State-led success and low growth rate
Arvind Panagariya in the Times of India:
One, these expenditures have hovered around a bare 1% of GSDP. Two, and much more importantly, private expenditures on health dwarf public expenditures in Kerala: in 2004-05, the latest year for which we have data, whereas public expenditures amounted to just 0.9% of GSDP, private expenditures were a gigantic 8.2%. The corresponding India-wide figures were 0.9 and 3.6% of GDP, respectively.
The proportion of the population accessing public health services reinforces this story. In 2004, only one-third of rural and one-fifth of urban population chose the public health system for non-hospitalised treatment. Likewise, only about one-third of the population in both rural and urban areas chose public facilities for hospitalised treatment.
This same pattern is observed in education. NGO Pratham carries out extensive surveys of children in school up to 16 years of age in rural India. According to its latest report ASER 2010, excluding two or three tiny northeastern states, at 53% Kerala has the highest proportion of students between ages 7 and 16 in private schools in rural India. The corresponding figure for the nearest rival, Haryana, is barely 40%. No matter how we look at it, the conventional and dominant story of Kerala as a state-led success crumbles in the face of hard facts.[ToI]
From the conclusion in India’s Growth in the 2000s: Four Facts by Utsav Kumar and Arvind Subramanian [pdf]:
The analysis of growth in the 2000s throws up one more quirk, relating to Kerala. The conventional wisdom is that this state is Scandinavian in its social achievements but sclerotic in its growth performance because of investment-chilling labor laws and strong trade unions. This is reflected in a labor force that has voted with its feet by emigrating to the Middle East. The abiding caricature is of the lazy, argumentative Malayali, discussing Foucault and Gramsci over endless cups of chai while living parasitically off the remittances sent by relatives in exile. However, the data suggest that the conventional wisdom and the caricature are dead wrong. Kerala posted among the highest rates of growth in the 1990s (4 percent per capita), continued its stellar performance in the go-go 2000s (7.5 percent), and exhibited great resilience during the crisis, experiencing virtually no decline in growth.
India, evidently, is capacious enough to allow both Bania, reforming Gujarat and Marxist, and reform-resistant Kerala to flourish. Or, to put it more honestly, the Indian growth miracle, including the experience of the 2000s, continues to confound.[Paper]