Question

Which of the following statements about the role of foreign remittances in Kerala are correct?

(1) Remittances boosted industrial investment significantly.

(2) Remittances were largely channelled into housing and consumption.

(3) Remittances improved human capital through health and education spending.

• A. (1) only
• B. (1) and (2) only
• C. (2) and (3) only
• D. (1), (2) and (3)

Answer 1

Answer:

C. (2) and (3) only

The role of foreign remittances, primarily from the Gulf countries, in Kerala's economy and society has been extensively studied.

1. (1) Remittances boosted industrial investment significantly.

   • Incorrect. While remittances boosted the overall economy, a common finding is that a relatively small portion was channeled into industrial or productive investment. Instead, the high savings and deposits often did not translate into high industrial growth due to a less-than-conducive investment climate. Remittances were often directed toward non-productive assets like land, housing, and consumption.

2. (2) Remittances were largely channelled into housing and consumption.

   • Correct. Studies consistently show that a major share of the remittances was spent on day-to-day consumption (including non-food durable goods) and investments in land and housing (construction of new houses or repair/renovation). This led to a significant change in lifestyle and a rise in conspicuous consumption in the state.

3. (3) Remittances improved human capital through health and education spending.

   • Correct. Remittances had a positive and significant effect on human capital formation. Households receiving remittances tended to allocate a larger share of their income to education (e.g., private schooling, professional college fees) and health expenditures, leading to improved living standards and human development indicators.