Legacy of Kerala: From spice haven to thriving export hub

Kerala, located in the southwestern corner of India, is not only renowned for its breathtaking natural beauty but also its robust and diverse economy. With a skilled and educated workforce, it has become one of India’s most prominent exporting states, contributing significantly to the country’s trade balance. 

The state’s major exporting sectors include spices, tea, coffee, marine and seafood products, coir, and more. The state’s infrastructure, including ports, road networks, and power supply, facilitates efficient trade connectivity. Kerala’s exports are characterised by quality, sustainability, and value addition.

Kerala’s untapped export potential is substantial and can further boost the state’s economic growth, investment, and employment opportunities in the coming years.

Kerala exports
Image source: Pixabay

Kerala is located in the south-western corner of the Indian mainland, has an area of 38,863 sq km, and is home to around 33 million people. Kerala’s Gross State Domestic Product (GSDP) is expected to be Rs 11.3 lakh crore in 2023-24 (at current prices), representing an 11.2% increase over 2022-23. Being strategically located, Kerala has a coastline of around 600 km and also boasts fertile midlands and lush highlands with 44 rivers running across the breadth of this state.

The state has over the years become socially progressive, and the literacy rate is the highest in the country with a large workforce and an extensive skill pool. The state also boasts a large and affluent diaspora spread across the world.

Kerala has long been recognised as a hub of trade and commerce, with a history of maritime trade dating back centuries. Today, it stands as one of India’s most prominent exporting states, contributing significantly to the country’s trade balance. The state’s diverse economy encompasses a wide range of sectors, including agriculture, fisheries, textiles, spices, coir, tourism, IT and IT-enabled services, healthcare, and manufacturing.

Kerala is also one of India’s most progressive states in terms of support to human development, delivery of justice; and social protection. It boasts essential infrastructure and connectivity, viz., 4 airports, 2 major seaports, 17 mini seaports, 2 ICT Terminals, 11 national highways, railways, metros, “SEA-MEWE-3” and “SAFE” submarine cable landings, higher road density, 100% digital telephone exchanges, 98% of telephone exchanges connected by OFC to the National Internet Backbone (NIB), 24*7 power connectivity, etc.

‘Kerala Model’ in many indicative parameters is arguably on par with some of the major global superpowers. Its export sector is characterised by its emphasis on quality, sustainability, and value addition. The state’s exports are renowned for their authenticity, craftsmanship, and eco-friendly practices, making them highly sought-after in international markets. From premium tea and spices to handloom textiles, seafood, Ayurvedic products, IT services, etc.

One of Kerala’s key strengths lies in its skilled workforce. The state boasts a high literacy rate and a well-educated populace, providing a strong foundation for knowledge-based industries. Kerala’s human capital is known for its proficiency in English, adaptability, and entrepreneurial spirit, making it an ideal destination for export-oriented businesses seeking a skilled workforce.

Furthermore, Kerala’s robust infrastructure, including modern ports, well-connected road networks, and reliable power supply, enables seamless trade connectivity. The state’s proximity to international shipping routes and its well-developed logistics ecosystem facilitate efficient movement of goods, ensuring timely delivery to global markets.

Kerala exports

Kerala’s economic growth is fueled by sectors such as tourism, healthcare, IT, food processing, spices, rubber, ayurveda, electronics, handlooms, apparel and garments, coir, seafood, and traditional products such as wood carvings and designer jewellery, among others. Kerala produces more than 70% of India’s natural rubber and contributes significantly to India’s exports of cashews, spices, tea, marine products, coffee, coir, etc.

Kerala Exports

Source: Directorate General of Commercial Intelligence and Statistics

Kerala’s merchandise exports for the year 2022-23 were ₹ 35,117.23 crores (US$ 4.37 billion), constituting nearly 6% of the state GDP and 1% of India’s merchandise exports during the same period.

Kerala exports commodities

Source: Directorate General of Commercial Intelligence and Statistics

Among the various export commodities, marine products, spices, petroleum goods, cashews, rubber, textiles, electronics, tea jewellery, and coir are the major commodities exported from Kerala, contributing to more than 70% of the state’s merchandise exports.

Kerala exports market

Source: Directorate General of Commercial Intelligence and Statistics

The USA, UAE, China, Japan, Saudi Arabia, Spain, Singapore, UK, Germany and Netherlands are the top 10 export destinations for merchandise from Kerala. Ernakulam, Alappuzha, and Kollam districts alone account for ~79% of Kerala’s merchandise exports.

Government initiative to boost exports

The Indian state of Kerala has embarked on several key initiatives to foster economic growth and self-reliance. One such initiative is the ‘Make in Kerala’ program, designed to bolster domestic production, reduce dependency on imports, and generate employment opportunities. This approach aligns with a global trend towards self-sufficiency and sustainable economic development.

Additionally, the ‘Towns of Export Excellence Scheme’ and the ‘Status Holder Scheme’ play pivotal roles in recognising and incentivising towns with export potential and experienced exporters, respectively. This encourages the growth of export-oriented businesses in India.

Furthermore, the ‘Identifying Export-worthy Products and Services’ initiative under the ‘Districts as Export Hubs’ (DEH) scheme is a commendable effort to identify and promote products and services with export potential at the district level, fostering economic growth at the grassroots level. Additionally, the ‘One Family One Enterprise‘ initiative is set to provide support to family-owned businesses, recognising their contribution to the Indian economy.

The ‘Foreign Trade Policy 2023’ is a comprehensive strategy that seeks to enhance international trade by leveraging the Indian rupee. This policy includes industry-specific objectives and various government schemes like the Exports from India Scheme and Remission of Duties and Taxes on Exported Products (RODTEP).

The introduction of ‘Merchanting Trade’ provisions in the Foreign Trade Policy 2023 aims to establish India as a hub for merchanting trade, fostering international trade partnerships. It is a significant move towards bolstering India’s position in the global trade ecosystem. The ‘E-commerce Exports’ initiative is also noteworthy as it empowers Indian vendors to access international markets through e-commerce, tapping into a vast global customer base.

Furthermore, the establishment of ‘Export Promotion Councils’ is poised to be a valuable asset in promoting the products manufactured under the ‘Make in Kerala’ program. These councils will play a pivotal role in expanding the reach of Kerala’s products and services in international markets.

Kerala’s new export promotion policy is designed to support businesses in their international ventures. This policy aims to enhance export competitiveness, promote market diversification, provide financial incentives, streamline trade procedures, and foster innovation and skill development. By creating a conducive environment for exporters, Kerala aims to further strengthen its position as a globally recognised exporter of high-quality products and services.

Major exporting sectors of Kerala

Kerala state has a diverse range of major exporting sectors that contribute to its economic growth. The state’s natural resources and cultural heritage play a significant role in shaping its export profile. Some of the key sectors include:

  • Agricultural and allied products: Kerala is a major producer of agricultural and allied products such as spices, coconut, tea, and coffee. The state is famous for its high-quality spices, such as black pepper, cardamom, and ginger. Kerala is also a major exporter of coconut products, such as coconut oil, desiccated coconut, and copra.
  • Marine products: Kerala has a long coastline and is home to a variety of marine products. The state is a major exporter of shrimp, tuna, squid, and other seafood products.
  • Cashew nuts: Kerala is one of the largest producers of cashew nuts in India. The state’s cashew nuts are known for their high quality and are exported all over the world.
  • Coir and coir products: Coir is a natural fibre that is extracted from the coconut husk. Kerala is a major producer of coir and coir products, such as mats, carpets, and geotextiles.
  • Textiles: Kerala has a rich textile tradition. The state is known for its handloom and powerloom products, such as sarees, dress materials, and furnishings.

In addition to these traditional export categories, Kerala is also emerging as a major exporter of value-added products in the sectors of engineering, electronics, and pharmaceuticals.

Challenges

  • Land scarcity and infrastructure: The state struggles to find suitable industrial land for large-scale manufacturing due to limited availability. Inadequate infrastructure, such as roads and ports, further hampers sector growth.
  • Emigration: Kerala has a high rate of emigration, particularly of young people. This is due to a number of factors, including a lack of job opportunities and a desire for better wages and working conditions.
  • Reliance on remittances: Kerala’s economy is heavily reliant on remittances from expatriates. This makes the state vulnerable to fluctuations in the global economy.
  • Lack of diversification: The export portfolio relies heavily on a narrow range of traditional products, making the sector vulnerable to market fluctuations. Encouraging the export of non-traditional, high-value goods is essential for sustained growth.
  • Market access and promotion: Insufficient trade facilitation measures and limited promotional activities hinder global market access. Strengthening market linkages, participating in international trade fairs, and targeting promotions can enhance competitiveness.
  • Skill development: Despite high literacy rates, the workforce lacks industry-relevant skills. Tailored skill enhancement programs and collaboration between educational institutions and industries are needed.
  • Regulatory complexity: The state’s complex regulations and bureaucratic hurdles discourage potential investors, both domestic and foreign. Streamlining regulatory procedures and increasing transparency are necessary for a conducive business environment.

Kerala’s potential to become an export hub

The state has an untapped merchandise export potential of nearly US$ 6.7 billion. Kerala, which in the last few years has been devastated by floods, pandemic, and other natural calamities, has overcome the economic setback caused by them by way of its policy interventions, reform measures, forward-thinking growth orientation, etc. In this context, it is only prudent that the recovery from trying times be converted to long-term economic growth and employment generation. This can be significantly made possible by an enhanced focus on the untapped export potential, which would aid its sustainable economic development and place it as one of the major export economies on par with the best in the world, as per Exim Bank research.

According to Dr. Santosh Kumar P.K. Director and Associate Professor at the Centre for Budget Studies, Cochin University of Science and Technology, to position itself as a vibrant export hub, Kerala must prioritise comprehensive reforms across its manufacturing, export, and human capital sectors. Streamlining regulatory frameworks, investing in infrastructure development, promoting export diversification, and fostering a conducive environment for skill development and talent retention are essential steps in transforming Kerala into a dynamic economic powerhouse. By addressing these challenges strategically and implementing targeted reforms, Kerala can unlock its true economic potential and emerge as a key player in the global market.

Kerala has emerged as an important contributor to India’s economic output and trade. The state’s production of key merchandise export items, skilled human resources, and favourable policy environment have contributed to its emergence. However, the state faces several challenges, including untapped export potential. Realising this untapped export potential can position the state on a higher trajectory for economic growth, investment, and employment.

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