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Reforms and the Kerala Model

A model, which is not sustainable, is a tragedy. In the context of neoliberal reforms, this article raises certain emerging issues relating to equity and sustainability of the "Kerala model" of development.


transforming the social, economic and

Reforms and the Kerala Model

moral foundations of the so-called Kerala model, only some issues of equity and sustainability are raised here.

M A Oommen

A model, which is not sustainable, is a tragedy. In the context of neoliberal reforms, this article raises certain emerging issues relating to equity and sustainability of the “Kerala model” of development.

This is based on a larger paper presented at the Canadian Society for International Development held at the University of Saskatchewan in June 2007.

M A Oommen ( is at the Institute of Social Sciences, New Delhi.

his article seeks to raise certain issues relating to equity and sustainability concerning Kerala’s development experience, widely referred to as a development “model”. The issues are raised in the context of the neoliberal reforms underway in India since 1991. It is particularly important because there is a strong view that “Kerala’s social democratic gains have been preserved and the social costs of its transition to a more open and competitive economy have been effectively managed” [Sandbrook et al 2007:68]. If Kerala, long subjected to class-caste iniquities, became a fascinating field of study in development literature, an important reason is the overarching concern for social justice in its policy choices. With the highest record of per capita consumer expenditure among the Indian states which has been progressively increasing since 1993-94, Kerala has also now entered a high growth regime triggered largely by the service and construction sectors.1 Although these factors have been

Poverty and Income Inequality

We may start with the issues of income poverty and income inequality. The all-India and statewise trend in the estimates of poverty headcount ratio (HCR) and Gini coefficient has been calculated by Himanshu (2007) and is based on the comparable NSS data for 1983, 1987-88, 1993-94 and 2004-05. It shows that in rural Kerala the HCR based on official income poverty line in 1987-88, a clear pre-reform year, was

10.3 percentage points lower than in 1983. The reduction in four years is remarkable. But for the 11 years spanning the postreform period from 1993-94 to 2004-05, the fall in rural poverty was only 12.2 percentage points. Meanwhile Himachal Pradesh, which did not have the luck of a Gulf boom, however, reduced its post-reform rural poverty to a lower HCR of 10.9 per cent in 2004-05 [Himanshu 2007]. The urban poverty reduction in Kerala during the pre-reform era was less spectacular and the post-reform experience is much less impressive. Apparently, the trickle down of growth failed to work very much.

January 12, 2008 Economic & Political Weekly


The most disquieting aspect of the high growth story is the Gini ratio of Kerala in absolute and compartitive terms. While there is a marginal decline in the Gini coefficient for rural Kerala in 1993-94 compared to the earlier years, there is a quantum jump to 38.3 per cent in 2004-05 and is the highest figure compared to all-India and all other states. The urban Gini coefficient for Kerala is equally disturbing. Kerala’s Gini coefficient in 2004-05 (41 per cent) is second only to Chhattisgarh (44 per cent).

Table: Socio-Economic Categorywise Headcount Ratio of Poverty

Groups HCR
Backward castes 21.4
Forward castes 14.2
Scheduled castes (SC) 38.0
Scheduled tribes (ST) 38.7
Hindus 22.6
Muslims 28.7
Christians 14.0

Source: Aravindan (2006): 78.

By using the Planning Commission methodology for estimating the poverty line, the Kerala Sastra Sahitya Parishad (KSSP), based on the monthly per capita consumption expenditure (MPCE) for 2004, has collected data from 6,000 households and estimated the HCR on a castewise basis (see table). The summary picture shows that the caste gap yawns wide in regard to poverty. The scheduled tribes, scheduled castes and Muslims are much above the forward class categories in poverty levels. The growing disparities in income poverty between different socioeconomic categories and the high overall Gini coefficient may be seen in the context of the increasing incidence of suicides,2 family violence, reported growth of mafia gangs (compelling the state government to pass a “goonda” Act in 2005 restricting their activities), day light robbery, criminalisation, alcoholism and so on.3

Education and Health

Public provisioning of education and health and equitable access to these services have been the twin basic pillars of the Kerala model. Along with that, the social security entitlements to help the vulnerable sections of society have strengthened the egalitarian base of Kerala’s development. It is significant that the percentage of public spending on education to total

Economic & Political Weekly January 12, 2008

government expenditure which was as schools (which claim to offer better quality
high as 29.28 per cent in 1982-83 declined coaching and courses) accounted for only
to 23.17 per cent in 1992-93 and to 17.97 2.5 per cent. By 2005-06, this proportion
per cent in 2005-06. The educational ex rose to 7.4 per cent while the student
penditure size of 6 per cent of net state intake in the government schools de
domestic product (NSDP), a widely ap clined from 39 per cent in 1990-91 to 31.5
proved norm which Kerala followed in the per cent in 2005-06.4 Only those who
1960s and 1970s declined to a little over 4 can afford to pay high fees go to these
per cent during the 1980s and below that unaided schools.
in 11 out of 16 years during the post-reform Another striking aspect is that while
regime. While public expenditure on edu- Kerala succeeded in reducing the size of
cation as a percentage of total expenditure non-literates among SC/ST categories and
during the pre-reform period (from 1980-81 narrowing of the gender gap in education,
through 1990-91) decreased at the rate of inequalities in schooling between SC/ST
(-) 0.97 per cent a year, the decline has and “other” categories have continued to
turned much sharper at the rate of (-) 2.13 persist. This is well exemplified in Kochar
per cent a year, during the post-reform (2006) who uses NSS (55th round) data
period. Equally sharp has been the fall in which show educational attainments by
the public expenditure on health both as social groups. Taking 10-year age cohorts
percentage of total expenditure and as a of the population, Kochar analyses the
percentage of SDP. proportion of each cohort, from the oldest
The public expenditure on health and to the youngest that has completed eight
family welfare which reached 11.67 per years of schooling, distinguishing cohorts
cent as a percentage of SDP in 1983-84 fell by caste (SCs and ST, versus other
to 9.94 per cent in 1989-90, during the castes) and shows that a persistent caste
pre-reform period, declined to 6.36 per gap exists in schooling at this level, with
cent in 2005-06. While the public expend almost no reduction in this gap across
iture on health and family welfare as a age cohorts.
percentage of SDP during the pre-reform During the last 10 years, the self-financ
period 1980-90 remained in the range of ing professional colleges have mush
1.59 per cent to 1.91 per cent and in roomed in Kerala.5 More than 80 per cent
creased at a rate of 0.29 per cent per an of engineering seats and 65 per cent of
num, it registered a decline of -1.94 per medical college seats are now in the self
cent per annum during the 15 years of financing sector. The Left Democratic
the post-reform period from 1991-92 to Front (LDF) government’s efforts to ration
2005-06. The social security entitle alise the fees structure and admission
ments which as a percentage of SDP was rules to enable the vulnerable sections of
increasing at a rate of 1.83 per cent during society to get a fair deal (what is justice
the pre-reform period fell to 0.15 per cent if not fairness?) has not succeeded be
during the reform regime. A poor quality cause of court interventions to protect
of education and healthcare have been minorities and opposition of manage
the net outcome of this. It is the poor that ment interests. Surely, the constitutional
bear the burden of this especially be protection given to the minority commu
cause their social security entitlements nities (Christians are the dominant
also have declined. interest groups in education) who run
It is not only the reduced budgetary self-financing institutions should not be
allocation for education and health, but discriminatory towards the more deprived
the accelerated commercialisation of these and those excluded due to a lack of pur
sectors under the neoliberal regime chasing power to buy the costly education
materially destroyed the equity base of under the new regime. While commerciali
the Kerala model. The unaided private sation of know ledge production itself is
schools and colleges, which were not a questionable, the moot question is
strong presence in the state under the whether any group (minority or others
pre-reform era mushroomed under liber who enjoy constitutional protection) can
alisation. In 1990-91, out of a total student trade education and health to make profit
population of 5.9 million, private unaided on the strength of constitutional protection.

Affordability and accessibility, which were the hallmark of the Kerala model of education, have been jettisoned under the new dispensation.

All evidence suggests that liberalisation has challenged the equity foundations of the Kerala model based on low-cost healthcare. While on the one hand, public healthcare and medical expenditures have been declining (with very little allocations available for preventive public healthcare and for buying essential equipment and drugs), the cost of medicines has increased. The recent health statistics of Kerala tell a dismal story of degenerating public health system. For example, the percentage of fully vaccinated children in the age group of 12-23 months in Kerala came down from 80 per cent in 1998-99 [National Family Health Survey-2 (NFHS)] to 75 per cent in 2005-06 (NFHS-3). The proportion of anaemic women in the age group of 15-49 years has increased from

22.7 per cent to 32.3 per cent and that of underweight children from 27 per cent to 29 per cent during the same period.6 Infant mortality rate in the state which reached 10 per 1,000 live births in the mid-1990s has increased to 14 as per the latest SRS data.

While the public domain of healthcare declined, private hospitals, nursing homes, scanning centres, diagnostic centres and the like registered a phenomenal growth in recent years unleashing a high cost health regime. More than 60 per cent of the beds are in the private sector with those in the public sector providing indifferent patient care and services due to overcrowding, lack of equipment, medicines and so on. The primary health centres (PHCs) and subcentres which historically have been the key institutions for the delivery of primary healthcare are not increasingly utilised by the public. Even the low income categories use only 30-40 per cent of the government healthcare services and this includes the primary health centres [Nair V M et al 2004; Kunhikannan and Aravindan 2000]. This is obviously due to the poor quality of healthcare in the public sector institutions. No wonder while the poor spend over 40 per cent of their income on healthcare, it is as low as 2.4 per cent among the rich [Kunhikannan and Aravindan 2000]. This is obviously because of what has come to be widely referred to as “mediflation” or inflation in medical expenses. The recent KSSP study (2006) put the per capita medical expenditure at Rs 1,722 for 2004 as against Rs 549 for 1996 and Rs 89 for 19877 [Aravindan 2006: 106]. Several field studies show that the impact of mediflation is most severe for the lower socio-economic groups who have been pushed below the poverty line and into deep indebtedness [see for e g, Kunhikannan and Aravindan 2000; George M K et al 2002; Aravindan 2006]. Using NSS 55th round data, Asish George (2005) examines the incidence and intensity of impoverishment in urban and rural Kerala due to out of pocket expenses on healthcare and comes to the conclusion that around 14 per cent of individuals in rural and 11 per cent in urban Kerala incurred expenditure on healthcare in excess of 15 per cent of their income and that these “catastrophic expenses” were concentrated mostly among the poor. It has pushed 3.8 per cent individuals in rural and 4.5 per cent in urban Kerala below the poverty line [Asish George 2005]. With nearly 70 per cent of the poor taking to the private sector for healthcare [Varadarajan et al 2004] and the cost of medical expenses mounting, the poor borrow heavily for survival and run fast into indebtedness.

Sustainability Issues

A model that is not sustainable is a tragedy. Sustainability of the Kerala model is closely related to equity. Here we raise the issues relating to the emerging fiscal problems and ecological crisis in the state.

The fiscal crisis which Kerala confronts today is a major factor that can affect the sustainability of the human development attainments and efforts of the state. The health and education sectors in Kerala also face this crisis. When public services and welfare are incurred through heavy and costly borrowing, the cost of human development will also be unduly high. In Kerala interest payments as a percentage of total revenue receipts which were around 14 per cent in the early 1990s rose to around 26 per cent in 2005-06. This has happened when the average interest rate declined from 9.5 per cent in 2000-01 to

8.5 per cent in 2005-06. An important indicator of debt sustainability is the net availability of the funds after payment of the principal and interest and this has been on the decline in recent years [for details see GoK 2005: 20]. This means you have to borrow more and more to enhance your net availability of funds. The total debt outstanding as a percentage of SDP has been well over 40 per cent and much above the 30 per cent norm suggested as a reasonable limit by the Reserve Bank of India. The fact that own tax revenue of the state as a percentage of SDP declined from

9.6 per cent in 1994-95 to 9 per cent in 2004-05, shows that the economic growth of the 1990s and early 2000s has failed to generate adequate buoyancy to service the mounting debt. Here we may note the disquieting decline in the capital expenditure which as a percentage of total expenditure went down from 15.8 per cent in 1980-81 to 9.2 per cent in 1989-90 and to a low of

3.8 per cent in 2004-05 and picked up only marginally in 2005-06. This is to be seen against the decline in expenditure on education, health and social security which we have already noted.

As per the original Fiscal Responsibility and Budget Management (FRBM) Act, 2003, the state government has to reduce revenue deficit to zero by 2006-07. Now that it has agreed to amend the FRBM Act to be in conformity with the Twelfth Finance Commission, the revenue deficit target has been postponed to 2008-09 and the fiscal deficit target to 3 per cent of SDP by 2009-10. The actual revenue deficit in 2006-07 (RE) as a percentage of SDP is -4.36 per cent and fiscal deficit -6.14 per cent. Clearly the state is not staying within the fiscal reform targets. The moot question is: what is important, the hard budget constraint imposed as a result of neoliberal reform or the genuine social responsibility demands of a state government such as for better education, health and social security entitlements? Here again in recommending fiscal reform conditionalities on constitutionally mandated revenue transfers to the states by the Eleventh and Twelfth Finance Commissions, they surely have not performed a constitutionally neat and proper act. Also, a state like Kerala that has implemented constitutional mandates with regard to literacy, health, land reforms and decentralised local governance indeed deserves more untied resource

January 12, 2008 Economic & Political Weekly


transfers and support from the federal government. Federal equity in India indeed needs a radical reformulation.

Ecological Overkill

Kerala enjoys one of the rare varieties of flora and fauna, and probably, the richest biomass per unit of area in the world. Hedged in by mountains and sea and replete with 44 river systems, numerous lagoons and backwaters the unique ecology of the region is structured on a slender base. As one of the densely populated regions of the globe, this state requires careful conservation and powerful policy choices against the demands of a growing consumerist culture which is well underway.

In the emerging ecological scenario, at least four aspects need be mentioned. One, the hydrological cycle is seriously damaged, probably irreversibly. Natural systems like forests and the river systems are irreparably destroyed. Kerala’s abundant wetlands sometimes referred to as the “kidney of the economic system” are fast disappearing. The Kuttanadu paddy lands and water bodies have become an ecological and environmental disaster. Despite the copious monsoon rainfall, Kerala has the lowest per capita availability of fresh water. Rhetorics apart no worthwhile effort has been made to conserve forests. Powerful forest mafia with political patronage has acquired, destroyed and plundered one of the rare forest resources of the world. Conservation of fresh water is done only at a very modest scale. Two, Kerala with its vast coastal system of 580 kms, mountains and undulating terrains has a peculiar geography which has been considerably modified. Kerala’s rich biodiversity is being fatally interfered to the levelling of paddy lands, mountain regions and heavy quarrying – all under the pressure from the fast growing building construction boom propelled by the flow of foreign remittances. Three, few parts of the world have such a rich and diversified natural base of bio-resources which over the years have been culturally dependent on the people who protected them. Unfortunately this beauti ful matrix of agro-eco system is being badly destroyed. The traditional know-how is virtually vanishing. Four, a

Economic & Political Weekly January 12, 2008

consumerist society throws out heavy solid, liquid and medical wastes. The hospitals alone generate around 1.5 lakh tonnes of solid waste per day.

It is estimated that about one million cubic metres of sewage is generated per day in the coastal areas alone. Diseases like tuberculosis, malaria and visitations of vector-borne diseases like chikungunya and dengue fever which are the result of bad management of wastes and garbages and reckless destruction of natural predators are taking heavy tolls of human lives. That 70 per cent of the households surveyed by the KSSP recently reported that the greatest health hazard confronting them was mosquitoes [Aravindan K P 2006].

This is a measure of the deteriorating environmental sanitation and poor hygiene in the state. What is required is a comprehensive vision and purposive actions. A powerful decentralised government with adequate funds and wellmotivated functionaries and full state support can make a great difference to the current situation.


In sum, however unique Kerala might have been as a development model, it is an evolving one shaped by the dynamics of events and forces, some beyond its control. This article raises certain emerging issues relating to equity and sustainability of the “Kerala model”. True, the pessimistic prognostications of several scholars that it is a stagnant growth model have been proved wrong. But its equity and sustainability foundations are rudely shaken. The growth content and trajectory need proper planning and long-term vision. This is sadly missing. Political parties with strong pro-poor and eco-friendly commitments are crucial to a desirable statesociety synergy that promotes equity and sustainability.


1 As per the latest NSS Report (No 508), in 200405, MPCE for rural Kerala is Rs 1,013 which is 81.2 per cent above the all-India level and nearly double than that of Karnataka and the corresponding urban MPCE of Rs 1,219 over 22.7 per cent of all-India. This consumer boom is triggered by the inflow of foreign remittances which is easily above $ 7 billion per annum in recent years.

2 Here it may be noted that two scholars who did a field investigation of farmers’ suicides in Kerala traced them to the neoliberal policies implemented in recent years [see Mohan Kumar and Sharma 2006].

3 The state inspector general of police in charge of crime estimated the size of parallel economy for 2006 to be the order of Rs 50,000 crore which is over 55 per cent of the net state domestic product for the year 2005-06.

4 These are based on the data from the office of the director of public instruction and Economic Review for various years.

5 One of the lucrative sources of investment in recent years in Kerala is in the field of educational and health services.

6 These data are based on

7 This fabulous increase is obviously not due to inflation.


Aravindan, K P (ed) (2006): Kerala Padanam, KSSP, Thiruvananthapuram.

George, Asish T (2005): ‘Good Health at Low Cost: How Good and How Low?’ Economic & Political Weekly, June 18.

George, M K, J Doni (2002): ‘Residual Illiteracy in a Coastal Village: Poovar Village of Thiruvananthapuram District’, DP No 45, the Kerala Research Programme on Local Level Development (KRPLLD), Centre for Development Studies, Thiruvananthapuram.

GoK (2005): Report of the Controller and Auditor General of India for the Year ended March 31, 2005, Government of Kerala, Thiruvananthapuram.

Himanshu (2007): ‘Recent Trends in Poverty and Inequality: Some Preliminary Results’, Economic & Political Weekly, February 10.

Kochar, Anjini (2006): ‘Improving the Quality of Elementary Schooling in Kerala’ in Sunil Mani et al (ed), Kerala’s Economy Crouching Tiger, Scared Cows, DC Books.

Kunhi, Kannan T P, K P Aravindan (2000): Changes in the Health Status of Kerala, 1987-1997, KRPLLD, Centre for Development Studies, Thiruvananthapuram.

Mohan, Kumar S, R K Sharma (2006): ‘Analysis of Farmer Suicides’, Economic & Political Weekly, April 22.

Nair, V M, K R Thankappan, R S Vasan, P S Sarma (2004): ‘Community Utilisation of Subcentres in Primary Healthcare – An Analysis of Determinant in Kerala’, The Indian Journal of Public Health, XXXXVIII, No 1, January-March.

Sandbrook Richard, Mark Edelman, Patrick Heller, and Judith Teichman (2007): Social Democracy in the Global periphery Origins, Challenges, Prospects, Cambridge University Press.

Varadarajan, D K R Thankappan and Sabeena Jayapalan (2004): ‘Assessing the Performance of Primary Health Centres under Decentralised Governance in Kerala, India’, Health Policy and Planning, 19 (1).

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