there is a need for additional investment, more skilled people, more experienced managers, more and better office space, more power for the factories, more skilled service providers like lawyers, accountants, etc. There will be greater demand for better housing admissions to schools and colleges, better leisure and entertainment facilities, and better shopping facilities.

More factory space and more warehouses would mean more land would have to be found for industry and related services. More of the road length within the state would have to be capable of carrying 20 foot and 40 foot container trucks which would be moving in and out of ports and state entry points. More ships will need to be handled at major ports like Vizhinjam and Kochi, and more containers will need to be moved to and from ports. More power will be needed for new factories and offices and data storage centres. More hotels will be needed for business and leisure travellers. More taxis, guides, and homestays will be needed.

All these represent opportunities for educational institutions and skilling institutes and schools to upgrade their courses and deliver programs that are relevant to this growing and emerging economy. More shared service facilities will be needed, as there is a shortage of land and hence of office space in Kerala. Cities will need more and better municipal services, that will need to be delivered by better trained municipal staff, as well as by outside agencies. New jobs like landscape gardeners to maintain the road medians, and traffic islands, and other public spaces that are today neglected and overgrown will be needed. These are all opportunities form young people.

Huge opportunities will arise in the healthcare sector, as the technology changes enable more care to be delivered outside hospitals and in the homes. Upgrading such mobile healthcare will require more ambulances, nurses, technicians, and care providers. The aging population of Kerala, that is already high, and growing, will require home care services, that will be remunerative, and jobs with dignity. Where are these people today? There is a huge shortage today, and this will exacerbate.

Someone asked: where would a marketing guy go? To Germany that is slowing down or to India that is growing fast? Where would a company look for markets? Retail accounts for 10% of GSDP and 10% employment. China and India 1100 mn and 780 mn consuming class ie >$ 10 per day spending power. That’s what happens as economy develops. This will happen regardless of policies and who is in power. The economy is an engine that once it gets into gear, is difficult to stop .

What about the impact on the public finances of the state? As GSDP rises and GSVA grows, tax revenues will be buoyant and rise too. Rates will remain the same but revenues will grow. This growth in state public tax revenues will have an impact on the quantity and quality of public services that must be financed by these revenues. Current ratios that are not healthy will change for the better, enabling the state to have more fiscal space for important projects to be funded.

My advice: don’t waste time listening to those who complain. Spend time with those who try out new ideas. Don’t worry about failing. Those who never fail are those who have never tried something new! If you try, you might; if you don’t, you wont! Don’t help propagate negative narratives. They do no good, only harm. They especially mislead the young. We must join together to change the narrative. If we envisage a bright future and a prosperous state, that is what we will get!