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Notes for BA Economics, Govt.College, Ambalappuzha

Responsible Tourism

Responsible   Tourism   is   a   Tourism   Management   strategy   embracing   planning,   management, product development and marketing to bring about positive economic, social, cultural and environmental impacts to the local community.   Kerala Tourism has been piloting the responsible tourism initiatives at 4 destinations viz Kovalam, Kumarakom, Thekkady and Wayanad with very active support of the local self Governments, Tourism Industry, Kudumbasree, NGOs and the local community as a whole. The remarkable feature of Responsible Tourism is that it provides better living conditions to the local community, extra income generation, emergence of new entrepreneurs, micro enterprises, large area brought under cultivation.

Eco - Tourism

Kerala is famous for its ecotourism initiatives. The broad objectives of Eco-tourism are: (1)   convert entire tourism industry in Kerala into Eco-friendly mode. (2) Strengthen Eco-tourism development initiatives in the State (3) ensure local community involvement in tourism initiatives leading to employment and income generation and it also intends to create public awareness and involvement in responsible tourism development.

Supporting Organizations for Tourism in Kerala

1.      The Hotel sector (Tourist Accommodation): it forms an important part of tourism industry. Kerala is blessed with classified hotels having a total of 13861 rooms which comes to be 15.9 percent of total classified hotel rooms available in India.

2.      Kerala Tourism Development Corporation (KTDC): It is a commercial agency under government control to build infrastructure for tourism in Kerala. It runs hotels and wayside amenities for tourists.

3.      District Tourism Promotion Councils (DTPCs): DTPCs create and market tourism products at the district level. They monitor and supervise tourists destinations at the district level. They develop tourism clubs, disseminate tourist’s information, and regulate home stays.

4.      Tourist Resort Kerala Limited (TRKL): It is the agency meant for joint venture projects in the tourism sector in Kerala. It runs four hotels and overseas the Land Bank Scheme and conducts Investors Meet for tourism development.

5.      Bakel Resort Development Corporation (BRDC): It is a company formed to develop Bakel and surrounding places for tourism.

6.      Kerala Institute of Tourism and Travel Studies (KITTS) and Food craft Institutes (FCIs): It is a pioneer organization offering quality education and training for those engaged in tourism industry.



Tourists Arrivals in Kerala

Kerala attracts both foreign and domestic tourists. The State has recorded an increase in tourist arrivals over the years. But during 2008-2010 the State experienced a decline in tourist arrivals due to the impact global economic slowdown. Presently, roughly more than 7 lakh tourists visit Kerala which turns out to be more than 12 percent of total tourist’s arrivals in India. The growth in domestic tourist’s arrivals has been quite higher than that of foreign tourist arrivals in Kerala. Districts wise look at tourists’ arrivals reveals that Thiruvanathapuam and Ernakulum are the leading district recording the highest arrival of foreign tourists whereas Ernakulum and Thrissur attract the highest number of domestic tourists in Kerala. 

Growth and Structural change in Kerala Economy

Kerala has completed her more than 58 years of tryst with growth as a State and a regional economy in 2014. Over years, it has transformed itself from an agrarian economy to modern economy fuelled mainly by the service sector. Along with growth, structural changes have also occurred in the State economy. We discuss the trend in the growth rate of Kerala economy as follows.

The Stagnation Phase

Looking at the SDP growth it could be observed that the State economy started slowing down during the period 1955-56 to 1965-66. This period coincided with the first decade since the formation of Kerala. Brief spurt in economy activity took place in 1965-66 to 1970-71. There was a slackening of growth rate in all sectors viz. primary, secondary and tertiary sector in this period. The growth in income originating from the primary was dismal. Very often, during this period the growth in all sectors was less than the national level. During 1970-79 to 1979-80, the growth rate of SDP was as low as 1.97 percent.

Turnaround Phase

There has been a turnaround in the Kerala economy since 1987-88. The turnaround coincided with period of economic reforms in the country characterized by liberalization, privatization and globalization. During the period 1999-1991 to 1999-2000, the growth rate of State income at constant prices was to the tune of a little more than 6 percent. During 2000-01 to 2006-07, the growth rate of Kerala was higher at 8.1 percent which was higher that the India’s growth rate of 7.1 percent. 

Recent high growth Phase

Recently there has been a spurt in the growth rate of the State economy. In 2010-11, SDP at 2004-05 prices grew at a rate of 8.05 percent and in 2011-12, the growth again increased to 9.51 percent. This high SDP growth rate is good sign of progress that the State has started achieving in the real sector.

Structural Changes in Kerala economy

To know the changes in the structure of SDP in Kerala, we need to look at the changes in the sectoral composition of SDP of State over the years. Analyzing the trend it is evident that the contribution from the Primary sector has been declining while that of the Tertiary Sector has been increasing. In 1960-61, the Primary Sector contributed 56 percent of SDP of the State, 15.2 percent was contributed by the Secondary Sector and the rest 28.8 percent came from the Tertiary Sector. When it comes to 2011-12, the contribution from the Primary Sector plummeted to a dismal level of just 9.48 while the Secondary Sector contributed only 20.22 percent. But it is interesting to note that the contribution from the Tertiary Sector to SDP skyrocketed to 70.30 percent. This sea change in the sector composition of SDP of Kerala obviously reveals that the State has undergone structural changes in economy.

District wise State Domestic Product

District wise distribution of GSDP reveals that Ernakulum district is the highest contributor to the State SDP while the lowest contribution comes from the Wayanad district (2011-12 estimates). The highest growth rate in GSDP is with Pathanamthitta district and lowest is recorded by the Idukki district (2011-12 data).

Percapita income of Kerala

In 1950-51, the Percapita income of Kerala was just Rs.247 at constant prices. By 2000-01, it increased to Rs.10, 809, and in 2011-12 it became Rs.60536. It needs to be noted that in 2011-12, the growth of Percapita income registered a growth rate of 8.75 percent compared to the previous year.

District Wise Percapita Income

Data shows that in 2011-12, the districts of Thrissur, Thiruvananthapuram, Pathanamthitta and Ernakulum had a much higher growth rate than the average growth in per capita income. Idukki and Wayanad showed much lower growth in per capita income than the state average of 8.75% in 2011-12. The analysis of district wise per capita income shows that Ernakulum district stands first and Malappuram district stands the bottom position in 2011-12.

Decentralized Planning in Kerala

Participatory development and democratic decentralization are accepted as a strategy of development all over the world to enhance the quality of governance. Participation would strengthen democracy and thus promote good governance. The involvement of the people and   utilization of their knowledge and expertise will make development sustainable. The most important aspect of participation is effective devolution of power to the people so that they have a decisive role in making decisions concerning them. Participation also creates opportunities for the marginalized sections to influence decisions.

The 73rdand 74th Amendments in the Indian Constitution put forward the objective of democratic decentralization. Considering the importance of the 73rd& 74thActs, the state government have initiated one of the most historic and revolutionary step towards decentralization process in the state. It was named as the Peoples Plan Campaign.   It was   launched in the beginning of the IXth Five Year plan by ensuring peoples participation in the decentralized planning process. It is basically the process of devolving the functions and resources of the state to the elected governments at the lower   levels so as to facilitate   greater direct participation by the citizens in governance including fixing of local priorities, identification of feasible schemes, selection of beneficiaries, monitoring of  implementation   etc.   Peoples Plan Campaign in the state was a remarkable experiment   in decentralization of powers, functions, functionaries and finance to local governments with focus on local planning and implementation   of   development   projects.  

Major Landmarks in Kerala Decentralized Planning

Some   of   the   major   landmarks   in   the   decentralized planning   process   are:

·         Enabled the state to structure a systematic participatory planning methodology at various stages of developmental planning process, implementation, monitoring etc.

·         Initiated the transfer of about 25% of the annual plan allocation of the State Plan to the LSGs.

·           Enabled   transfer   of powers,   functions,   institutions   and   staff   to   LSGs   and   improved   not   only   the capacity of the local public but also capability of the elected representatives in understanding   and   identifying   local   level   planning.  

·         It   introduced   a   transparent method in the selection of individual beneficiaries of the schemes based on some fixed   criteria.  

·         It motivated improvement of accountability and introduced good governance features in the administrative. It   made   local   governance   more   practical,   responsive   and   transparent.

Performance of Agriculture Sector in Kerala

Kerala has a glorious past in agriculture sector.  In 1960-61 the contribution of the primary sector to the GSDP is 56% while it falls into 9.1% in 2011-12 (constant   prices). The share has been   falling steadily over the years. There has been negative growth in this sector in all the years of the XIth Plan except   in   2008-09.   In   2011-12   the   growth   rate   of   the   sector   is -0.7%.   The low availability of land and the high cost of other factors of production (farm labor, fertilizer, etc), the excessive dependence on volatile international commodity prices and the   vagaries of the monsoon have resulted in low farm viability. However, this sector is very significant from the point of view of rural livelihood options, food security, and raw material for the food processing industries and for exports. It is this sector which gives character to the State and various initiatives have been taken to promote crop development, animal husbandry and fisheries in Kerala.

The   growth   performance   of   the   agriculture   sector   has   been   fluctuating across the plan periods. It witnessed a negative growth rate of 1.3 percent in XIth Five Year Plan while a positive growth of 1.8 percent in Xth Plan period. The quick estimate of 2011-12 indicated a   negative growth of 1.6 percent over the previous year. The provisional estimate of agricultural income of the state again shows a negative growth of 4.5 percent during 2010-11.The crippling growth rate in agriculture as against a reasonably robust annual growth rate of GSDP of the State is a cause of concern.

The agriculture in Kerala has undergone significant structural changes in the form of decline in share of GSDP from 26.9 Percent in 1990-91 to 9.1 percent in 2011-12, indicating a shift from the agrarian economy towards a service sector dominated economy. Reviving the agriculture sector require a quantum increase in productivity from the current levels. This in turn requires technological breakthrough given the limited supply of land and other structural rigidities, addressing low level of mechanization, shortage of irrigation    facilities, treatment of soil acidity and multiple nutrient deficiencies, plant  health  management,   remunerative   prices and poor extension services.

Cropping Pattern in Kerala

Cropping pattern means the proportion of area under different crops at a particular   point   of   time. A change in cropping pattern implies a change in the proportion of area under different crops. Kerala is one of the states in India where land is put to more intensive use. This is because of the lower per capita availability of land in the state. Kerala cropping   pattern is characterized by the domination of non-food crops or cash crops like rubber, coconut, pepper, areca nut, cashew nut, spices and plantation crops, which together account for more than 50% of the cropped area in the state. The agro climatic condition of the state is also in favor to the cash crops. Under colonial period the Britishers initiate the plantation crops and the   Rajas   of Travancore also promotes such crop to tap the European capital, technology and   man power. In cropping pattern Kerala resembles with the agricultural economy of Sri Lanka.


The area under rice has been declining consistently over the last several years. After a long period of continuous decline, area under rice increased from 2.29 lakh ha in 2007-08 to 2.34 lakh ha in 2008-09 and sharply declined by 20828 ha in 2010-11 period over to the previous year. During 2011-12, the area under rice declined by 5027 ha, but the production has increased by 0.5 lakh MT. The production is increased due to increase in productivity.




Coconut based farming is the main stay of farmers of the State with a coverage of 8.2 lakh ha which occupies 40.2 per cent of the net cropped area. During 2010-11, area and production of coconut in the State were declined by 1.2 percent and 6.7 percent respectively. In 2011-12, the situation has improved with 6.6 percent expansion of area and 12.4 percent upsurge in production over the previous year.


In Kerala, the area under pepper is estimated at 0.85 lakh ha and production at 0.38 lakh MT during 2011-12.


Area under the crop in Kerala has been declining steadily from 1.25 lakh ha. in 1988-89 to 0.44 lakh ha. in 2010-11. During 2011-12, there is 23.3 percentage increase in the area (0.54 lakh ha) and the production also surged to 0.37 lakh MT from 0.35 lakh MT in 2010-11. The share of Kerala in the area under cashew in the country has come down from 23 per cent in 1987-88 to 5.4 percent in 2011-12 and the corresponding decline in share of production is from 31 per cent to 5.3 percent

Plantation Crops

Kerala has a substantial share in the four plantation crops of rubber, tea, coffee and cardamom. These four crops together occupy 7.02 lakh ha, accounting for 34.4 percent of the net cropped area in the state. Kerala’s share in the national production of rubber is 87.3 per cent, cardamom 79 per cent, coffee 22 per cent and 7 percent in tea during the year 2011-12.


In Kerala the coverage under the crop in 2011-12 was 5.39 lakh ha, higher by 5335 ha over the previous year.


The area under coffee in Kerala was 0.84 lakh ha out of 4.09 lakh ha in the country during 2011-12, which works out to around 21 per cent. The percentage share of area under coffee is highest in Karnataka (56.1%)    


Against the total area of 5.8 lakh ha under tea in the country Kerala accounts for only 0.37 lakh ha 2011-12.



Kerala accounted for a major share (78.8%) in the total cardamom production in the country. Karnataka and Tamilnadu contributed 14.7 percent and 6.5 percent share respectively. In Kerala, the area under cardamom is 0.42 lakh ha comprising 59.2 percent of total area of crop in the country during 2011-12.

Causes of Industrial Backwardness in Kerala

Several explanations are given for industrial backwardness of Kerala. They include the following:

1.      Spatial Distribution Hypothesis: In Kerala almost all industries are concentrated in Ernakulum, Thrissur and Palakkad districts. The other regions of the State are neglected. This lack of regional spread of industries has slowed the industrial progress in Kerala.

2.      Militant Labor Hypothesis: The labor unions under the clout of major political parties often try to materialize their seemingly illegitimate demands. As a result, many industrialists have had very bitter experience with the labor unions. Often, production and productivity are to be overlooked for considering wage demands of unions.

3.      Wage Cost Hypothesis: Kerala is often regarded as a High Wage Cost economy. Trade unions pressurize for hike in wages.

4.      Linkage Hypothesis: Industrial units in Kerala have poor linkage effects, both backward and forward linkages. Hence two problems arise: non availability of raw materials and lack of demand for the output.

5.      Capacity utilization hypothesis: The average capacity utilization of industrial units in Kerala is in the range of 20 percent to 80 percent. Public sector enterprises utilize only 50 percent of the existing capacity. This adversely affects the profitability of industries in the State.

6.      Public Policy Hypothesis: The absence of proper public policy slows down the industrial progress of the State. The policy initiatives should be timely and environment friendly.

7.      Other Cost Hypothesis: Besides wages, there are other costs incurred by industrial units like welfare payments, depreciation charges, interest cost, input prices etc. These other costs are high in Kerala.

8.      Bureaucratic attitude: The bureaucracy is not professionally equipped to handle industrial issues in Kerala. It takes more time to take and disseminate decisions. The multiplicity of bureaucratic hurdles discourages people to venture into business.

9.      Up gradation of technology: Increase in productivity is necessary for industrial growth. Technology enhances productivity. But industries in Kerala especially traditional industries have failed in updating the technology.

10.  Central Investment Policy Hypothesis: The Central investment in Kerala has been relatively low. This has retarded industrial development of the State.



Industrial Development in Kerala

Kerala, which has been traditionally backward in the filed of industrial development, is taking serious efforts to identify new opportunities and to equip it                      to meet the emerging

challenges.    The Industrial Policy, IT Policy, establishment of            INKEL are all intended towards

the enhancement of investment in the State especially in              the industrial sector with the objective

of   creating   more   income   and   employment.   The   role   of   Government   has   been   changed   from   a

provider to that of a facilitator for industrial investment.         In the 11th Five Year Plan a number of


schemes have been evolved and being implemented with a view to attract more and more private

investment to the State.      Efforts at maintaining the tempo of investment in the traditional sector

are   continuing   with   the   aim   of   bringing   about  its   technology   upgradation,   diversification   and


Industrial Growth


Industrial growth recorded from 2000-01 to 2006-07 was positive except in 2001-02, which were (-) 4.44 per cent and (-) 2.88 per cent in the year 2001-02 respectively at constant and current prices. The average growth rate for the period from 1999-2000 to 2006-07 was 2.9 per cent and 6.99 per cent at constant and current prices respectively. The contributions of manufacturing sector to GSDP at constant and current prices are 7.86 per cent and 6.61 per cent respectively during 2006-07.

Index of Industrial production (IIP)


8.5   The   Index   of   Industrial   production   measures   the impact of development in the filed of

industrial sector over a period of time in the State in comparison with a selected previous year. It

gives a comprehensive view of the industrial development of the State. So far the index used to

cover    only   the  production    in  the  manufacturing    and    electricity  generation    and  transmission

sectors in the State. But now the mining and quarrying industry also falls within the purview of

IIP.  In order to ensure more accuracy and better reliability of the data the base year has been

shifted from 1980-81 to 1993-94.


8.6        The General Index for the year 2006-07 increased to 262.37 from 208.31 in                       2005-06

showing an increase of 26 per cent.          Negative growth was recorded in products such as jute &

other vegetable fibre textiles.      All other items showed positive growth.lick to add text, images, and other content

International Conference on 'Transformation of Indian Economy' at Government College, Ambalapuzha