Kerala Story: India's Most Literate State May Be Heading Towards Economic Dilemma, Much Like Japan

Nationally, states such as Uttar Pradesh and Bihar have registered above-replacement fertility. However, Kerala with 100 per cent literacy rate is facing a peculiar challenge—plunging fertility rate. Kerala is not alone. Few other states such as Sikkim and Goa are facing the same situation with falling fertility rates similar to South Korea and Japan.

A close analysis shows a direct correlation between education and fertility rate.

What Is Replacement Level Fertility

Fertility rate reflects individual parameters of a woman, indicating the average number of children she could give birth to in her lifetime.

Replacement level fertility is defined as the number of children required for a population to replace its aging populace, ideally 2.1 but 2.2 or higher in places with higher infant mortality.

Peculiar Case of Kerala

In India, one of the most developed states, on the parameters of Human Development Index (HDI) ranking, with high literacy rates, and excellent performance in healthcare metrics such as infant mortality and maternal mortality, Kerala, is competing with Japan on the population front.

Kerala shares similarities with some developed nations, particularly regarding the rapidly aging population in the state.

Curiously, a quarter of Kerala’s population is expected to fall into the elderly category by 2036 – Japan was in a similar spot in 2010, at the outset of its population decline.  

Latest projections from the Directorate of Public Health indicate a possible total fertility rate in Kerala of around 1.16 for 2025 – down from 1.46 in 2023 and, keeping in view of the current trajectory, would further fall to below 1.0 by 2026, affecting the replacement rate. To put that into perspective, Japan’s total fertility rate declined from 1.2 in 2023 to an estimated 1.12 as of 2025.

According to Kerala's Economic Review -2024, the number of people in care homes rose by 67.27 per cent over the past seven years.

The number of elderly residents has steeply increased from 19,149 persons in 2016-17 to 32,032 persons in 2023-24. A rapidly declining consumption trend leads to potential cuts in funding for social welfare programmes, putting the elderly at a greater risk of health complications.

Furthermore, Japan has a per capita income of about US$ 33,000. Kerala stands at merely US$ 4,500, which marginally qualifies it as an Upper Middle-income economy as per World Bank standards. 

Regardless of the urge for comparisons, Kerala still lags behind Japan in parameters such as HDI, life expectancy, and income, among others.

Kerala, perhaps, remains a victim of its own success, as a highly educated workforce has been unable to translate its social progress into economic and population growth. 

Rural-Urban Disparity

The rural-urban disparity in terms of the prices of land and properties has come to the fore as districts in Kerala, such as Pathanamthitta, Alappuzha, and Kottayam, have witnessed a drop in prices due to low demand.

Meanwhile, spurred by migration of people from other places, the rates have increased in the urban pockets of Kochi and Thiruvananthapuram.

Findings from the Kerala Migration Survey 2023 revealed a staggering 1.5 million empty houses in the state, akin to Japan and Italy, the rural areas of which saw houses left in a state of neglect.

The only difference here is that the income level of Kerala is merely 10-13 per cent of the two developed nations.

Challenges in securing a job for the graduates pose another hurdle, as data from the Periodic Labour Force Survey (PLFS) 2022-23 show that graduate unemployment is at a staggering high of 42 per cent in the State, the youth are left with no other choice but to either navigate the job-search grind or migrate to other States.

Reliance On Migrant Workforce

If not for the high remittances from abroad, Kerala would have faced the brunt of its 29.9 per cent youth unemployment. With a dearth of workforce, the State now relies on the services of 2.5 million migrant workers. 

The ICAR-Central Marine Fisheries Research Institute (CMFRI) found that migrant workers account for 58 per cent of its total workforce – a stark contrast to the neighbouring State of Tamil Nadu, which is witnessing a manufacturing boom after having attracted several international companies.

Remittances From Abroad

The survey also showed the State’s high dependence on remittances from abroad, particularly the Anglosphere and West Asia. As of 2023, Kerala was the largest recipient of foreign remittances (20 per cent of the total US$120 billion received nationally), a disproportionate share considering the fact that the State accounts for roughly 2.7 per cent of the total population. This roughly translates to 15.5 per cent of the State’s GDP.

A reduction in foreign remittances is likely to devastate the State’s fragile economy, which is almost entirely dependent on services. Kerala, evidently, is also the State with the lowest share of people engaged in agriculture, only a meagre share of 8.5 per cent.

The effects of the demographic crisis are fairly evident in the agricultural sector, glaringly in the esteemed coconut industry. While the State alone accounts for a gargantuan 45 per cent of the national production between 2003 and 2004, as indicated by records from the Coconut Development Board of India. It dipped to 27.5 per cent between 2012 and 2014.

The State even slipped behind Tamil Nadu. In 2023-2024, the production further fell to 25.8 per cent, lagging behind Karnataka.  

Consumption behaviour

A similar trend is observed in the State’s consumption behaviour, most noticeably in the film industry. Ever since the pandemic, the industry has been unable to turn its fortunes.

It was reported in 2024 that the industry foresaw a decline in revenue to the tune of Rs 700 crore, with only 26 movies managing to recover production costs.

During 2014, the state ranked the highest in South India in GSDP per capita, but this is projected to slip to the second lowest by 2026, and it would slump even further as the State is staring at the end of its demographic dividend. The State’s healthcare and education sectors have also been impacted by job losses. 

The economic slide of Kerala continues unabated as its demography worsens over time. Every parameter of the State – be it consumption or employment prospects – has been in decline.

(The writer is a political and social data analyst. Views are personal.)