Why Kerala failed to create jobs? Kerala Model v/s Gujarat and Tamil Nadu Model
Kerala’s celebrated social model delivered literacy, health, and equity but also one of the highest unemployment rates in India. Tamil Nadu and Gujarat built job-rich industrial ecosystems through a different policy mix. The article compares the two development models to bridge the gaps between them and chart a path to local job creation for Kerala.
Kerala state’s achievements in human development are a mirage
1) Literacy
The narrative is that Kerala achieved higher literacy level than other states through grassroots campaigns. This is incorrect. In 1947, when rest of India was at 12-15% literacy level, Kerala already had 45% literacy rate. Between Missionary schools, schools opened by Hindu Kings, and the Hindu community reform movement, such as those of Sri. Narayana Guru and Ayankali, there was both a substantial network of schools and an awareness among Keralies about the importance of education. From the 1970s, Keralites started going to the Gulf region, primarily as skilled and unskilled labourers at that point. The money Kerala’s expat community send back home led to increased financial wherewithal among Keralites. Keralites who had already been convinced about the importance of education started prioritising their children’s education. Anyone who could afford it sent their kids to private schools as quality of education in government schools remained poor even into the 90s and 2000s. In short, state policy, had very little to do with the educational achievements of Keralites.
2) Healthcare
Another set of indicators for which Kerala gets much praise is healthcare. However, the details tell a different story. People in Kerala spend the most per capita on healthcare in India, this high expenditure is largely due to the state’s reliance on private healthcare. It results in high out-of-pocket expenditure (OOPE). For instance, in 2021-22, Kerala’s out-of-pocket expenditure was ₹7,889 per person, accounting for 59.1% of the total health expenditure. By comparison, Kerala’s per capita government spending on health, at ₹4,338. Though it should be noted that Kerala government’s per capita expenditure on healthcare is the highest among Indian states, even if it’s much less than private spending. In short, Kerala’s achievements in health, much like the achievements in education, are more a consequence of the improved financial well-being of Keralites stemming from remittance than government policy.
Kerala lags in job creation despite high human development. Why?
1) Service & remittance-led—not production-led
Growth leaned on Gulf remittances and services (healthcare, education, retail, tourism). Manufacturing never reached scale, leaving too few posts for the rising educated youths.
2) Weak industrial & agricultural base
Equity-oriented land reforms improved welfare, but left little surplus land and capital for large factories. Agriculture shifted to cash crops, creating wealth but limited jobs.
3) Labour relations & business climate
Strong unions, frequent strikes/hartals, and higher wage floors improved worker security but discouraged labour-intensive investment. One of the things that never gets talked about when talking about Kerala’s labour rights achievements is that it stands on the back of workers with no rights working in the Gulf. The poor treatment of Keralites who work in the Gulf is an open secret in Kerala. Whether it be based on race, class, or religion, Malayalis who go to the Gulf, especially those doing lower-end jobs, often face massive discrimination and poor working conditions. Work camps with 100s of people are cramped together and share a few toilets. Upon arrival, their passports are confiscated by their local employer under the “Kafala” system. There are also cases of workers not getting wages for months but being unable to change jobs or leave because of the “kafala” system. No government in Kerala has taken any action to help Kerala’s Gulf workers from exploitation. While the Central government has signed some agreements, set up helplines in embassies, etc., the ground reality is that worker abuse remains a widespread issue in the Gulf.
4) Education–employment mismatch
Social mobility raised white-collar aspirations. Many graduates prefer public sector/IT roles, widening gaps in blue-collar availability and industrial hiring.
5) Migration safety valve
Large-scale outmigration to the Gulf absorbed surplus labour and remittances reduced the urgency to reform local job markets.
6) Dispersed urbanization
Linear settlement along coasts/highways hindered dense industrial clusters and supply chains that power mass employment elsewhere.
How Tamil Nadu & Gujarat created jobs
Industrial policy & investment climate
Tamil Nadu pursued proactive industrialization: auto hubs (Chennai, Hosur), textiles (Coimbatore, Tiruppur), electronics and IT. Gujarat emphasized ports, SEZs, stable power, and pro-business clearances, scaling chemicals, petrochem, textiles, engineering, and autos (Sanand, Halol).
Labour relations
Tamil Nadu kept a pragmatic balance between worker rights and investor predictability. Gujarat remained more employer-friendly with fewer disruptions. Kerala’s more militant unionism raised perceived risk for labour-intensive plants.
Entrepreneurial ecosystems
Both TN and Gujarat have deep trading/industrial communities and SME networks that reinvest locally. In Kerala, risk-averse preferences and remittance-fuelled consumption channeled savings into real estate and gold rather than factories. Promoting entrepreneurial culture in schools and colleges can go a long way in bringing industries to Kerala.
Urban form & clusters
TN and Gujarat nurtured tight industrial clusters and corridors (Chennai–Sriperumbudur; Ahmedabad–Sanand; Surat textiles). Kerala’s dispersed pattern limited agglomeration economies.
Migration dynamics
Gujarat attracts migrant labour from other states, ensuring a steady low-to-mid-skill workforce. TN retains a larger domestic industrial workforce. Kerala exports workers abroad—good for incomes, bad for local job depth.
Politics & the state
TN’s party competition and Gujarat’s business-first governance created a consistent “welcome mat” for industry. Kerala’s politics rightly prioritized welfare, but underweighted production capacity.
Quick summary table
| Factor | Tamil Nadu | Gujarat | Kerala |
|---|---|---|---|
| Industrial policy | Proactive; autos, textiles, electronics | Ports, SEZs; petrochem, engineering, autos | Welfare-led; services over manufacturing |
| Labour relations | Predictable, manageable unions | Employer-friendly, fewer disruptions | Militant; higher wage floors |
| Entrepreneurship | Strong SME networks | Trader-industrial culture | Risk-averse; remittance consumption |
| Urbanization | Dense clusters, supply chains | Corridors & coastal hubs | Linear, dispersed settlements |
| Migration | Domestic industrial workforce | Net in-migration for jobs | Large Gulf outmigration |
| Politics | Competitive pro-industry stance | Business-centric continuity | Welfare-first priorities |
Interpretation: TN and Gujarat paired human capital with production systems—clusters, logistics, investor confidence—while Kerala optimized for social outcomes without building comparable industrial depth.
The bottom line
Kerala’s model is a social success but an economic failure. It is unsustainable, as people of continue to leave, Kerala is being drained of talent, its culture, and its identity. The contrast with Tamil Nadu and Gujarat is not about choosing equity or growth. it is about pairing social welfare with a credible economic strategy.
Policy ideas for Kerala (actionable)
- Pick 3–4 employment engines: e.g., medical devices, light engineering, food processing, green mobility components, Titanium industry, and aerospace industry.
- Build compact industrial clusters near Kochi/Thiruvananthapuram with plug-and-play infra, stable power, and single-window digital clearances.
- Labour compacts: sectoral agreements that guarantee productivity, safety, and dispute-resolution timelines.
- Reorient skilling toward middle-skill manufacturing roles; dual apprenticeships with local SMEs.
- Remittance to investment: match-fund diaspora bonds and SME equity funds; de-risk first-loss capital for manufacturing SMEs.
- Logistics & exports: leverage Vizhinjam and Cochin ports for export-oriented supply chains; time-bound warehousing & customs reforms.
FAQs
Is Kerala anti-industry?
It would be more accurate to say that Kerala’s governments have never prioritised industry. Since, money keeps coming from migrant workers, and Kerala’s voters have never demanded job creation, Kerala’s politicians had no reason to prioritise it. So the task now is to raise awareness among voters about the importance of economic development in addition to human development and get voters to raise their voice.
Can Kerala replicate TN/Gujarat?
Kerala is a coastal state with a highly educated population, which gives Kerala similar advantage to Tamil Nadu and Gujarat. Hence by focuing on niches that fit its geography, skills, and logistics.
What’s the quickest win?
Clusterize: choose a few exportable product lines, co-locate suppliers, and offer predictable operations via labour compacts. One industry that quickly be constructed is Titanium metal alloys for aerospace industry and other Titanium products. India currently imports 4 billion dollars worth of Titatanium products every year and the demand is only growing. Kerala government currently has two titanium factories one in Trivandrum Travancore Titanium Products limited and other is KMML or Kerala Minerals and Metals limited. Mining, refining, and creation of Titanium metal and products can also be used as a stepping stone to building an aerospace hub in Kerala. Titanium is known as the metal of the future. Kerala has one of the largest titanium reserves in the world, and it would be a case of gross mismanagement to leave this resource untapped.