KERALA'S GULF CONNECTION Emigration, Remittances and their Macroeconomic Impact 1972-2000

Abstract

This paper attempts to construct a time series estimation of
\nremittances from abroad to the Kerala economy for the period 1972 to
\n2000. It is now widely acknowledged that foreign remittances in the
\neconomy of the State of Kerala in India in the form of money sent by its
\nworkers in the Gulf countries play a crucial role. The study finds that by
\nthe early nineties remittances to the Kerala economy assumed a
\nsignificant share of state income. This ranged from 17 percent during
\n1991-92 and 24 percent during 1997-98 with an average of 22 percent
\nfor the second half of the nineties. The liberalisation of the Indian
\neconomic policies, particularly the foreign exchange rate, benefited
\nKerala directly. Adding the remittance income to the Net State Domestic
\nProduct, a Modified State Income series has been constructed. As a
\nresult Kerala’s per capita income not only caught up with the average
\nper capita income for India but started exceeding it reaching 49 percent
\nabove the national average by the end of the nineties. This tallies with
\nper capita consumer expenditure in Kerala, which was in excess of 41
\npercent above the national average by the end of the nineties.
\nRemittances have also made significant impact on savings. By the
\nnineties savings rates in the Kerala economy seem to have reached such
\nhigh levels comparable to the East and South East Asian countries. The
\nsignificance of remittances can also be gauged by its relative magnitudes.
\nBy the end of the nineties remittances reached such levels that they
\nwere well above the total government expenditure, value added in
\nmanufacturing and even the value added in industrial sector as a whole.
\nJEL Classification: F22, J61
\nKey Words: emigration, Gulf countries, Kerala economy, remittances,
\nand consumption.