Question

Which of the following statements accurately describe the key influencing factors of Kerala's economic development during its Third Phase (1991 onwards)?

1. The economic reforms implemented by the Government of India since 1991 significantly influenced this phase.
2. Decrease in public expenditure and investment was a major factor during this period.
3. The substantial increase in migration and the flow of remittances played a crucial role.
4. State policies had no discernible impact on this phase.

• A. ഒന്നും നാലും
• B. രണ്ടും നാലും
• C. മൂന്നും നാലും
• D. ഒന്നും മൂന്നും

Answer 1

Answer:

D. ഒന്നും മൂന്നും

Kerala's Economic Development: Third Phase (1991 Onwards)

• This phase of Kerala's economic development, starting from 1991, aligns with India's broader economic liberalization, privatization, and globalization (LPG) reforms.
• It marks a period where Kerala's economy became more integrated with the national and global economic systems.

Impact of National Economic Reforms (Statement 1: Correct)

• The Economic Reforms of 1991, initiated under Prime Minister P.V. Narasimha Rao and Finance Minister Manmohan Singh, fundamentally changed India's economic landscape.
• These reforms led to:
  • Increased private sector involvement and foreign investment.
  • Reduced governmental controls, moving away from the 'License Raj'.
  • Greater integration with global markets, influencing trade and capital flows into states like Kerala.
• For Kerala, these reforms opened up new avenues for growth, particularly in services, tourism, and IT, while also posing challenges to traditional sectors.

Role of Migration and Remittances (Statement 3: Correct)

• A defining characteristic of Kerala's economy, prominent since the 1970s, is its extensive emigration, primarily to the Gulf Cooperation Council (GCC) countries (UAE, Saudi Arabia, Qatar, Kuwait, Bahrain, Oman).
• The post-1991 era witnessed a substantial and sustained increase in remittances (money sent home by Non-Resident Keralites - NRKs).
• These remittances became a crucial contributor to Kerala's Gross State Domestic Product (GSDP) and stimulated:
  • Significant growth in household consumption and improved living standards.
  • Increased investment in real estate and various service sectors.
  • Expansion of the banking and financial sectors within the state.
• The 'remittance economy' has been a vital engine of growth, although it also contributed to inflationary pressures and labor shortages in certain local industries.

Public Expenditure and Investment (Statement 2: Incorrect)

• While Kerala, like other states, faced fiscal challenges and pressures for fiscal consolidation post-1991 due to structural adjustment programs, a major decrease in public expenditure and investment was not a primary driving factor in its overall economic development during this phase.
• Kerala consistently maintained a high level of social sector spending (on health, education, and welfare), which is a cornerstone of the 'Kerala Model' of development.
• Although there were ongoing discussions about the sustainability and efficiency of public investments, especially in productive sectors, the general trend was not of a significant *decrease* that fundamentally shaped its development negatively.

Impact of State Policies (Statement 4: Incorrect)

• The assertion that "State policies had no discernible impact" is false. Kerala's unique development trajectory, often termed the "Kerala Model of Development", is largely a result of its progressive and sustained state policies.
• Key policy interventions that continued to influence this phase include:
  • Social Sector Investment: Continuous high allocations to public health and education created a highly literate and skilled population, forming strong human capital.
  • Decentralization: The highly acclaimed People's Plan Campaign, launched in the mid-1990s, significantly empowered local self-governments (Panchayats and Municipalities), enabling more participatory development planning and localized resource allocation.
  • Land Reforms: Though implemented earlier, their long-term socio-economic impact continued to shape asset distribution and social equity.
  • Welfare Measures: Robust social safety nets and a strong public distribution system continued to play a role in poverty alleviation and food security.
• These policies profoundly influenced social equity, human development outcomes, and the overall socio-economic fabric, which in turn shaped the economic development during and after 1991.