Once upon a time, there lived a king called Kubera, who ruled over modern day Sri Lanka.
In the Hindu pantheon, Kubera is the god of wealth and prosperity. He is considered as the owner of all material treasures in the world – money, precious metals, and all other forms of wealth. Scriptures describe Kubera’s kingdom as an abode of abundance.
Kubera and his kingdom had so much wealth that he had even extended a loan to Lord Venkateshwara so that the latter could meet his marriage expenses, the interest for which is being repayed by devotees who visit Tirupati.
In Buddhism too, Kubera is associated with wealth and abundance.
Fast forward to present day, this abode of abundance is today reeling under a severe economic crisis, and is on the verge of becoming a ‘defaulting’ country, surviving primarily on the lines of credit extended by India and China.
The Crisis
Over the past few weeks, prices of essential food items in Sri Lanka have been skyrocketing with their supplies getting depleted in the market. Inflation is in double digits hitting over 18% in March 2022. A 400 gram packet of milk powder costs around ₹200 Indian rupees. A kilogram of rice costs 500 Sri Lankan rupees.
The country has run out of fuel as it has not been able meet its import bills. People can be seen standing in serpentine queues to refill their gases, get kerosene or put fuel for their vehicles. The army has been deployed at fuel stations and shops to avoid deterioriation of law and order as there were several incidents of sporadic violence resulting in deaths being reported.
Long hours of power cuts lasting more than 13 hours have plunged the country into darkness as power stations remain closed due to fuel shortage. Even street lights are being turned off to save electricity.
School exams have been cancelled as the country has run out of printing paper putting futures of millions of children in limbo.
Some Sri Lankans are even trying to flee the country, with refugees entering India through Tamil Nadu.
So, how did Sri Lanka end up in this pathetic situation?
Afterall, Sri Lanka fares remarkably good in many indicators literacy, life expectancy, infant mortality rate, etc.
The Sri Lanka Model
Sri Lanka is a country that lacks a manufacturing or skilled service base. The country’s economy is mainly dependent on two Ts – Tourism and Tea.
Due to the COVID-19 pandemic and the resultant travel ban, tourism had taken a toll because of which the country saw a significant drop in foreign exchange.
Also, the Sri Lankan Government’s policy of banning chemical fertilizers and complete shift to organic agriculture had drastic effects on production of crops especially tea.
With the yield of tea decreasing, the Sri Lankan government saw less money coming in through tea trade.
Another significant source of revenue for Sri Lanka is the remittance money sent by Sri Lankans working abroad. This had dropped to a 10-year low of $5.49 billion in 2021.
The cumulative effect of tourism, tea and remittances has put Sri Lanka’s economy in peril with its forex reserve down to $2 billion.
Tourism, tea, and remittances – Does this ring a bell?
The Kerala Model
Kerala’s similarities with Sri Lanka goes beyond the beaches, tea garderns, and the tropical climate. Just like Sri Lanka, Kerala’s economy too is dependent on tourism, tea and remittances.
Decades of Communist rule has rendered the state devoid of any industrial development. The incessant strikes by trade unions and labour unions has made businesses wary of investing in the state.
The extortionary practice of ‘gawking wages’, which the Communist government tacitly supports even today, haunts businesses – small and large.
Even the Indian Space Research Organization (ISRO) was not spared from this menace when in September 2021, a large number of people blocked a truck carrying heavy equipments to the space agency, demanding that they be paid ‘gawking wages’ of ₹2000 per tonne for the 184 tonne load.
This business-hostile environment has made many companies based in Kerala to down their shutters.
In 2020, Pepsi Co shut its manufacturing unit in Palakkad due to frequent labour strikes. Kerala’s biggest private sector employer Kitex Group cancelled its ₹3500 crore investment deal in 2021, alleging a witch-hunt by the Communist government.
This harassment meted out to businesses has ultimately resulted in Kerala having no industrial or manufacturing base that can support a young workforce. As a result, the people of Kerala have moved on to other states or Gulf countries in search of opportunities.
Today, Kerala’s economy is heavily dependent on the remittance money sent by those Keralites living in the Gulf.
According to the World Bank, remittances sent by Malayalees working abroad account for around 30% of the Kerala’s total income.
This remittance money and the revenue generated through tourism is what the state survives on.
Tourism is the state’s top revenue generator. Almost 10% of Kerala’s GDP comes from the tourism sector contributing to 24% of the total employment in the state.
When the pandemic struck, the tourism sector received a severe blow due to frequent lockdowns and travel ban. Revenue from tourism dropped from over ₹45,000 crore (12% of GSDP in 2019) to ₹11,000 crore in 2020.
And if Sri Lanka sits on a huge pile of debt that it owes to China, Kerala is sitting on a debt of its own making.
The state has one of the highest Debt-to-GSDP ratio of 38.3% standing fourth in the country after Punjab (53.3%), Rajasthan (39.8%), and West Bengal (38.8%).
Kerala also has one of the highest household debt in India. With 47.8% of urban households indebted, Kerala has the highest incidence of indebtedness among urban households.
The dire condition of Kerala’s economy is visible from its contribution to the GST revenue which remains far below its potential.
Kerala collected just ₹2,074 crores just for the month of February 2022, lagging behind all the southern states. Its neighbouring states of Karanataka and Tamil Nadu collected ₹9,176 crore and ₹7,393 crores respectively. Even the 8 year old Telangana has collected ₹4,113 crores, nearly double the amount that Kerala has collected.
Hollow HDIs
Just like Sri Lanka, Kerala fares well in most of the human development indicators like literacy, life expectancy, infant and maternal mortality rates, etc.
While Kerala has the highest HDI score of 0.79 in India, Sri Lanka stands at 72 with a score of 0.78.
But of what use is literacy when there are not enough colleges in the state for students to pursue higher studies?
Of what use is life expectancy if the state does not have a strong, vibrant, working population?
Sri Lanka basically has no food, no fuel, no paper, no electricity, no medicines with people on the streets demanding the resignation of their President. Yet it is ranked Higher than India in Global Hunger Index (Sri Lanka – 65; India – 101), Global Happiness Index (Sri Lanka – 129; India – 136), and Human Development Index (Sri Lanka – 72; India – 131).
This goes on to show the absurdity of the indices produced by these global institutions, which are a byproduct of Eurocentric thinking that accompanied the rise of the West, so that they could maintain their hegemony over the world.
Hence, if we go by the example of Sri Lanka, HDI indices mean nothing if the state does not have an enterprising economy that can generate revenue and provide employment to its people.
Had the state not been a part of Indian Union, it would’ve ended up just like Sri Lanka. The state has been able to keep its neck above water thanks to the revenue generated by other states like Maharashtra, Gujarat, Tamil Nadu and Karnataka.
Sri Lanka is a case in point that shows that you and your dreams would be at peril if you do not have the right government framing the right policies.
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What the Sri Lankan Economic Crisis tells us about the ‘Kerala Model’
Once upon a time, there lived a king called Kubera, who ruled over modern day Sri Lanka.
In the Hindu pantheon, Kubera is the god of wealth and prosperity. He is considered as the owner of all material treasures in the world – money, precious metals, and all other forms of wealth. Scriptures describe Kubera’s kingdom as an abode of abundance.
Kubera and his kingdom had so much wealth that he had even extended a loan to Lord Venkateshwara so that the latter could meet his marriage expenses, the interest for which is being repayed by devotees who visit Tirupati.
In Buddhism too, Kubera is associated with wealth and abundance.
Fast forward to present day, this abode of abundance is today reeling under a severe economic crisis, and is on the verge of becoming a ‘defaulting’ country, surviving primarily on the lines of credit extended by India and China.
The Crisis
Over the past few weeks, prices of essential food items in Sri Lanka have been skyrocketing with their supplies getting depleted in the market. Inflation is in double digits hitting over 18% in March 2022. A 400 gram packet of milk powder costs around ₹200 Indian rupees. A kilogram of rice costs 500 Sri Lankan rupees.
The country has run out of fuel as it has not been able meet its import bills. People can be seen standing in serpentine queues to refill their gases, get kerosene or put fuel for their vehicles. The army has been deployed at fuel stations and shops to avoid deterioriation of law and order as there were several incidents of sporadic violence resulting in deaths being reported.
Long hours of power cuts lasting more than 13 hours have plunged the country into darkness as power stations remain closed due to fuel shortage. Even street lights are being turned off to save electricity.
School exams have been cancelled as the country has run out of printing paper putting futures of millions of children in limbo.
Some Sri Lankans are even trying to flee the country, with refugees entering India through Tamil Nadu.
So, how did Sri Lanka end up in this pathetic situation?
Afterall, Sri Lanka fares remarkably good in many indicators literacy, life expectancy, infant mortality rate, etc.
The Sri Lanka Model
Sri Lanka is a country that lacks a manufacturing or skilled service base. The country’s economy is mainly dependent on two Ts – Tourism and Tea.
Due to the COVID-19 pandemic and the resultant travel ban, tourism had taken a toll because of which the country saw a significant drop in foreign exchange.
Also, the Sri Lankan Government’s policy of banning chemical fertilizers and complete shift to organic agriculture had drastic effects on production of crops especially tea.
With the yield of tea decreasing, the Sri Lankan government saw less money coming in through tea trade.
Another significant source of revenue for Sri Lanka is the remittance money sent by Sri Lankans working abroad. This had dropped to a 10-year low of $5.49 billion in 2021.
The cumulative effect of tourism, tea and remittances has put Sri Lanka’s economy in peril with its forex reserve down to $2 billion.
Tourism, tea, and remittances – Does this ring a bell?
The Kerala Model
Kerala’s similarities with Sri Lanka goes beyond the beaches, tea garderns, and the tropical climate. Just like Sri Lanka, Kerala’s economy too is dependent on tourism, tea and remittances.
Decades of Communist rule has rendered the state devoid of any industrial development. The incessant strikes by trade unions and labour unions has made businesses wary of investing in the state.
The extortionary practice of ‘gawking wages’, which the Communist government tacitly supports even today, haunts businesses – small and large.
Even the Indian Space Research Organization (ISRO) was not spared from this menace when in September 2021, a large number of people blocked a truck carrying heavy equipments to the space agency, demanding that they be paid ‘gawking wages’ of ₹2000 per tonne for the 184 tonne load.
This business-hostile environment has made many companies based in Kerala to down their shutters.
In 2020, Pepsi Co shut its manufacturing unit in Palakkad due to frequent labour strikes. Kerala’s biggest private sector employer Kitex Group cancelled its ₹3500 crore investment deal in 2021, alleging a witch-hunt by the Communist government.
This harassment meted out to businesses has ultimately resulted in Kerala having no industrial or manufacturing base that can support a young workforce. As a result, the people of Kerala have moved on to other states or Gulf countries in search of opportunities.
Today, Kerala’s economy is heavily dependent on the remittance money sent by those Keralites living in the Gulf.
According to the World Bank, remittances sent by Malayalees working abroad account for around 30% of the Kerala’s total income.
This remittance money and the revenue generated through tourism is what the state survives on.
Tourism is the state’s top revenue generator. Almost 10% of Kerala’s GDP comes from the tourism sector contributing to 24% of the total employment in the state.
When the pandemic struck, the tourism sector received a severe blow due to frequent lockdowns and travel ban. Revenue from tourism dropped from over ₹45,000 crore (12% of GSDP in 2019) to ₹11,000 crore in 2020.
And if Sri Lanka sits on a huge pile of debt that it owes to China, Kerala is sitting on a debt of its own making.
The state has one of the highest Debt-to-GSDP ratio of 38.3% standing fourth in the country after Punjab (53.3%), Rajasthan (39.8%), and West Bengal (38.8%).
Kerala also has one of the highest household debt in India. With 47.8% of urban households indebted, Kerala has the highest incidence of indebtedness among urban households.
The dire condition of Kerala’s economy is visible from its contribution to the GST revenue which remains far below its potential.
Kerala collected just ₹2,074 crores just for the month of February 2022, lagging behind all the southern states. Its neighbouring states of Karanataka and Tamil Nadu collected ₹9,176 crore and ₹7,393 crores respectively. Even the 8 year old Telangana has collected ₹4,113 crores, nearly double the amount that Kerala has collected.
Hollow HDIs
Just like Sri Lanka, Kerala fares well in most of the human development indicators like literacy, life expectancy, infant and maternal mortality rates, etc.
While Kerala has the highest HDI score of 0.79 in India, Sri Lanka stands at 72 with a score of 0.78.
But of what use is literacy when there are not enough colleges in the state for students to pursue higher studies?
Of what use is life expectancy if the state does not have a strong, vibrant, working population?
Sri Lanka basically has no food, no fuel, no paper, no electricity, no medicines with people on the streets demanding the resignation of their President. Yet it is ranked Higher than India in Global Hunger Index (Sri Lanka – 65; India – 101), Global Happiness Index (Sri Lanka – 129; India – 136), and Human Development Index (Sri Lanka – 72; India – 131).
This goes on to show the absurdity of the indices produced by these global institutions, which are a byproduct of Eurocentric thinking that accompanied the rise of the West, so that they could maintain their hegemony over the world.
Hence, if we go by the example of Sri Lanka, HDI indices mean nothing if the state does not have an enterprising economy that can generate revenue and provide employment to its people.
Had the state not been a part of Indian Union, it would’ve ended up just like Sri Lanka. The state has been able to keep its neck above water thanks to the revenue generated by other states like Maharashtra, Gujarat, Tamil Nadu and Karnataka.
Sri Lanka is a case in point that shows that you and your dreams would be at peril if you do not have the right government framing the right policies.
Click here to subscribe to The Commune on Telegram and get the best stories of the day delivered to you personally.
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