Journal article / The Macroeconomic Impact of Remittances in Kerala

Kannan, K. P., and K. S. Hari. ‘Revisiting Kerala’s Gulf Connection: Half a Century of Emigration, Remittances and Their Macroeconomic Impact, 1972–2020’. The Indian Journal of Labour Economics. Published ahead of print, 19 October 2020.

Abstract (edited): In the literature on development studies, the state of Kerala is known for its high human and social development despite its low-income status. However, there has been a turnaround in its growth performance and has now come to occupy a high rank in terms of per capita income among Indian States. This has been largely through a high growth performance facilitated by significant remittances from abroad. However, there have not been consistent time-series data on annual remittances.

This paper is an attempt to fill this gap by estimating foreign remittances to Kerala for a period of 47 years that is close to half a century. Using these data, the paper has presented a Modified State Income for Kerala and calculated its impact on consumption and savings. The significance of the sizeable emigration to the labour market situation has also been highlighted. Given the fact that remittances come as household income confined to a small segment of the total households, the impact of annual remittances on income and consumption inequality has also been highlighted.

The results show an increasing trend in inequality. Despite a high growth performance aided by remittances, Kerala has not been able to address its long-standing problem of educated unemployment, especially for its women. In this context, the state’s inability to take advantage of the enhanced per capita income to maintain its tax-income ratio, let alone enhance it, assumes great significance as an area of concern.

Reposted from Kerala Scholars eGroup

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