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Kerala Economy Journal

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The services sector in the Kerala economic review, 2021: Some reflections

Authors: Arshad Mashour , Manu D | Published on: 15-Sep-2022

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Abstract

The contribution of  IT and Tourism t sectors, though substantial, their share in GSDP is not reported separately in Kerala Economic Review.
As no composite indices of the quality and quantity of various services are given, researchers may find it difficult to arrive at a meaningful assessment of the reach of these services.
We feel that the value of Kerala Economic Review would have been much more, had it reported the gist of some of the NSS Reports relevant to the service sector. The logic of why some other important services are not discussed is not clear.
More theoretical analysis of the issues discussed in KER would benefit the students and young researchers.
Though a plethora of services are offered by the above-mentioned Departments to the citizens, there is no index available to measure the effectiveness of the service delivery. Unless such an index is available, it is difficult to assess the efficacy of the public services and the efficiency of public spending on these services.

 

Full Content

Introduction
Kerala Economic Reviews, in general and the latest one in particular, provide a wealth of information. A perusal of these reviews indeed helps any one to have a clear and informed understanding of the Kerala economy. For researchers and students, it is a goldmine of data and information. In this note, we wish to make a brief review of the chapters on Services.
A shift share analysis of the service sector shows that it has become the predominant sector in Kerala both in terms of value added and employment share. Kerala's economy is primarily dependent on the service sector. The three main service sectors that are covered in the Kerala Economic Review (KER), 2021 are tourism, IT, and public service.
The IT sector is a growing sector in Kerala as in India. The 2022/23 Budget of the State gives a great deal of emphasis on making Kerala a knowledge economy whose underpinning is mainly internet and digital services. Though Kerala is one of the harbingers of IT in India, by the time of implementation, many other states bypassed us. True that many IT giants and start-ups are coming to Kerala employing technically qualified Keralites adding high value to its GSDP. Massive Public and private investment has taken place in the sector which is considered the future of Kerala. A large number of start-ups in the IT sector have been set up in Kerala during the last two decades. Another feature of these IT firms is that many of their clients are foreign companies that account for massive inflow of dollar remittance to the economy. Moreover, the IT sector has significant backward and forward linkages with the rest of the economy. Many famous companies like Wipro and Infosys are offering jobs to the new generation and contributing to a major share of the service sector of Kerala Economy.
Though the Kerala Economic Review claims that Kerala is a growing IT destination in India, a closer scrutiny of the data does not enable us to be fully supporting this claim.
Let us first consider the plan outlay and expenditure in the sector. Whether it is Info Park, IT park, Cyber Park, IT Mission or Technopark, it is clear from Table  1 that the expenditure has been far below the outlay . The table shows a widening gap between plan outlay and expenditure.  Even during the pre-pandemic 2019/20, the expenditure was not even 50 percent of the plan outlay. However, it is surprising that during the pandemic year of 2020/21, the ratio has increased substantially followed by a sharp dip except for Technopark and Info Park, in the recovery year of 2021-22.

Table 1: Percentage of Plan Expenditure to Outlay

Name of department

2019-20

2020-21

2021-22

IT Mission

54.8

70.42

20.77

Technopark

39.4

87.5

92.34

Info Park

38.8

81.6

107.08

Cyberpark

2.55

0

0

Start-up mission

48.21

19.0

19.63

Source: KER, 2021


Another  puzzling factor is that despite an increase in investment, the number of companies, employment and the turnover did not increase (Table 2). The KER does not give any convincing explanation.

Table 2: Technopark’s Contribution to the State Economy

Particulars

2019-20

2020-21

Total turnover (in cr)

15000

15000

Total export (in cr)

7350

#

Total investment (in cr)

4979

5309

Total employment (nos)

62000

63000

No. of companies (nos)

450

460

Total land (acres)

662.54

662.54

Source: KER, 2021

A look at Table 3 which indicates the physical performance of the Info Park also does not give unambiguous information. In this case, despite an increase in turnover and employment, the number of companies has decreased. Is it that the existing companies have become more labour intensive over night coupled with clear increases in productivity?. However, the received theories do not seem to give any insight to this contradiction.

Table 3: Physical performance of Info Park

Particulars

2019-20

2020-21

Total turnover (in cr)

5200

5700

Total employment (nos)

47000

53000

No of companies (nos)

427

420

Total land (acres)

323

323

Source: KER, 2021


Table 4 which shows the physical performance of Cyberparks, indicates that while exports and total turnover nosedived by 46 percent followed by a fall in Investment by 22%, employment increased by 20%. Any researcher on the contribution of the IT sector may find these data confusing. Using these data, it is difficult to make any meaningful interpretation and draw inferences. Table 5 also narrates a story of shortfall in expenditure as a proportion of outlay even in the post pandemic year under Science and Technology projects also.

 Table 4: Physical performance of Cyber Park

Particulars

2020-21

2021-22

Total turnover (in cr)

26.16

14.09

Total export (in cr)

26.16

14.09

Total investment (in cr)

2.47

1.93

Total employment (nos)

764

917

No of companies

52

52

Total land (acres)

43

43

Source-KER 2021

Table 5: Outlay and Expenditure of agencies under Science and Technology

Year

Percentage

2019-20

27.6

2020-21

56.37

2021-22

18.29

Source: KER 2021

Another concern is that we do not get any indication of the contribution of the IT sector to the GSDP from the KER. Of course, there is a lot of eloquence about the contribution of the sector to employment. Unless we have this crucial information, it is difficult to arrive at a clear assessment of the vitality of the sector.  
Government of Kerala has launched a single window service delivery platform, "e-Sevanam" portal and "m-Sevanam" mobile application on October 01, 2021. Aimed at making Kerala a "Digitally Empowered" society, the State Government has now set in motion an ambitious policy initiative that aims to bridge the digital divide by empowering the citizens to access all government services online. While e-sevanam provides the consolidation of more than 500 services of 60 departments in a single platform, m-Sevanam can render more than 450 mobile-friendly services.
Tourism
Tourism is another component of the service sector which claims  to contribute significantly to Kerala's economic development. Kerala is an internationally recognised and a sought-after tourist destination in India. Tourism industry in Kerala is known for its world-renowned brand, consistent growth, diverse products and presence of local entrepreneurs. Public spending in Kerala mainly focuses on infrastructure development, marketing, human resource development, and hospitality.
Food, culture, history, and art also play a major role in tourism. The promotion of these not only boosts tourism but also gives employment and business opportunities to the youth in Kerala. Kerala has the potential to grow in medical tourism and needs to explore the opportunities there. Another feature of Kerala is its demography. Kerala is generating a huge number of high skilled labourers every year, which can be used for furthering the prospects of the economy.

Figure 1: Annual growth rates of foreign tourist arrivals in India and Kerala from 2011 to 2020, in per cent

Reference


Government of Kerala (2022). Budget Speech 2022-23, Finance Department, Thiruvananthapuram.
Government of Kerala (2022). Economic Review 2021 Volume 1, Kerala State Planning Board, Thiruvananthapuram.