 Welcome to the second session of the Vikas Earth Conversations, which is titled as immigration consumption boom and service economy of Kerala. In an attempt to reflect on where Kerala stands to get today and Kerala's growth trajectory during the past three decades. The Center for Public Policy Research is organizing 2022 Vikas Earth Conversations, supported by the Institute of New Economic Thinking New York. On the topic, 30 years of India's economic reform, assessing the growth and development experience of Kerala. The second session will deliberate on immigration consumption boom and the service economy of Kerala. This session is basically structured as a discussion on the theme mentioned before and also it is followed up by a question and answer session from the audience. Now I'm very happy to welcome both our distinguished speakers to the Vikas Earth Conversations. Let me first introduce myself. I am Sumita M research fellow migration studies at the Center for Public Policy Research, and we welcome you cordially to this year's second session of the Vikas Earth series. This topic of migration lies very close to my heart, both professionally and personally because I've been associated with both the institutes, INIT Institute of New Economic Thinking New York and Center for Public Policy Research. Let's go into the professional aspect first professionally I've been doing a lot of research on migration on remittances on the consumption boom. In the past decade. So, both these institutes have featured a lot of work have done a lot of work on migration issues, especially related to the Kerala economy. Currently I've been associated with the Center for Public Policy Research for more than 15 years now, and also has been an active participant in VINIT's YSI programs, which actually throws open various opportunities for researchers like us. These organizations, most of you might know, are very familiar to all of us. Let me just put in a word about INIT. INIT is an institute which encourages heterodox economics thinking, and therefore it is. A very vibrant group of thinkers and advanced thinkers, economists, thinkers from different social, other social sciences, and also promotes a lot of research in interdisciplinary areas. Center for Public Policy Research also does a lot of work on redirecting public policy, which is very important to give a right direction to our work. So, we have two distinguished speakers today in the panel. One is Professor Dr. A. Irrumbin, who is an assistant professor and researcher at the University of Gordhugin. And the other panelist is Professor KP Karnan, who is the chairman of Lorry Baker Center for Habitat Studies. To talk about, we are very happy to welcome both our speakers to the panel today so that we have a vibrant discussion. Dr. Irrumbin has worked a lot on labour issues, and recently he has done a lot of work concentrating on Arab countries. His research work, he has had widespread research outside India, and his work is being followed by all of us. So we are very happy to have you here, sir. Dr. KP Karnan, as you all know, is a very senior social scientist as a mentor and guide to many of us here. So, Dr. Karnan has served as director of the Center for Habitat Studies. He has also taken up various positions in government bodies and has, and as a social scientist for excellence. So we are very happy to have them both on our panel. Now I'll just take you through how we have structured the event. So basically the event, the speakers will go first. So Dr. Irrumbin will start off this session with, it will be a 30-minute presentation followed by the second speaker, Dr. Karnan. After which, three of us, there will be a discussion among three of us about the related themes or themes for future research. At any point of time, the audience is most welcome to type in their questions, which will be taken up towards the end. So this is how we have structured the event. Now over to you, Professor Irrumbin, for your session. We hope it will be a very fruitful and exciting debate. Thank you. Can you hear me? Yeah, we can hear you. Thank you, Sumita for the nice introduction. And I'm quite glad that to know that you follow my research, even though I'm not a big migration expert. Kerala had a very renowned model of development called the Kerala Model of Development, which indeed had its limits as well. However, the public policy and initiatives in Kerala and several historical factors had the state to achieve a better living standard compared to the rest of India. Since the late 1970s, Kerala's economy has been supported by remittances. And you know as a migration expert and many of you know that, primarily from the Middle East and also elsewhere. Gradually, due to several factors, the economy has shifted from a farm based economy to a service based economy. Today's discussion is all about this transition and the reliance on migration. Good afternoon, everyone. My name is Abdul Erumbin. And as Sumita said, I'm an assistant professor at the University of Kroningen in the Netherlands. And I do a lot of research on the Indian economy, from the perspective of productivity, structural change, global value chain, digital transformation, and the impact of these aspects on welfare in comparison with other countries. First of all, I thank CPPR and INET for inviting me to this discussion. And more importantly, I'm quite glad to share this space with Professor KP Kannan, from whom I learned quite a lot from CDS about the macroeconomics of India. Also, I understand that the previous session, the first session, was with Pulapri Balakrishnan, who also contributed to my journey in the world of productivity, along with Professor Pushpangadhan, who also does quite a lot of research on Kerala economy, both from CDS. So I thank again, thank you. I don't know Raj Sunanda, Anu and Claire, and all the participants today for facilitating this today. As I said already, I'm not a migration expert, and I do very limited work on Kerala. So my reflection and this was a very short notice and also so my reflections today are going to be primarily based on my research on the Indian economy in the global context, and some recent work on the Middle East and Africa from the perspective of productivity and structural change. Can you see my slides actually? So I am not sure about that. Yes, yes, it's visible. Okay, let me put it in the presentation mode. Yeah. Is that better now? No, it's fine. Okay, good. First, let me give you an overview of my primary observations in today's discussion, in case if Sumita stops me for one of time in between, I do not want to lose any of the main points. First, I think there is a lot to worry about Kerala's economy, but that is not necessarily due to the service sector's dominance or reliance on remittances. But the environmental vulnerability of the state, the short-sighted nature of our policies without considering the global trends and the local needs and fragilities. The attitude to jump into the construction of infrastructure and technology without considering the appropriability of these technologies to the state's geography and climate. Poor integration of service sector into value chain, national and global, due to poor orientation towards the right sectors within the services. Frankly speaking, I'm not quite worried about the service sector per se. I think that is a benign and inevitable transition for Kerala, given its unique demographic, social and economic characteristic. I will explain that. I'm also not quite concerned about the migration and remittances and the reliance on that per se. Kerala has been historically globalized, and that will continue. However, the lack of local incentives leading to a substantial brain drain that will affect innovation and entrepreneurship in the state, politicization and other weaknesses of our educational system, and still existing social exclusion are some of the major concerns for Kerala. Indeed, the population of Kerala is highly educated. Still, the question is whether our education and the needed skills are complementary and how flexible our graduates and our students are to get into the modern labor market needs. I think we need smart and productive enterprises that are suitable for Kerala's geography. Kerala is a wonderful place. Whenever I say to my colleagues that I'm from Kerala, the first question they ask me is that, why are you here? Here actually, because whenever they visit Kerala, they all really love it actually. All that we need is to create an enterprise friendly ambience for locally appropriate industries. I really stress that aspect. And if we slow in that process, that will make us miss the boat. So that is the main story that I'm coming up. So now I'm going to place this whole debate about servitization in Kerala with the help of some numbers. Compared to other states in India, Kerala was already tending to become a service economy in the early 1990s. We are also looking at the economic reforms during since 1990s. So the economic reforms in India, the labor market reforms may have triggered that process in Kerala, but that shift was already happening. So this chart basically shows the share of service sector jobs in Kerala, compared with other states in India in 1993 and 2019. The orange ones are for 1993 and the grey ones for 2019. And I have circled with Kerala in the chart as you can see. Only a handful of small states or union territories were ahead of Kerala in servitizing the economy in the 1990s. And that is still the case. Most people in Kerala work in the service sector and only a few states outpace Kerala even today. Now, in this chart, which is a follow up of this last chart actually, I have the distribution of employment and GDP. So the left hand side, you have the employment distribution. And on the right hand side, you have the GDP distribution across sectors in India and Kerala over the last quarter of a century. This is taken from a paper that I am currently working on with some colleagues from the Reserve Bank of India. So both GDP and employment show somewhat similar pattern and similar picture, but I personally would like to look at the employment distribution. That is where people are actually ultimately, right? I mean, if you can have a high distribution of GDP from a particular sector, if that sector has very high productivity. But if the sector is not employing sufficient people, its impact on welfare will be very limited. So what do we see here? Service sector is expanding in Kerala. You can see that the share of service sector employment, which is the grey one in here actually. It is expanding in Kerala much faster than that is happening in India. Both agriculture and manufacturing are shrinking, but this is again not unique to Kerala. This is the case in India in general. Interestingly, we also see that the construction sector is also expanding in terms of job creation in Kerala and also in India. There is also another interesting aspect which I have not marked here in terms of the chart, which is that close to 70% of all the service sector jobs in Kerala are market service sector. That is activities such as trade, distribution, transportation, business services, etc. The remaining 30% are in education, health, government services, etc. So clearly what we see is that the market-based service activities are driving job creation in Kerala along with construction sector while other sectors like agriculture and manufacturing are losing out. So this is really happening and that pace has been accelerated since the economic reform, although it has already started prior to that. So with this background, I'm also providing you what we need to ask what is the implication of this shift to services for economic growth. And this is a little bit technical, but I will explain to you what it is actually. So in this chart I have the productivity defined as the volume of output and average worker in Kerala produces in a year. On the left-hand side, we have the productivity levels in different industries or sectors in Kerala compared to the national economy at the all India level, relative level. So all India is 100 here and then compared to all India what is the Kerala's productivity level. What you see is that so there is a line on that which is 100, which basically means that if any sector is on that line, which means that that sector has the same productivity level as all India level in Kerala. In all the sectors, Kerala has high productivity compared to the national economy right now and except in mining and utilities. These are anyway not big sectors in Kerala and we know that electricity sector for in India is, you know, public sector, for example. We also see that the agriculture sector has lost its relative productivity levels, but all other sectors have improved their productivity levels from the since 2004. Now on the right-hand panel, I have the level productivity growth rate or the changes, average annual changes averaged over this period in the productivity levels. Over this period, which I have decomposed into two different components. So the productivity growth rate over 93 2004 is the first bar and 2004 to 2018 or the since 2004 onwards is on the right part. So I decompose this overall productivity growth into two components. It's a bit technical. I'm not going to the technical part, but I will explain to you what it means. The first is a productivity improvement within industries. So that is whether agricultural manufacturing and services sectors are improving their productivity and whether they are contributing to the national and state level productivity growth. The second is a bonus that we get from the shift in the economy or the change in the structure of the economy or the shift of workers across sectors. For instance, the increasing privatization of the economy, whether that enhances or reduces economic growth and productivity. So that is what the second part. So now what we see, we see is that the upper bar, which I have marked here with the blue line, you see that service sector is the largest contributed to aggregate productivity growth in Kerala that has been growing very fast in terms of productivity since the 2004 period. The second largest contributing to the aggregate state level productivity is manufacturing sector, both service sectors, both manufacturing and services sectors have improved their productivity growth substantially over 90 90s. Agriculture and other sectors, which includes construction utilities and other sectors contribute relatively less compared to manufacturing and services. So that is the within industry productivity growth so that we see that there has been productivity improvements in services and manufacturing sector. Now what is what is also interesting is that at the lower part, which is the dark gray part which you see here, which I have marked with the blue line. And that is also positive in both periods. What does that suggest. This suggests that the expansion of jobs in the service sector is actually not damaging economic growth and productivity in Kerala. Rather, it is enhancing productivity growth. This is quite important because famous growth economists like Danny Roderick have observed that in many African countries, the change in their economic structure is actually growth reducing that is hampering their economic growth and economic growth. And that is not what we see in Kerala. This is also the case with many Arab economies we found in a study which we did for the international labor organization recently that many of Arab economies are also seeing a growth reducing effect from structural change over the shift in the labor across different sectors. So what we conclude here is that the so-called servitation of Kerala economies and not that bad purely from a growth perspective. That brings us the question, do we really need to worry about servitation of the economy? That is not a simple question. There is no simple answer to that question also. If we ask that question in the context of in the larger context of India where more than 40% of our workers are still in agriculture and a major chunk in the informal sector where productivity and wages and welfare is relatively lower. The boom in high-skill service in the economy may mainly create some kind of spillover effects and very limited positive and inclusive welfare impact. Because a large proportion of workers in India are semi or unskilled who cannot be easily absorbed in the high-skill services sector and they can only benefit from marginal or the secondary impact of the service sector growth. And of course they can be employed in the informal services which is not paying very high, which can lead to inequality for example. But in such case for example small and medium enterprises and manufacturing jobs may be more appropriate. But even then as we all know the national economy is struggling to attract manufacturing investments and create jobs in the manufacturing sector. So the economy is still moving into the service sector in terms of output growth and also a lot of people are still employed in the agriculture sector. Now Kerala is a state which is relatively more educated compared to other states in India with only about less than 10% of total service sector workers are less educated with relatively high wages and with very dense population. The question is that why would we imagine, dream and aspire to create typical smokestack industries to create jobs. We don't have to and we cannot. When you take the reality in our federal setting, anyone who would think of location choices of manufacturing firms in India may easily disregard Kerala compared to any other states. Unless any of the factors that a private firm would consider hampering their competitiveness is compensated by productivity. So we do not have to worry much about it in my opinion. I think Kerala does not have the potential to expand the typical smokestack manufacturing industries and we should not be striving to do so. Manufacturing is also changing right when manufacturing is not the same as what we used to think about manufacturing in the past. The service content in the manufacturing has been increasing substantially, creating more and more opportunities to service provided we are integrating with the global and national value chain. The possibility of fragmenting different production segments both within and manufacturing and services is amazingly huge in the current context. So there comes the global picture. So personally I think I have written about this in prestigious Brookings Institute's Future Development series. Personally I think the future of the global economy lies in the digitization of societies which will eventually lead to the globalization of services not manufacturing and I will show you that in a minute. And the early beneficiaries of that where would be those who equip their human capital, their people to embrace service globalization. And I personally believe that Kerala has all the potential to go in that direction. Now, let me show you a few charts that establish what I am trying to say here. In this chart, the blue line in this chart is the trade in manufacturing as a percentage of global GDP, and the yellow line is the trade in services as a percentage of global GDP since 1995 until under 2019. I did not take beyond 2019 because of the COVID frictions that normal trend is being affected. First of all, what you see is that the trade in manufactured goods has declined as a percentage of global GDP since the global financial crisis. Of course, the global financial crisis have caused a significant decline, but even after that recovery, you see the trend is declining in the global manufacturing trade as a percentage of GDP. And number of factors can be, we can identify a number of factors for this decline in the global trade, including the rising populism in the western countries. Trade war between the United States and China, the anti globalization sentiments growing in the western world, Brexit, advances in technology that really facilitated the shift in production more closer to consumers rather than going somewhere else and so on, whatever it is. And I personally think that the COVID-19 is the final straw in the long chain of events that really return the manufacturing globalization to this downward trend. But at the same time, the yellow line, you also see that this has not affected the global trade in services. You see that that is still continuing to grow. And I think this clearly give you an indication that the trend of global integration is likely to diverge between services and manufacturing. And I'm going to show you that with another picture, which is more interesting to look into. So this is again a complicated calculation, but I'm not going to that but what I'm going to tell you is that this is about production fragmentation. What I mean by production fragmentation, as you know, production of manufacturing products is highly fragmented now. If you take any product today, anything which is on your table right now, it will have its parts produced somewhere else, right? I mean the product, the final product is assembled somewhere, but every part of that is produced somewhere else in the globally corner. So production has been highly fragmented and this has also helped to many countries to participate in the global value chain and to contribute to global value chain. So in the production chain has been so fragmented that way. But the interesting thing is that on the left hand side, you see that that trend in the fragmentation of production is also declining since 2011 onwards. So that basically means that the foreign inputs used in the domestic production of manufacturing goods are declining. In general, it is declining, but manufacturing goods are declining more rapidly. Again, a number of reasons have been highlighted for this trend in the literature, including the shift of businesses from the business perspectives from efficiency orientation to more resilience and flexibility. I mean, I'm pretty sure that you all hear about all the stories about intellectual property protection in China and companies are moving from China back to Vietnam or to United States or to Germany and so on. For instance, I'm not going to the details of that, but whatever the reasons are, so this is actually happening. So there is a decline in the global fragmentation of production, countries are increasingly sourcing their supply from the same country where they are being produced. So again, on the right hand side, you can see that service fragmentation is not falling at the same pace as that is happening in the manufacturing sector. So again, you really see a difference between manufacturing and services in the way production fragmentation has been happening. So what all this makes me conclude is that the potential for this is also not my simple conclusion. Richard Baldwin in his 2016 book has clearly described a lot of theories and a lot of, you know, scenarios around this. So the potential for service globalization is relatively high for a number of reasons actually, for instance, right now if you look at although three fourth of workers in the advanced economies, United States, Europe and all other advanced economies are in the services sector, but its trade is only one third of manufacturing trade. So that there is much more potential to increase the globalization of services. This is despite the fact that many tradeable activities are now part of services. And these activities have a high employment share in advanced economies. And after COVID firms and households are increasingly adopting new technologies that can facilitate service trade. Remote working makes it possible for anyone with the technological infrastructure to participate in the global value chain and foster small scale businesses and production and also increase participation of female workers in emerging market economies in the service activities. There is also substantial wage differences between countries in the service sector across countries in the service sector, which will create a lot of potential for service integration across countries and outsourcing of more and more services to other countries. And finally on point which I missed I'm just thinking about it which I missed to indicate here is that services are also likely to be less amenable to standard trade barriers, such as tariffs and quarters, until we in the new forms of barriers I mean, of course we will invent but at the moment there is an advantage that it is much more easy to trade services across the globe. So I believe that the potential for service globalization is much more and Kerala has the potential to tap that opportunity. Now the second topic of today's discussion is migration. In the context of migration from the perspective of Kerala, we do create human capital workers in Kerala that can be employed elsewhere. And this is sometimes we argue about a lot, but I don't really think that is a bad thing. For, I will explain the reasons we have been doing this historically I mean the people who are working the migration statistics, and the history of Kerala knows that we were in Ceylon, we were we went to then we went to Middle East when the oil was discovered. And now we go to the West we are in Africa we are in China when there are opportunities are emerging in those countries, we are everywhere not in Mars yet but we will be there soon also. So and some of these countries require more people actually let me show you a picture right now. There is a lot of discussion in the Western economies at the moment about future labor shortages in many occupations and industries. This picture is a symbol and very small simplified depiction of the current situation. So this is basically the number of vacancies per unemployed person as a ratio. You see that the number of vacancies available for unemployment person is higher than one in a recent years. That is for every unemployed person, there is more than one job vacancy available in Europe and in the United States. The already looming labor shortages in Europe and the United States, barring the global financial crisis and COVID-19 related declines. The trend in the opportunities has been clearly and consistently upward and firms are finding it hard to get the right people. Companies are talking about retaining talent, as they are expecting a global hunt for talent in the coming years. So we do not have to really worry about this. I mean, it is not a bad thing that we are exporting human capital and we have been doing it historically and we were successful in doing that and we are quite flexible in that actually. But another concern that recently we have seen is the flight of many migrant workers from the Middle East countries back to Kerala amid their job nationalization policies. Since the discovery of oil, these GCC economies have created a kind of segmented labor market where migrants have been dominating the private sector and the native workers in the very unproductive public sector with very, very high wage premiums. But it has come to a saturation point now that that model is no more sustainable as the population of GCC economies are growing so rapidly. Women started working and they started participating in the labor market. And the demand for more jobs for the locals are increasing day by day. Oil prices are highly volatile. We know that this is very unstable and the hunger for alternative fuel is rising globally, which is again threatening their distribution model, which they have been following for for a long time since the discovery of oil. But the question is, is that nationalization policy easy for these economies? We did a work for the Kuwait Science Foundation lately and the conference board. And what we found is that it is actually not really easy for to implement the job nationalization policies, at least for the private sector, because one of the objective of these economies to privatize their economy and to increase more privatization and create more opportunities in the private sector. And why that is not easy for the private sector? This picture, which is from a report we recently submitted to the Kuwait Science Foundation, shows that migrant workers are about 70 percentage more productive than the native workers across industries in Kuwait and Saudi Arabia. While their wages are only 20 to 40 percentage of the natives that is much, much lower, they are more productive showing very small unit labor cost for the migrant workers. Clearly, this indicates that the private sector will not find it easy to go for nationalization unless these cost differences are compensated by productivity. These countries can provide some incentives at the moment, but that is not sustainable because they cannot continue providing subsidized subsidies to private companies to employ the local workers and then keep paying them very high wages, because these are small economies and why would companies, especially multinational companies will be engaged in employing, creating opportunities by employing locals by paying very high wage if their productivity is not compensating for their higher costs. So that will really need upskilling the local population and also continued reliance on expatriate for many jobs, including several high skilled complementary jobs in these countries. Indeed, that does not mean that there will not be disturbances, there will definitely be some disturbances, but that is not going to be the end of the world. And there are opportunities opening up elsewhere in the world. So there is, of course, there is some worry, but I think that is not, you know, completely going to make Kerala fall off the cliff. So my conclusion is that there is nothing wrong with being a service economy. The concern that migration is ending and Kerala will be in trouble is also less realistic. What we need to realize is that the tradability of services has increased productivity or and potential productivity potential has of the service sector has increased it is as much as manufacturing sector. It provides opportunities to create high and medium skilled jobs. It is tech intensive less polluting. And we also need to realize that we are not alone in this race. A lot of African countries are moving into this for like Rwanda, Kenya, South Africa, they're all trying to embrace this service where already you can see that that is happening in this race. What is wrong is that we are not asking ourselves whether we are harnessing the right services. Are we able to contribute to the rest of the Indian economy and the global economy by participating in the national and global value chain. We need to be developing infrastructure skills and capabilities that equip us to compete in the global and national value chain, wherever we have the competitive advantage. We need to think about industries that are suitable for Kerala right I mean they're really not smokestacking manufacturing industries. How to align ourselves with the national policies for example many national policies are regarding export policies and exchange rate policies will have implications for the state enterprises. We need an attitudinal change that encourage innovation and entrepreneurship in the state, especially considering the young generation. So, the privatization and migration are not necessarily the main concerns. The question is whether we are checking the right boxes I don't have the answer to that question of course, someone really need to look into that in detail and identify those factors, but definitely what we are doing may doesn't appear to be in the right direction always. So I'm going to stop this conversation with a quote from a recent paper by Joseph Stiglitz which I'm leaving it here I'm not going to read out, but which basically claims that manufacturing cannot reduce the economic growth anymore, the way it did in China and East Asia, but it will be the services of which developing countries need to be much more aware of many things I have indicated some of them. And in a recent paper that myself and my colleague H&D freeze, we did for the United Nations, we empirically observed that the shift to manufacturing did not help to reduce poverty in many African countries. Actually, it did help to reduce poverty in some of the East Asian economies and China, but that is not doing the same magic in African economies. So, basically because many of the shift to manufacturing sector has been to low wage sectors and informal sectors which are not creating welfare effects and poverty reducing effects. Thank you for listening to me. And I look forward to your questions and I submit I really think that I was in time. Thank you very much. Thank you so much, Dr. Rumbin that made my job pretty easy because you're spot on on time. And it was a very interesting presentation I'm sure a lot of questions will follow up. So just a reminder to the audience that questions are open to you at any point of time you can type in the questions and we'll take up towards the end of the presentation. A very positive presentation and I guess it will set the stage for the next speaker. Welcome, Dr. Karnan, over to you, sir. First of all, I'm sorry for being late. I had an emergency to attend to unanticipated shops like the ones Rumbin has forecast for the world economy, but household economies are also subject to uncertainties and exogenous shops. I think I think I'm in a better position now having listened to. I will call him Aziz. So, Aziz's presentation makes my presentation, I think, much more easier. So I'm going to share my screen. Now, let me just start by making a few somewhat sweeping statements. As far as Kerala is concerned, it's a state economy, it's a regional economy. It's not an sovereign national economy. That makes a big difference. We tend to compare with countries and the region. Sometimes it's not methodologically fair. Because Kerala doesn't have the economic sovereignty to take its own decisions. So subject so it is basically the Indian economy that provides the economic sovereignty issues and background, and within which you can maximize your effort and economic development. It is possible for the most large countries you have subnational states which are fast growing, some are very slow growing. California, for example, in the United States is a leading economy. And in China there is, you know, Southeast China is much more dynamic than the Northwestern China. So I'll start with that assumption. Kerala has gone through a continuous record of human development ahead of all India and major states since the formation of the state in 1956. In several specific indicators of human development. India's record is behind Kerala by more than a generation, 30 years, for example. If you take a demographic transition infant mortality, under five mortality, literacy, and a whole range of human development indicators. Kerala's HD human development record has not only surpassed major states in India, but also most countries in East and Southeast Asia. The human development induced high economic growth with a lack through labor migration and remittances educational advancement calls for special mention, because of its foundational character in moving a human development. However, quality of higher education continues to be a big challenge for Kerala. So I'm giving an example how the educational attainments of Kerala may be can be compared with all India. For example, if you take the working age population, which is very important for understanding the performance of an economy. If you take secondary level school as a threshold for calling being called an educated person and secondary and above. Among Kerala adults, it was 18.5% in 1983, as I can 16.3 for all India that increased to 56 or 57% in 2018, as against 46 for all India, the gap has widened. If you go a little higher and you take consider only graduates and about Kerala was 2.3 but India was slightly higher partly because Kerala graduates tend to emigrate much more disproportionately and therefore you find this. In 2018 also whoever remains in Kerala we get only around 13% people who are graduates and about as against a little more than that for all India. If you take the younger generation of men, you can see this it is much higher both in 1983, but much more higher in 2018 that is currently. You can say about 68% of Kerala adult men are now educated if you take secondary level as a threshold. So it is an educated male labor force, both employed and unemployed graduates is all close to 20%, which is slightly more than the national level, but I put a star to say that this is because. You can be close to 29% if you go by the women's rate because women's continues to be less mobile internationally speaking than men. So women's what is the achievement is much more interesting when you look at women in Kerala and all India, whereas you know you see in 2018. For women between 15 and 59 years working age, 58% had at least a secondary level education that is 10 years pass, whereas it was only 34% for all India, and for graduate it is close to 18% against 10%. In the younger generation, 73% of women adult women in Kerala have at least a secondary level pass or above. And for graduate and above it is 29%. Whereas the national average is 15%. So if you consider men and women, women in Kerala outshine women in all India, in terms of their own educational attainment and the threshold levels I have taken is fairly high, a secondary level pass. Whereas usually it is taken as literacy or five years schooling and all that are putting up a very high threshold. So, I made a statement that Kerala now outranks many Southeast Asian and South Asian countries including its own country, all India. So this is what it happens that the 2000 if you look at just to tell the recent data on human development index. Here comes the second rank in this list of 12 or so countries. It's just below Malaysia, but higher than Sri Lanka, Thailand, China, Philippines, Indonesia, Vietnam. India is at a lower level than Bangladesh, Myanmar, Nepal, Pakistan. And percentage change and rate of change is also very impressive. So one could say from a human development point of view, it's amazing that Kerala has reached such high levels, middle income country levels of human development. In some respects it is closer to European and American levels like in life expectancy and infant mortality rates and things like that. So that gives you a rough idea of the nature of human development in Kerala society. Now, I now come to the, you know, immigration, outmigration of people. I'll come to its process a little later, but just to show you that there has been a secular increase in outmigration of adult people. I would say here adult male Kerala's international migration is dominated by men, 80% men, 20% women. In that 20% only mostly marriage migration, although they also go and work there since they are educated. Otherwise like hospital services, nurses, medical, paramedical staff, unmarried girls also go due to historical connections and reasons where they feel secure in their international movements. Otherwise I must say Kerala women's ability or mobility to be mobile is still restricted by conventional norms. What you find is a slight decline since 2013. This is just after the, a few years after the financial crisis. And, but more due to internal reasons, which I will show it later, that the low skilled and low educated migration has come now more or less ceased. Because the labor market in Kerala is able to give a much higher wage to the unskilled labor. So there's a shortage of unskilled labor in Kerala for manual work. And sometimes the net saving that one can get by working in Gulf countries is lower than what you get as wages within Kerala. Many construction workers now prefer to remain here so there is no push migration, mostly pull migration of educated people, I'll come to that. But what is interesting about this, although the total number has come down, the amount of remittance has not come down. That strengthens my point that the per capita earnings have raised because of higher levels of education and consequent earning capacity. And this is the earning the remittance figures that I'm showing just to take out the annual fluctuations which are normally there for several reasons, especially exchange rate reasons in a more or less not a fixed exchange which used to be the case till 1990, but now the blue line is in rupees, and the red line is in US dollars, both are increasing. So the, there is no decline in the average annual flow of remittances, and this might come as a surprise to many. During the first US invasion of Iraq and consequent conflictual situation, many people returned from Kuwait, fearing their life and selling all their assets. So they in fact the remittance increased because they brought back all the assets they have. But interestingly, within a year they could go back because conditions were stabilized, and they even got reparations from the Kuwaiti government. So in a way, they were compensated for whatever temporary loss. Secondly, even in the second Kuwait in the US war on Iraq, that also did not result in any permanent decline in immigration, because that also proved to be a short term people came back whenever there was a conflict, but they could return. So the net migration was always positive till 2013. This is what I told you the collective change in the out migration. In 1998 that was the first time the Center for Development Studies did a comprehensive household survey sample survey to understand the migration patterns and characteristics. And then the graduates were less than 4%, 12% higher secondary and about 39, 40% secondary level. So you could see this, but now what you get is in 2018, that's about 20 years after graduates in the above constitute almost 31%. That's about 7 times the almost 7 times the 1998 figure 30% of them are now at least 12 years of education, at least these are lower thresholds and secondary level 30 so 90% are educated workers, only 10% are less than secondary level, only 40, 52 plus 45, 45% used to be less than second renounce only 10% so which is an interesting point to note. What does remittances mean remittances mean they are income from outside to the household economy, not to the public extra. So, but remittances we can see in a macroeconomic sense as autonomous injection of outside money. Normally for a regional state it is not considered or estimated as part of the state income, but I will do that just make to show you the difference between domestic income and domestic income plus remittances. It did impact because then you are injecting outside money that creates effective demand for goods and services and also raising your savings. So it was a consumption led growth process, because these remittances became significant only by the second half of the 1980s, as I have shown the graph, the secular increase in both remittances and people. And that resulted in increasing consumption. And by 1991 there was national level economic reforms, neoliberal economic reforms which gave a floating, more or less floating managed floating exchange rate. This also could get even fall effect. So this year the rupees 20 rupees next year it is 22 rupees. So you get the same dollar you get more Indian rupees. So, in a way that produced a heightening of the consumption and Kerala emerged by 1994 as the highest per capita consumption expenditure state in India. So the increase in consumption that led to a new phase of growth which I will show you what this is beginning with 1987 increase in household savings that did not lead to a significant increase in growth in commodity producing sectors but boosted growth in services. And I will come to that. That is partly because as he said mentioned that you know, the trade and non traded division was important and I think it is continues to be important despite surveys emerging as a traded sector, it will take some more time for fully feeling the impact of that. Kerala's labor market went through a major change. This graph is to basically show you the trajectory of growth and 86 87 as more or less roughly the turning point in taking off to a higher growth path and 98 99 a further acceleration. Now, if I show you know, this is the one where you know, you try to get the Kerala's growth performance. I divided by in terms of two phases the first phase of low growth is between 1960 to 87 almost three decades 27 years, and then the takeoff period from 1987 to 2020, around 33 years. You find the difference NSDP is the next state domestic product that is without including the annual flow over and okay. So from 2.6, the growth rate jumps to 6.8. But when I include the this is called the modified state income. I include the I add the remittance annual remittance money to NSDP. Then your growth rate changes to 3% and to 36.9 more than double the Indian economy also has a similar experience but its first phase was not too bad, not as bad as Kerala 3.6 to 7.1. So anyway, the national policies also helped Kerala because Kerala was well prepared to take advantage of the globalization and liberalization to a limited extent to the extent of reaping benefits out of remittances not necessarily in attracting investment either domestic or foreign. Now, what is more interesting is Kerala's per capita income growth is much higher than all India in the second phase 6.2 5.3. This is because Kerala realized an early demographic transition, because my 1990 Kerala's total fertility rate. Came down to two children per couple, whereas Indian average was close to three or so or 2.8 or something like that. So because of the early demographic transition, Kerala's per capita income growth was much more impressive than all India. And that's an interesting fact to note. Now, when you look at the sectoral performance, you will find here that the primary sector continues to experience a very low rate of growth, annual rate of 0.7.9. All India is somewhat better 2.1 to 3.4, 3.4 for primary sector is not too bad for the country as well. But Kerala's is disappointing. Secondary sector Kerala 4.3 to 6.5. But I'm not going into the details, but I think as he's also mentioned, it is not due to manufacturing, it is due to construction. The secondary sector includes construction. It's almost overwhelmingly contributed by construction. For all India, it is slightly better than Kerala, but not too much different. Service sector is the one Kerala out shines in the sense from 4% to 8.8. And if I include the remittances, it 5.1 to 8.6 as against 5 to 8. India is also going through a similar experience of service sector led growth, but Kerala is much more dependent on the service sector than the Indian economy as a whole. Now, the importance of the remittance sector is very crucial here, because if you take all India, the remittance to Indian economy, it's not even 2% or 3% of its national equivalence. Whereas in Kerala, it was in the early period, it was negligible. Then it rose to 12%, then 23%, 13% in equivalence to the state domestic income. If you take the government's general expenditure, then it was again by 2000, it exceeded the government expenditure, not general expenditure, government expenditure. It increased, it exceeded government expenditure in some period, but the latest is almost close to 70%. Value added in manufacture by 2000, by turn of the century, remittances exceeded the income generated in the manufacturing sector. By more than 100% here, now it is 50% more. Similarly, the value added in industry, but the important construction and manufacturing value added in agriculture, so it exceeds the income generated in both the material producing sectors of the economy. So you can imagine the importance of remittances both in terms of the domestic income generation as well as government's ability to spend money. You don't have to spend much time on this except to note that remittances have been increasing the annual growth rates of remittances, both in dollars and fees, and per immigrant, total bank deposits, domestic deposits, non-residential, external deposit, foreign exchange, deposits of Kerala, all these are very remarkable or impressive growth rates. Now, if I may say so, there are not a lot of positive aspects and negative aspects. The negative aspect, for want of a better word, I put it as negative aspect. The labor market and factor market disequilibrium led to a continuing lopsidedness in economic growth in favor of the non-trader sector, that is construction and services. First, when you have such migration of people, the total number, let me first say, although Aziz was gaga about Kerala, it's being everywhere except Mars. You know, Aziz, 90% of the Kerala's are now in Gulf countries, only the remaining 10% are distributed and the rest of the globe. So we are there in most parts, but in tiny numbers, but really Kerala's level force now is in Gulf. And that accounts around 15 to 20%, depending on the year that you look at, of the total workforce in Kerala. Okay, so that's very important. It disequilibrated labor market in the sense the shortage of unskilled workers in Kerala raised their wages to such an extent that agricultural profession became less and less profitable for many of the marginal and small farmers and most farms are marginal or small. Secondly, the price of land has shot up. So when land prices go up, not due to demand for agriculture, but for demand for construction. So land is shifted away from agriculture to construction sector. So people have been selling their land to prospective builders. And the stage has come now there is a net decline after a long time earlier it was crop shifting. Now there is a net decline in the area so on for agricultural crops and land prices have gone. If you factor, either the implicit or explicit value of land and the wage cost of agriculture, your profitability is so low that it's better to purchase agricultural grains and other vegetables from the nearby states, which have which offer you competitive prices. So there is no incentive despite government schemes subsidies, the incentives are not sufficient. And there is no there has not been so far technological breakthrough in agriculture, partly due to structural constraints of small size of farms, but also partly due to the strong trade union object objections and trade unions are a very powerful institution in this state. So in a way they objected to technological change both in agriculture and manufacturing wherever it resulted in job loss. At the same time they also bargain for high wages. So naturally this can this can only be absorbed by reducing your profitability. And if this is a regional economy if I'm a prospective investor, I would rather go to the nearby state where both land prices and labor wages are lower, so I can get higher profitability. The only way to change this situation, as Zeiss mentioned is through a productivity break to such an extent that you should overcompensate my extra profits from if I located in neighboring states that has not yet happened in a significant sense in some that are recent technological or new technology based industries coming in, but they are not large enough to make a big difference in the contribution of the manufacturer itself. So this resulted in job loss for the economy as a whole. And the job loss is due to not a straight away process of jobs being cut down, but by a process where jobs of less educated people especially in agricultural sector declined. The jobs were created in the construction sector as well as in the service sector. And in the service sector, the average levels of education needed is much higher than in agriculture, anybody can work in agriculture as manual labor but in services or teaching for health for training for finance for travel and all this you need a minimum qualification. So the gain of employment gain was for the educated. Employment loss for was the less educated. But, however, the supply of because of this everybody wanted to get educated education has a very high social premium in Kerala society. First for its own sake for the intrinsic as a matter of sense that intrinsic value of education. And also for the instrumental value of getting a better job and better decent work conditions. So the supply increased so much that we now have basically educated unemployment, not less educated. The employment generating capacity of this high growth is quite disappointing. And what I have done here is to work out to the employment elasticity for each sector. And you can see primary sector showing a negative employment elasticity, which means that you know, both growth is negative and employment is also negative. Secondary sector in the latest figures show a minus point four. So the employment net loss is much greater and the growth is not sufficient. Service sector also is showing somewhat in a negative employment elasticity. So what what we are now saying is you are growing very fast without creating jobs. And this is the jobless growth story. And I should say that this is not only true for Kerala but India as a whole. I myself have done a lot of work on this, along with my colleagues. And you can see the latest one I did was from job loss growth, jobless growth to job loss growth in the economic and political. If I give you a sense of the numbers of people who have lost jobs in primary sector, if I take these two periods for which data are readily available. 2014 and 17 that's about 13 years. That's a lost net loss of 26 lakh, one lakh is 100,000 or 2.6 million. Manufacturing is also a net loss, although secondary sector is again because of construction, you can see 0.7 million jobs, net jobs were created in country but tertiary is the one which created 0.5 million jobs. So all these three sectors together because the job loss in agriculture is so high that you have a net loss of 19.7 lakh or almost 2 million jobs. The loss is more for women than men. So you can see technological, such technological changes as have now happened in agriculture, especially in transplanting, harvesting, processing, etc. I've taken over by men, whereas it used to be performed by women. More than the unemployment resulting from this, what I'm concerned is the unemployment is an artifact in the sense you take the number of people seeking work divided by the number of existing workers plus number of workers who are seeking work. And that is expressed as a percentage you get unemployment rate. What about people who are not in work but not seeking work? They are basically kept out of the... Sorry to interrupt you but in another two, three minutes if you could wind up. Yes, I can wind up now but you won't get the full story. So what I have done is to work out the unutilization, underutilization of labor which is a measure which ILO has also recently come about. They are concerned about discouraged workers because they are not seeking work because they're less educated people have no mechanism to seek work unlike the educated unemployed. So you have a very huge percentage of people in the working age population, basically women, not men. Men are only less than 10%. You can see this even for the educated category 15 to 59. Only 9% men are out of work and out of education. Either you are in work or in education. If you are not, then you don't have a gainful employment and you may or may not be seeking work. 56% of our educated women are in this category. For younger generation it is much higher, younger generation, they have a long waiting period. Increasing inequality, how much of it is induced by remittance is a matter for investigation. I wouldn't say it's all due to remittances but this is an empirical challenge and needs to be investigated. Given the regional nature of the Kerala economy and the strong preference for service sector jobs of an increasingly educated population, the potential for a productive growth of the service sector deserves a serious investigation. This is what Aziz has been educating us for the last few minutes. And I'm sure he's one of the best persons to undertake this investigation because when you say a serviceization or serviceization, what exactly or what could be the possible growth path in that. Which are the sectors where you have productive service sector opportunities for employment that needs to be spelled out. And I'm not very sure that the globalization will continue the same way as before. In fact it has already changed after 2008, both European Union and America, especially after Trump has gone back on the, their own project of globalization when it hurt them. When it didn't hurt them they imposed it like right left and center through the World Bank and IMF. And the World Bank lost much of its credibility after 2008 because the medicine they proposed for recovery for Europe and the United States was very different from the bitter medicine they prescribed for Asia and Latin America. It's a matter of worry. And now that Ukraine conflict has further given a blow to the earlier neoliberal globalization. So I'm not so optimistic as Aziz seems to be but I think he knows better that my feeling is that uncertainties are so strong that we could see a bipolar situation in globalization or you can say a bipolar globalization or regionalization within that because there are now, since financial instruments have been weaponized, this is creating a lot of worry among developing countries, although it is seemingly against certain countries. But every country is now worried what happens if their foreign exchange results are frozen for one reason or another. So they are now regional currencies are, they are talked about new currencies are being or bilateral trade is taking place. So these things you cannot rule it out. And my guess is the story is going to be very different. So we may not be able to project from the past. Yeah, that's all. That's all. Thank you. Thank you so much. It was nice listening to you. Excellent presentation. Okay. Now, before we take up the questions, we will discuss certain common themes which were overlapping in the presentation certain themes which we can take for further discussion. So, Professor, Professor Irungan, if your presentation was on the service sector and how, how much we can leverage on the growth of the service sector of Kerala. I was just wondering, like, Dr. mentioned like how, how, how can we make this growth path more productive. So we know that we have a service sector economy a growing service sector economy. How can we create opportunities back home. Because one of your slides mentioned that the nationalization policy in Gulf countries is now very different so we have a lot of return migrant issues in the state. We are going to absorb this kind of labor back if at all there is an opportunity into the service sector. Would you like to respond now or? Isn't it better if we take more questions and maybe some of the questions. Yeah. Yeah, these are questions which we discussed among ourselves at not it started taking questions from the audience, like in another 15 minutes we can take up questions from the audience. So this is one question which we had our team had in mind, like because you've done a lot of work on the service sector. Another question is, most of our labor policies have been framed, keeping in mind manufacturing sector right. How, how, how, how well do you think have a labor policy changed for the service sector, or how, how conducive is a labor policies or what what is the general idea about labor policies back home when we when we see the service sector growth. Now, also, we would like to know like, which are the major segments among the service sector which can drive care like now through to its growth path, especially because you showed a very interesting slide on the labor productivity, the two phase division which I really liked most of the audience would have noticed that slide because it, it was a simple slide which had many shades to it. Now, I have a question for Dr. Canon for many years we have we have argued in popular media among academics that remittances fuel economy is not a very sustainable model in Kerala. Does the aftermath or the consequence of COVID-19 with disruption have concur with this hypothesis or do we have another different conclusion that's one question to you sir. And the second one is, you've shown us how important remittances are in spite of the decreasing number of immigrants to the Gulf, we still have a resilience in remittances. So we would like, we would like to know the extent to which the pandemic has changed the dynamics of remittances because we had a World Bank study where remember correctly, predicting that remittances would decline rapidly post COVID but that has not yet happened. So, is it because, so what are the, how has it impacted Kerala's economy. And also, one passing mark that you made about consumption. So just wondering that, till now whatever debates we have had we have had about Kerala being an exceptional consumption state. But are there any policies existing or do we have any policies to be explored to incentivize productive investment. Yeah. And then I have a common question to both of you that we know that private remittances are private income. So you can't tell people how to spend it right so that is a major problem with remittances. But how can state policies be incentivized in such a way that we use it for, or we channelize it towards productive investment in Kerala. These are some of the questions from the themes that you've discussed, if we have further questions we can take it up, but if you could. Sorry, let me straight away respond to these questions so that I can pass on the burden of complex questions to Aziz. Okay. First of all, labour policies. In India, labour policies is a joke. In India, the employment of Indians, Indian workers, 80% of them are in the unorganized sector, where there is no hardly any employment policy or labour policy. So remaining 20% now 12% of the 20, they are informal workers in the formal sector. Okay. So what you have is 8% of the Indian workers working in the formal sector, subjected to some employment policies or labour policies as non-mage payments, bonuses, gratuity, social security, etc. So it's a very small amount, but that is not the one employers are worried about. They are worried about higher and fire. But what is the higher and higher labour policy in India. The government of India's labour policy is that you have to seek government permission to fire employees. So that establishment is employing more than 100 people. Now that threshold is raised to 300. That's a different. And when I was in the National Commission for the 9th sector we worked out, only 2% of Indian workers are working in establishments employing more than 100 workers. So what are we talking about. So it's a kind of straw when they wanted to, they basically wanted control over labour. No questions asked, and that's now happening. So there is no labour, the recent labour courts have considerably watered down, or even the earlier small provisions, and you can even make people work more than 8 hours now by state laws if the state decreases. Yes, we are back to 19th century. Okay. Secondly, remittance is not sustainable. Yes, people used to say but that is casual empiricism. We have had an experience of a continuous flow of annual remittances from the Gulf countries from 1971 72 onwards, half a century of uninterrupted. Remittance flow, increasing remittance flow on per capita terms. Okay. So, despite the shocks of regional law, COVID has twisted the situation. There is a report we have not conducted any survey the CDS is yet to, I don't know whether they are planning now. We have not yet conducted any post COVID Kerala Migration Survey cameras. If they do, then we will know. But government reports suggest that a lot more people have come back. But that is not yet reflected in the Reserve Bank of India's remittance figures to India. All right. So that's it. I don't know why. Some of the most interesting factors are working there. There needs to be. Maybe World Bank was looking at a number of countries. So there may be, you know, other factors or other countries. But so far this has not happened. India. This is for productive investment as Kerala has been discussing that for a long time. The government is trying their best to attract investment, but just by giving soaps like some concessions or electricity subsidy you don't get industries like that. You know, people to invest their money, hard earned money and ability to take risks. So it's a much more larger challenge than a mere state policy for what are the state policies or what could be the state policies for tapping the remittance and engaging. Yes, there is much I have written about it. I have talked about it. The first thing for the government is to increase their tax collection efficiency. Because when consumption increases, disposable income increases, consumption increases, then you are taxable, then tax potential should increase. In Kerala's tax efficiency tax collection efficiency has a secular decline from 12 and a half percent in 1970s and early 80s to 8 and a half percent. And therefore every rupee spent in Kerala government used to collect 12 and a half rupees. Now it collects the eight and a half. Sometimes it has reduced to six and a half. That means widespread evasion of taxes, because if government has more money, then it could provide more incentives and more in better infrastructure. There are also other failure areas of, you know, large time and over time and cost overruns of infrastructure projects. So these things also put off people. So the government does a job very well, basic duties of collecting taxes and utilizing it effectively. Because your budget allocation and expenditure is one actual result is another, because if I give you figure irrigation projects take six times the estimated time and cost to complete. So if you have 100 million rupees for a project, you end up with 600 million. If you promise that it will be finished in four years, it takes 24 years. So I think the state's failure in efficient economic management is one of the reasons in our inability to translate premises into more productive investment. Thank you so much, sir. It's like more points to think about. Thank you so much. Would you like to respond? Yeah, I can, of course. First of all, thank you, Kanan sir, for making my life easy, especially in terms of the labor market policies, which you are much, much more capable of reflecting upon. And I, I mean, most of the labor market policies we talk in the context of India is about manufacturing sector. And as for second and already indicated, we don't have much, especially covering the major segment of the labor force, which is in the informal sector. He's indicated 80% and even that 80% is actually even higher in some sectors actually like agriculture sector. I think there are differences across sectors when you really compare. And a while ago we did, we really did a kind of study whether that the transition from formal to informal sector and then, you know, equipping the informal sector to technologically and modify in terms of capital deepening and all that really helps improve their productivity and welfare actually. So, but we don't have a lot of policies oriented that I mean that still remains a dream for India, and it is a huge dream and it's a big challenging dream for India. Now about the other questions, Sumita, you already indicated that you have been asking these questions for a long time that it clearly explains that how difficult those questions are to answer. Right. And it is a very complex question. And I said to said during my presentation, I do not have the answers to that. Only some, some indications first of all, what can we do about the people who are coming back from the girl. And how you how our service sector can accommodate them. I mean, I do not know the perfect answer to that question but. It is also hard to answer that question, without analyzing the skill composition of those people who are coming back. The question is that, do we have a mechanism and a system that really track the people who are coming back and you know, segregating or, you know, identifying them what are they and what are the qualification, what kind of work they were doing back in the in the Middle East. And, you know, that kind of a system I don't know whether we have in place. So without knowing that I mean it's very I mean I can just tell okay you employ them in this and the sectors but that makes no sense at all, right. So we really need to know what are they and who are coming back is, if they are all construction workers I mean construction sector in Kerala I saw the booming so I really don't know actually. So it really depends upon what kind of information we haven't one really need to seriously look into that. And then only we can really say I mean I come from a originally come from a place in Malapuram district where a lot of my neighbors are in the Gulf countries. And what I have observed I mean this is not I'm not coming saying this from the from a perspective of an economist but what I have observed is that most people who are coming back just going to some kind of unproductive business activity. It is just a kind of activity for them to keep engaged, rather than to gain income. So that is not very a productivity enhancing or welfare enhancing or contributing to economic growth. So that is my, that would be my vague answer to that question. Now, coming to the question of which segments of services can we improve and and you know how we can improve a productivity of the service sector. I mean, first of all, again, this is something which one really needs to look into what are the advantages Kerala has and which segments we have. First of all, we need to identify globally and locally what are the sectors which are upcoming, including for example we have all these sectors like many ICT based services, tourism, tele robotics and tele medicine, all those are sectors where Kerala have Kerala can you know, elaborate its advantage. But at the same time, I also think that it is not just the responsibility of the government, but also of the society. And as a Graham Rajan recently wrote in his book, the third pillar, which is a society, which is very important actually in this whole game. We need to change right I mean our cultural attitude I mean our attitude to the business people, the people entrepreneurs and innovators and the social and cultural ambience that needs to change which is not very easy. I mean it is easy for politicians and you know, people to say that okay we are all good and we need to, we can increase employment, but at the ground realities that are we really changing ourselves, we need to ask this, all of us we need to ask this to ourselves. And I'm pretty sure Kerala is doing a lot. For example, I think Kerala is one of the startup destinations, one of the highest startup destinations in India. We need to promote that. A lot of startups are happening in Kerala. We need to increasingly promote that and identify which are the real sectors which can trigger economic growth and create more and more jobs. And this does not have to be large scale sectors, it can be small scale sectors because service the good thing about these kind of service activities is that it can be done at a small scale and you know medium enterprises and small scale enterprises. So, so that would be my general answer to your question. Thank you. Thank you so much, Dr. Ramban that the skill component actually is very important. Plus, I think both speakers talk about the institutional arrangements in place where we need more efficient systems of management, and as well as the point about how society should be more responsible and how our response should change according to the needs is very important. What I will do is to both speakers like I, there are some questions from the audience or like it's directed towards each speaker. So I will read out wherever questions as and when time permits, yeah, we have time. So, so let's take this a big question, Dr. Ramban, are you tired. It's a paragraph, but I will read it out for you. It's from Arun Balachandran. He says he thanks you for your talk, and it's directed towards Dr. Ramban. He says while you point out that there is no damage in focus on service sector is well taken. You did not make any mention on entrepreneurship in Kerala. The voters of focus on service sector in Kerala often use it as an argument to mirage the lands and entrepreneurship. Like, for example, he states a very recent example. Most of us have read that the move of Sabu Kittik group away from Kerala was seen as some national academics as a reflection of low entrepreneur support. Whereas the discussions in Kerala was around why the service sector growth is more important to us than manufacturing. Do you think of that question or shall I read out some more questions for you, Dr. Arun Balachandran. And I can, I can briefly reflect upon that I mean I will not talk anything about the Sabu Kittik which is which has both political and you know, academic component to that so I don't want to get into that. Definitely, this is this has to do with I mean I definitely did not touch upon the entrepreneurship active aspect of this whole discussion but I think I really indicated that Kerala need to develop a pro entrepreneurship entrepreneurship attitude. I also think that it's not only about the architects or manufacturing plants but in general that attitude will change needs to take into account the changes in the aspiration and attitude of upcoming generation. And that is not the same as what my generation, for example, or Professor Connors generation or the previous generation that is totally different. My son or my, I mean you're all new generation kids are thinking totally differently, and they they have much more better access to the global scenario and what is happening to the global economy and society they have much more access and exposure to that and they know, and they have more clear vision, and we often overlook that vision of the new generation while devising policies and so on. So that aspect has to be taken into account while we are devising policies to incorporate entrepreneurial activities. Now, given the what is happening in Kerala I mean people accused Kerala for high wages. I mean I really do not think that is a really bad thing I mean it is not something which government can easily fix. As Professor Connors earlier said Kerala is an economy within the federal setting of India it's not a country, I mean it's God's own country but it is not a country from that perspective right. So, the problem is that so Kerala has Kerala within the as a state, if you have high wage the high wages a result of so many factors, including our awareness, education, and income for example, and also relatively lower level of inequality even though unemployment in Kerala is high, I think Professor Connors indicated that. I also have noticed that the unemployment is more among female rather than male actually because the male unemployment in Kerala is quite comparable to other South Indian states. There may be some explanations about that I don't know actually, but female unemployment in Kerala is very high but even though that is the case, poverty and inequality. I think one of our previous CDS professors Uday Shankar Mishra and if I remember correctly William Joe in EPW, which estimates the asset inequality in Indian states, and Kerala is the second after Punjab in the lower bound, I mean I think only 10% or less than people are, I mean very low amount of I think one percentage for you and I correct if I remember at the lower 20% of the asset, you know, entombment. So inequality and poverty has declined in Kerala massively and it is one of the lowest in India. So, there is a lot of social aspect that really even though unemployment is high in Kerala, there is the correlation between these as typical figures between unemployment and poverty is not very strong. In the case of Kerala compared to other states in India. So, having said that we are not promoting entrepreneurial activity. I mean, people often say that this is because of high wage. That is definitely an issue is in the manufacturing sector, for example, because the manufacturing sector is highly informalized and other aspects are there actually but when it comes to services sector, if you can compensate that with productivity. And Kerala has the potential to do that, because people in Kerala are much more skilled and educated come back to any anywhere else in India, and we can compete. And once other states reach to that level definitely they will also there will some kind of equalization of wages, I mean may not be perfectly but there will be some kind of convergence. So, I think we do have advantages here. So we need to change a lot of our policy and attitude but I, again, I did not do a lot of research on this so I don't have the perfect answers to which are the pin pointing, which are the policies we need to change but there is a lot to do. Let me say something for me that I need to leave with there are no questions to me, because I have something to urgently attend to my wife. So just one question which is directed towards you I will just read that out and you're free to leave so it's just a question on Kerala model of development and Mr KV Thomas asks you that what is the, what about the condition of marginalized underprivileged sections, any, what is your take on this matter. My take may take on this has been written about a lot of times. And since it is not the team of this seminar, I did not elaborate on that. I'll make two statements one is that they have made a lot of improvements in education, poverty reduction, and a whole lot of human development indicators, but others have made much more So there is still inequality, but the process of catching up is a difficult process. So you say you raise your education by five years, but the others raising it by eight years. So you still have that gap. Secondly, I want to say, so there are questions of pockets of deprivation. Among basically among the scheduled tribes are devices that need to be attended to although they form only 1% of the population, probably that is where we are lagging behind much more than among Dalits, and maybe the fish workers. Secondly, I must also say that the general condition of SCs and STs marginalized people in in Kerala is better than other states, but that that is not to legitimize our lack of equality. Okay, so inequality persists, but absolute increases in standard of life is that it's a very complex quest. Thank you very much. Thank you so much. Thank you for your time and your wonderful insights. Thank you. Thank you, sir. Thank you. It was good to see you here. Thank you. Thank you. Thank you. We'll talk later. Yeah, sure. Yeah. Would you mind taking about a few more questions? Definitely not. Thank you so much. So, Dr. Joe Sebastian asked that. Don't you think that the aging population and challenges of climate change also needs to be factored in while we talk about Kerala's future? I think I already spoke about that climate aspect because I started with what is going wrong in Kerala's policy strategies is that we are not accommodating the fragility of our state in terms of environmental vulnerability. When we are devising policies, be it infrastructure policies, construction policies or an industrial policy. Now the issue of aging, I mean, I don't need to call, of course, you can talk more about it. Aging is a big issue. Actually, I always tell, I don't know, and also to my other friend, Nikhil, who are also talking, working on these issues, that what we need to think about when it comes to Kerala is not about creating old age homes, but about healthy aging. And we are not discussing healthy aging in Kerala. No, I mean, at least I haven't seen much actually. If you come to Europe, for example, every day there is a discussion about healthy aging and the government and policymakers and academicians, we are debating and discussing. We have institutes devoted to identify what are the factors which we really need to do, given the context we have now. We are now, or we can promote healthy aging among coming generation, old people and young people and their eating habits, their lifestyle, all these things. We need to promote that actually, but what we are doing, I mean, I think it is definitely a question that we need to factor in, because that is going to be challenging for Kerala, because our longitivities, I mean, average age, lifetime is longer than the rest of India. So aging is going to be a big problem. And our retirement age is very, very low actually compared to the rest of the world. So taking all those factors into account, I think, I mean, there is no easy solution for that. But one important aspect I would, if I were to devise a policy, without knowing what is the intricacies and the complexities of that in detail, my immediate reaction should be that we should really promote healthy aging in Kerala. Thank you, Joe Sebastian. I think I know your name. Maybe I think we met somewhere. Thank you very much for that question. And there's a question for you, Jijan P. Mr. Jijan P says appreciates you for a very good talk, but he is asking us a very important question that, could you please explain what the, what would be the implications for inequality, which is a rising concern for the economy that is shifting towards the service economy. And he asked that in context of Kerala how serious that question could be. In the context of, let me start with this in the context of India. As I said earlier, and I think I also mentioned in the presentation that if service sector, especially the high skilled segment of the service sector is growing rapidly in terms of productivity and income that can only create some kind of spillover effect. For example, it can create retail services it can create, you know, some other informal service activities which people can buy through which people these people who are working in those segments can't cater some sort of service to high skilled service employed people, but at the same time it can also create huge inequality because these people at the higher end higher top service sector, they may be gaining high levels of wage working in multinational companies, their high skilled people, they care that can create and it is already happening in India right because the inequality in India within, within the country inequality in India is already increasing. But in Kerala, the situation is slightly different. I begin again because of the bargaining power of workers and the later stronger trade unions in Kerala. So, the, even if you're working in law segment of service activities, your bargaining power to gain a higher wage in Kerala is relatively high. And one, one negative impact of that is that, okay, the opportunities for locals may decline and given the federal setting of Kerala, people from outside can come. But that is the reason why I am again and again saying that we should focus on high value services, where our human capital and education can be used. And that will help us to retain higher level of wages, and more equitable distribution of income. I mean, at the way that the way in which we are moving at the moment that can create inequality but again not to the same intensity as that is happening in the rest of India. So that would be my, my initial reaction to Gijin's question. I think, Sumita, you are mute. Maybe I cannot hear. Yeah, sorry, I was on mute. There's one more question from Mr. Thomas, who says that the growth in service sector is the main hallmark of Kerala. And according to you, it has contributed to the state's economy and structural changes. But some economists also point out that the worst growth in the service sector and resulting expenditure for salaries, pensions and other perks have adversely affected the state's economy. So what is your take on this? Thank you for that question, Thomas. I don't know much about the composition of how much of the growth has been contributed by salaries. But if you recall one of my charts, even though I did not show it, I mentioned that I made a distinction between market services and non-market services. Market services is a sector which is completely driven by private sector and markets, like distribution system, retailing system, transport services, IT services, all those sectors. And non-market services, which unfortunately with the data which I had, I couldn't take up further, it consists of public administration, which is what we are talking about the government, and education health services. And education health services again in Kerala is highly privatized, even though we have a lot of public sector, but a portion of that is also a private sector. And even though they are not following market principles in setting the prices and things like that, but that is also the case. So if I take that argument, if I just look at the distribution of job creation and productivity contribution, I think market sectors are so heavily contributing to that. It's not just the non-market sector, which even if, so if you strip off all the non-government, non-market activities, maybe the contribution is even lesser actually. So with the information I have in front of me, I'm not buying that argument fully, because I still think that the normal, the market services or the private market services is also contributing to the growth in Kerala. And perhaps that is driven by the consumption expenditure. There is a paper by Pushpangathan in 2012, which argues that most of the service sector growth in Kerala is driven by remittances, because consumers are driving that growth. And it is not actually the production activity or actual, you know, productive services that is driving, but maybe retail services, we are bringing products from outside and then generating income within the economy, by selling it in the domestic economy. But it is still in the private sector, not the government sector. Thank you so much. And there's one last question by Mr. Santosh Kumar. I'm just shortening the question, Mr. Santosh Kumar, if you'll pardon me. And towards the last part, he says that with the changes in geopolitics and rise of instability in the Middle East, how do you see Kerala State and its people reorganizing itself to formulate new policies? And additionally, he also talks about one very important point of how artificial intelligence would further impact unemployment in Kerala. Yeah, so the first question, I think part of that I already answered in the previous discussion, right, because what we are thinking about when in the Gulf countries, there is this nationalization policies happening. I personally do not think that is going to completely lead to an exodus of complete all the people working in the Middle East. First of all, the second thing is that I mean there is still a lot of possibilities and also I don't think that the natives in the Arab economies are going to work in the in the law skill segments. But of course we are not competing there anymore as Professor Kanan said, we are now increasingly exporting more skilled workers. And the skilled segments, there is a lot of complementary jobs actually there is a lot of evidence. And actually even in the United States and other countries, what empirical evidence says is that if you put a ban on foreign workers and to aiming to localize by through in both decision rather than competitive labor market. Companies private companies will find other ways, like adopting better technologies to replace them rather than employing the locals because locals are not going to be the exact substitutes for the foreign workers so I think many GCC economies are already aware of that I have had discussions with the ministries in Saudi Arabia and Kuwait several times, they're all aware of that. And that is also what we are seeing right I mean countries like United Arab Emirates is now issuing special visa for highly skilled migrants. So I think it's a skill that plays a role. So that is the trick actually triggering fact we really need to understand and identify. So the second question is about the artificial intelligence. I don't think Kerala is a unique case there if artificial intelligence has an impact on jobs globally. It will have an impact on Kerala to. But do we have to worry about that we were worrying about the same thing whenever all the technologies came in right. So what technology can replace human beings in complete sense, our roles will be shifting changing, for example in the United States, there is a study what that was published in American economic review by David Orcher. What he says is that after the introduction of robots and information technology, what really happened is that not absolute job losses, but jobs restructuring of jobs from low skill to medium and high skill jobs restructuring of jobs from advanced economies, low skill jobs to emerging economies and high skilled jobs to advanced economies. What we need to think is that we need to create a labor force that is more flexible. It's that is not very rigid and I don't think that Kerala is doing that. Even here actually we are increasingly thinking about actually because right now in my daughter's school they are experimenting in new technology for example with that class, how we can, how we can make the education future proof. In university we are developing teaching innovations to make teaching future proof. So we want students to be future proof and more flexible and adaptable to the changing needs of the labor market. So it is a challenge, and I cannot predict it I mean there are people like Eric Johnson, who are very skeptical. I mean about the technology is going to overtake but there are also people who are optimistic about it there is a lot of debate about it, but I am more optimistic personally that I don't think that human roles will completely disappear from the world. Our roles, the amount of time we need to spend on everything may decline. Okay, we will have more relaxing time, more leisure time, that is okay but then we will still have our roles to play. That will not be the same role as we are doing now. It might change. That's okay. We did that. I mean the way in which I am thinking and I am seeing the world, I am doing things is not the way my father used to do. It has changed, and change is the only inevitable thing. It is inevitable. We will change. Thank you so much Dr. Rembrandt. We are very happy to have two wonderful speakers today evening, and I am extremely privileged that I shared the platform with both of you Dr. Kandan had to leave because of a personal emergency I hope the audience will understand. And thank you for a wonderful audience, great questions, great themes being discussed, and also the entire debate being ending on a positive note. I hope you gained a lot from our discussions, and wherever you may be from different parts of the world that you've joined, managed to join in today, we were very happy to have you. Thank you so much. I also thank the organizers, Center for Public Policy Research and INET for organizing such a meaningful conversation. Thank you Dr. Erumben, and hope to see you sometime in the academic real world soon. Thank you very much and I look forward to it also. Thank you very much. Thank you again INET and CBPR for organizing this event.