Before the last Union Budget, the Kerala government demanded a package of Rs 24,000 crore, citing its extreme financial strain. However, the Union Budget once again proved to be a major letdown for the state. As the state government faces a severe financial crisis and struggles to generate resources even for its day-to-day affairs, many experts are now calling for bold measures.
D. Dhanuraj, Founder-Chairman of the Centre for Public Policy Research (CPPR), a non-profit, independent public policy think tank based in Kochi, is among those advocating for a systemic overhaul in Kerala through consensus. In an exclusive interview with THE WEEK, he analyses the complexities of Kerala’s financial troubles and offers his solutions.
Here are some edited excerpts:
Q/ The Kerala government is facing severe financial distress, and the state is keenly watching how it plans to generate additional revenue. With the finance minister set to present the state budget tomorrow, what do you think is Kerala’s way forward?
A/ We have developed a strong human resource base, but Kerala lacks avenues to effectively utilize it. The government alone cannot create these opportunities; a competitive market economy is essential—without compromising social welfare. Welfare programs can continue, provided there is higher tax revenue from local businesses.
The government has long claimed that Kerala has a favourable ease of doing business, but confidence in these assurances is waning. Industrialists frequently express concerns about bureaucratic red tape, which remains a major hurdle. Addressing this issue requires a bold political decision, not just a budgetary one—it is a policy shift that demands consensus building.
Private investors hold the financial power to drive progress. We should welcome public-private partnerships and private investments. Another crucial step would be divesting some of Kerala’s loss-making PSUs, which would boost investor confidence. The core issue is trust—people doubt whether the government will follow through on its commitments.
Job opportunities arise when investors have confidence, ensuring that our youth can build careers here instead of seeking opportunities abroad. To unlock Kerala’s human resource potential, we need two key actions: first, attracting private capital, as the government lacks sufficient funds; and second, implementing concrete policy measures with a time-bound action plan. A clear roadmap is essential. Bold decisions are necessary, and to make them effective, we must foster consensus.
Q/ The government has claimed that under its entrepreneurial year scheme, over a lakh businesses have been created in the state.
A/ Kerala needs to focus on scaling up [economic opportunities]. Job creation should not be limited to small units; instead, businesses must expand to generate employment on a larger scale. While cooperative societies have their place, they often struggle to scale, and without growth, job opportunities remain limited.
D. Dhanuraj
The goal should not be to register 1 lakh businesses but to have 1,000 companies capable of employing 1 lakh people. If 1 lakh companies employ only 3 lakh people, it highlights an inefficiency in scale. The focus should be on building enterprises that can each provide jobs for at least 200 people, rather than just a handful. Without this, our youth will continue to leave the state in search of better opportunities elsewhere.
In the next five years, as the population ages, Kerala may face a demographic shift where an increasing number of people reach their 40s and 50s without enough young talent to sustain the workforce. We must create an environment that retains talent and offers competitive opportunities. Foreign remittances have been a crucial part of Kerala’s economy, but we need sustainable local industries to ensure long-term stability and growth. Scaling up is the key to securing Kerala’s economic future.
Q/ What are the ways in which we can retain our young talent?
A/ We need to rethink our higher education system. When we look at discussions on higher education, we don’t hear much about academic excellence. Instead, the focus is often on political issues. Even parents have lost confidence in the system. Will the quality of education be good? Will exams be conducted on time? These are the concerns they raise.
We should invite private universities to be part of this transformation. While regulations are necessary, they should not stifle private institutions. In Kerala alone, colleges with decades of history—some over 70 years old—are now ready to become universities. Instead of bringing in universities with large financial backing from outside, we should grant autonomy to these institutions, allowing them to innovate new courses, handle faculty appointments independently, and recruit talent from beyond Kerala. Currently, our colleges lack faculty diversity, which limits exposure to different perspectives.
Higher education in Kerala needs to be more competitive—not in terms of money, but in terms of quality. Institutions should focus on offering dynamic courses, fostering research, and improving job prospects for graduates. Unfortunately, many of our universities lack the capacity to adapt to the rapidly evolving education sector. Supporting institutions with such capabilities will encourage students to stay and build their futures here.
