Below The Radar

By C Balagopal

This is a unique contribution to the literature on Kerala industrialization, based on the personal experience of an IAS turned entrepreneur in establishing a world class high-tech industrial unit in Kerala and in-depth case studies of several similar experiences in the state. The book is a guidepost and a must read for policy makers,entrepreneurs and academics who are engaged with theindustrial transformation of Kerala.

• Language: English
• Publisher: DC BOOKS
• Release date: Feb 1, 2023
• ISBN: 9789356433137

C Balagopal

Balagopal Chandrasekhar is the Chairman of the Board of Federal Bank Ltd. He is also on the Governing Body of the Centre for Management Development Trivandrum, Advisory Board of Fourth Wave Foundation, Member of the Board of TIMed Medical Devices Incubator of SCTIMST, and Member, Advisory Board of IIT Palakkad. Having completed his BA and MA from Loyola College, Madras University, he joined the IAS in 1977. He worked in the IAS in Manipur and Kerala till 1983 when he resigned to promote a venture to make hi-tech biomedical devices for the first time in the country. Acquiring the knowhow from Sree Chitra Tirunal Institute for Medical Sciences & Technology, Trivandrum (SCTIMST) and with the support of National Research Development Corporation and KSIDC, he set up his venture near Trivandrum. From those small beginnings, he grew the venture into the largest maker of blood bag systems in the world, exporting products to more than 50 countries. In 2012, he sold the company to a leading Japanese maker of medical products, and turned to investing in startups, mentoring entrepreneurs, writing, travel and his many other interests. With his wife Vinita, he set up and runs ANAHA Trust, which funds socially useful programs and projects, in the fields of primary health, primary education, and rural livelihoods. Projects supported by the Trust are in operation in Kerala and Manipur. He has written three books: On A Clear Day You Can See India, The View From Kollam, And Maveli & Markets: How Supplyco Held The Price Line. Balagopal is a sought after speaker to professional bodies and students, and participates in webinars and discussions online. He is active on social media, and his Facebook page with commentary on contemporary affairs and is followed by many.

Book preview

Foreword

I was provoked to write this book by the response of ordinary and business people, when discussing the problems of industry and business in Kerala. From mocking smiles, and the derisive tone, it was obvious that most people felt Kerala was unfit for business. While a few seemed to have specific reasons for holding such a view, most were dismissive about the prospects of any business in Kerala, on the basis of perceptions and conventional wisdom.

But, even without an extensive knowledge of the industry and business in Kerala, I knew that such a view was not supported by facts or data. My own experience as an entrepreneur, having set up a technology startup, struggled through tough times, and eventually succeeded in making it to a global leader in the field - reinforced this conviction. Starting out as the dissenting voice in industry association meetings and seminars, arguing trade union activity was not intrinsically antagonistic to the growth of the business, I started to come across more industrial units in Kerala that started small, established themselves in a tough market, and went on to succeed, nationally sometimes, globally.

I had written a paper titled ‘Make in Kerala: the untold story of manufacturing SMEs in Kerala’ in collaboration with Rajesh Nair and presented it at a seminar ‘Kerala and the World Economy’ at the Center for Development Studies in 2018. That paper presented the case of successful manufacturing SMEs in Kerala that had emerged in the past three decades. In this book, I have taken forward the closer examination of the success stories to understand the factors that may have helped these SMEs to succeed. I have also attempted here to place these success stories in the context of standard economic arguments about economic growth, in an effort to understand the role of deliberate public policy in changing the trajectory of growth.

The premise that I have tried to put forward here is Kerala is not hostile to business and industry, and in fact has factors present that support the growth of business and industry. This is based on the evidence of a sizeable number of the successful manufacturing industries that have been operating in the State since 1990. I have been able to list out at least 50 such manufacturing enterprises have been successfully operated in this period, and share common characteristics. This cohort has been steadily growing during the period, indicating that the ecosystem in Kerala continues to nurture such enterprises. This certainly requires an explanation and is what I have attempted to do in this book. Similar case studies and enterprise level research needs to be carried out to understand better what is going on here, and what has enabled these enterprises to start up, grow, and thrive in Kerala.

My purpose will be accomplished if the book provokes thought, discussion, and controversy. At least then it will be accepted that the view that Kerala is not good for business and industry is not uncontested, and that it is not supported by the evidence. As indicated earlier, more research and field studies are needed to better understand the growth of these enterprises, which is today considered counter intuitive and going against the conventional narrative. I hope management schools and economics department will encourage research into understanding why and how did these enterprises succeed in often adverse circumstances, confounding the prophecies of pundits who have decreed that Kerala is unfit for industry and business.

Let me state at the outset that I too dislike the ‘Kerala exceptionalism’ that is often on display, with people bragging about the high HDI and other social accomplishments, as if the rest of the world has much to learn from Kerala. That hubris has caused people in Kerala in all walks of life to lose sight of the fact that much remained to be done on various fronts once the HDI challenges were overcome, and a rights based social welfare system was installed. I do not think that attimari, nokku kooli, and hartals are good for civil society in Kerala, and do not in any way promote democratic values and the interests of the citizen. These are egregious practices that should be dealt with by the existing laws. But Kerala is much more than these obnoxious and restrictive trade and business practices. To assert business and industry will not be possible in Kerala as long as these practices exist in any part of the State, is an extreme view. The fact that so many successful business and industrial enterprises work here despite these practices is itself an evidence that these practices, despite being obnoxious and objectionable, do not discourage entrepreneurs from setting up shops in Kerala.

The danger of the single narrative is at work here. With this tendency to connect the dots between such bad practices, a few instances of militant trade union activity leading to the closure of business units, and the decline of large sections of traditional manufacturing sector to conclude that Kerala is hostile to business, we will be exaggerating the influence of one set of factors over the others that may in fact more than compensate for these negatives. We must look at each of these factors carefully, and study how they are connected, and whether in fact there are other reasons accounting for the decline of the traditional manufacturing sector. Through this book, I have attempted to show that the reasons for the decline of the large traditional manufacturing sector, employing hundreds of thousands of people in the last quarter of the 20th century lay elsewhere, in natural economic trends and tendencies, that have operated in other parts of the world. I have tried to show that the rise of wages in Kerala is better explained by exogenous factors connected to global developments including the steady rise in the flow of inward remittances from the Middle East.

I hope the reader will be stimulated to enquire more about these matters after reading the book, and will come around to the view that Kerala, while undoubtedly having several drawbacks such as scarcity of land for industry, a high population density, an unusual distribution of habitation across the land surface that is not concentrated in villages, towns, and cities, and a high degree of political mobilization, also has strong positive features that work to support hi-tech industry requiring certain favorable features. Despite the instances of attimari and nokku kooli, and a strong trade union movement, many SMEs have started and thrived here in Kerala. We must surely look into how and why these have happened. Our understanding of these success stories will equip us to design better policy initiatives, that will help promote the right kind of industry and business suited for the State and the people, that will then lead to all round economic development, and the prosperity that it promises.

Acknowledgements

I have benefited from conversations with many friends and associates, at numerous seminars and workshops, and even over innumerable cups of coffee, on the subject why and how so many SMEs have performed well in Kerala, despite the odds allegedly being against them. The number of such people who have helped my understanding of such issues is large, and difficult to list out here. But I would like to mention Ajit Mathai, Rajesh Nair, Rajiv Vasudevan, Chandan Mukherjee, Sunil Mani, K J Joseph, and Sushil Khanna. I have had interesting conversations with business people like K E Moidu, C Padmakumar, E K Ahammed, Jose Dominic, Navas Meeran, Shivdas Menon, and others that have enriched my understanding how they ran their enterprises, and solved the various problems they faced. I have had similar conversations with senior officials of the Government of Kerala, and tried to understand the constraints coming in the way of evolving an effective industrial policy suited to the needs of the State. I owe much to all these people for helping me refine my ideas, and improve my understanding of the issues facing industry in Kerala, as well as the potential that lies untapped. However, the responsibility for any errors and omissions as well as the conclusions drawn from an examination of facts, remains mine.

I thank Ajit Mathai who helped me restructure the book, and whose acute observations regarding the presentation of the argument have helped me. I acknowledge the help given by Rajesh Nair, who had originally agreed to be the co-author of the book, and help with the research, but who was prevented from doing so by several episodes of ill health and hospitalization, and subsequent changes in his professional commitments.

I am glad that my good friend Ravi Deecee came forward to publish the book, and did so in a remarkably short time.

It is to my wife Vinita that much of the credit should go for this book being written. One of the many ways she completes me is by ensuring that I do not leave things half done! I wonder how it is that I went through some of the most difficult phases of my life before she came into my life. But after Vini came on the scene, I have ended up accomplishing much more, simply because I’m now completing more of the things that I start!

I dedicate this book to Vinita, without whose determination and persistence, this book would not have been completed.

CHAPTER 1

Introduction

This book arose of trying to find the answer to the question: what factors explain the rise and growth of a modern manufacturing sector in Kerala at a time when the dominant narrative was that Kerala is not suitable for industry? This is an important question that will become clear as we examine the economic development of Kerala, in the light of the theories of economic development and the approaches to the economic growth of Kerala. Often, we see evidence of its salience every time the subject is discussed in the surprise with which our views are greeted by entrepreneurs, business professionals, academicians, government officials, and civil society organizations. The fact that manufacturing industry has grown and is thriving in Kerala is so counter intuitive to many. This is clearly a phenomenon that deserves more investigation.

In many discussions on business and industry in Kerala, there appears to be a general consensus that conditions in the state are not conducive for business. This statement is usually supported with anecdotal evidence that comprise mostly the personal experiences of the speaker, and is sometimes convincing and compelling. The narrative of the de-industrialization of Kerala would have been more compelling if it were not for the fact that there were so many successful industrial enterprises working in the state! It is not possible to regard these as exceptions to the rule. The list of successful manufacturing MSMEs indicate they are distributed across many sectors ranging from spices and food processing to rubber products, medical products and devices, steel casting and related activities, electronics products and components, ship building, telecom equipment, controls and instrumentation, electrical products, and so on that indicates this growth cannot be attributed to any specific factor endowment or similar explanation including local availability of either raw materials or key material inputs including power and water.

Something else seems to have happened, to enable so many MSMEs to start up in the late 1980s and 1990s, grow