Why Is Kerala Not A Top Choice For Investors?

The ongoing crisis between the Kerala government and Kitex Group has further raised eyebrows of investors that the state is looking for. Despite faring well in social indices like literacy, it has lagged behind when it comes to business investments. In the Ease of Doing Business (EoDB) index, Kerala secured the 28th position in the country, while the neighbouring state of Andhra Pradesh emerged as the topper. The Managing Director of Kerala Industrial Development Corporation (KSIDC), S Harikishore, wrote to the Centre demanding the criteria of evaluation be disclosed. KSIDC is the nodal agency for industrial promotion in Kerala.

The Financial Express reported quoted him as saying, "The details regarding the yardsticks adopted for the scoring and ranking have not been shared among the states or revealed on the website, which has resulted in lack of clarity regarding the process of ranking."

At the inauguration ceremony of Medium, Small and Micro Enterprises (MSME) forum of Kerala Management Association, the state's Industries Minister P Rajeev said that the state government is working to improve its ranking in the EoDB index. He aims to take his state from the 28th spot to among the top 10 states.

Why Are Kitex, Kerala Govt Sparring?

Last month, a major industrial group named Kitex Garments Limited, which is a kid apparel manufacturer, announced would be withdrawing from a ₹3,500 crore project, for which it had signed a memorandum of understanding with the Kerala government at the 'Ascend Global Investors Meet' in Kochi in January 2020. They alleged harassment from state government officials as the reason behind the decision. Sabu Jacob, the chairman of the group, said in a statement that several units of the company were raided around 10 times by officials from various departments last month. He said that 40-50 officials would come for the raid and obstruct the workers, including women employees, from doing their job. No reasons or justifications for the raids were provided to the company's authorities. This issue went viral on all social media platforms.

The Kitex group has been on a slippery slope with the ruling CPI(M) after the group entered the political arena with their party Twenty20. The party fielded candidates for eight seats in Ernakulam and had previously registered an impressive victory in the civic polls held last year.

Specially Designed New Team

P Rajeev said that the aim is bring Kerala to the top in the next five years and there is apparently, a core team working on it. The chairman of the Kerala wing of Confederation of Indian Industry (CII), Sreenath Vishnu, said that the state has implemented K-Swift (an online single-window clearance mechanism) and all top officials know about this system. However, he also added that it imperative for the local self-government department to be well versed with it. He said that the best way to educate the panchayat-level officers is by initiating a reward system. Each local self-government should be remunerated based on the number of jobs they have created and the direct and indirect taxes generated by new companies in their region. "This would result in healthy competition between panchayats to help set up businesses in their area," he added.

Vishnu said that considering the geographical location of the state, small and medium enterprises would be best suited. He said, "Kerala has a great potential for electronic products, including electronic chip and food processing," he said. He added that the state has the best water quality in the country, which makes it the best location for food industries.

What is K-SWIFT?

The government of Kerala had introduced an online single-window clearance mechanism, Kerala Single Window Interface for Fast and Transparent (K-SWIFT) clearance, to help entrepreneurs set up their businesses. It is a platform for all transactions with the Kerala government on issues like granting licenses and approvals in a time-bound manner. The platform was developed with a vision to reduce the physical touchpoints to make the entire process more effective and efficient.

The chairman of the Kerala for CII also mentioned that the state already has an e-commerce platform that needs to be developed into a full-fledged e-commerce portal. The state should focus on putting a price on all the services of the portal and should let a leading tech company maintain it. He added that it is a necessity for the government to have a logistics hub.

High Remittances To The State

Ever since Keralites have started migrating to Gulf countries for better prospects, the remittances to the state have grown. In 2014, the state's remittances were 1.2 times that of its revenue receipt. The remittances are sufficient to wipe out 60 per cent of the state's public debt. The money plays a significant part in enhancing the quality of life of the people of Kerala and contributes to a high human development index for the state in matters of education, health and reduction in unemployment and poverty.

The remittances are in thick mud as the state has been warned of losing ₹13,000 crore because 4 lakh Keralites who went abroad are planning to shift back in the wake of the pandemic. About 2.5 million people from Kerala work in West Asia, Europe and the US. Ninety per cent of these emigrants work in West Asia that is itself struggling with the oil crisis. Until 2020, "Kerala received ₹ 85,000 crore as foreign remittances," said S Irudaya Rajan, a member of the state government's expert committee on COVID. In his view, the state is at risk of losing 15 per cent remittances, and nearly 3 lakh families have been affected due to job losses.

On the brighter side, the job losses have provided a chance for the government to re-engineer its labour system. At the onset of the pandemic, Chief Minister Pinarayi Vijayan had made it clear that the state was all set to face an influx of all the Keralites who wished to return home.

Kerala is considered to be one of the most stable states in the country. However, the state which has the most remittances is not considered to be a good place for business investments. The government must adopt strategies to up its game in small and medium enterprises so as to make big investors feel safe while investing their money in the state.

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