Question

Which of the following statements correctly describe the economic changes brought about by large-scale migration and flow of remittances to Kerala?

1. It led to an unprecedented economic downturn in Kerala.
2. It resulted in unprecedented economic change in Kerala.
3. The changes were primarily limited to the agricultural sector.
4. Widespread changes occurred in the labour market, consumption, savings, and investment.

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

Answer 1

Answer:

A. രണ്ടും നാലും

Economic Impact of Migration and Remittances on Kerala

• Kerala has a long history of out-migration, primarily to the Middle East (Gulf countries), starting prominently in the 1970s. This era is often referred to as the 'Gulf Boom'.

• Remittances, the funds sent back by Non-Resident Keralites (NRKs), became a crucial source of income for the state, playing a significant role in its Gross State Domestic Product (GSDP).

• The substantial influx of remittances brought about an unprecedented economic transformation in Kerala, greatly enhancing the living standards of many households and contributing to poverty reduction.

• A large share of the remittances was directed towards consumption expenditure, leading to a flourishing consumer market, a booming real estate sector, and growth in various service industries. This boosted economic activity but also fueled inflation in certain segments.

Regarding the Labour Market:

• The emigration of a large number of Keralite workers, both skilled and unskilled, created a noticeable shortage of local labour in key sectors like agriculture and construction within Kerala.

• To compensate for this shortage, Kerala experienced a considerable inflow of inter-state migrant workers from other Indian states such as West Bengal, Odisha, Bihar, and Uttar Pradesh, leading to a significant diversification of its labour force.

In terms of Savings and Investment:

• Remittances also contributed to increased savings and investment, though a significant portion was often invested in non-productive assets like land and housing, which contributed to a real estate boom and rising land prices.

• Additionally, investments were made in small businesses, trade, and the service sector, fostering entrepreneurial activities.

• The economic changes were not limited to the agricultural sector. In fact, remittances often led to a decrease in the relative importance of agriculture as people shifted away from traditional livelihoods, with growth being more pronounced in the service and construction sectors.

• The enhanced financial capacity due to remittances allowed families to invest more in education and healthcare, further strengthening Kerala's human development indicators, which are integral to the widely recognized 'Kerala Model of Development'.

• At its peak, remittances contributed substantially to Kerala's GSDP, with some estimates suggesting over 30% during certain periods, making it one of the largest sources of external finance for the state's economy.