'Taiwan of India': Why high-skill jobs, not low-wage factories are defining Kerala's future

New Indian Express

15-06-2025

The headlines around Kitex Garments' plans to expand operations to Andhra Pradesh with a proposed Rs 4,000-crore investment have again stirred public debate. But the deeper story is not about one company's choice of destination — it's about Kerala's evolving industrial landscape and why labour-intensive industries like garments, cashew and coir are naturally moving out, while high-value sectors are moving in.
Take it from Balagopal Chandrasekhar, Chairman of KSIDC and one of Kerala's pioneering entrepreneurs.
Chandrasekhar, a former IAS officer, quit civil service in 1983 to launch Penpol, which would later become Terumo Penpol — India's largest manufacturer of blood bags. In a widely circulated LinkedIn post, he draws attention to a clear industrial shift: "Garment manufacturing, like cashew and coir, is a low value-added business. It is highly sensitive to wage rates and will naturally move to states with lower labour costs. Kerala, meanwhile, is transitioning to high-tech, high-value manufacturing."
The Kitex Mirage: A Case in Context
Around five years ago, Kitex's decision to pull back on an investment plan in Kerala and set up shop in Telangana sparked a fiery war of words with the state government. Yet, as Professor Jayan Jose Thomas of IIT Delhi observed in a seminal piece then, Kitex had already grown into the largest exporter of children's garments in India, employing nearly 10,000 people in Kizhakkambalam. Since the Telangana announcement, Kitex continues to operate unhindered in Kerala, clocking Rs 1,000 crore in business last year alone—hardly the profile of a company "hounded out".
Now, Kitex is reportedly in talks with Andhra Pradesh, where a new textiles policy is being marketed aggressively. The appeal is obvious—low-cost labour, large land tracts, and minimal regulatory hurdles. This is no surprise. The same industrial migration happened with cashew processing, which shifted to Tamil Nadu, and marine exports, whose low-end units are now based in Andhra.
But here's the critical point: Kerala is not being left behind—it is evolving.
High Skill, High Pay, High Value
Today, Kerala is seeing the rise of an entirely different kind of industrial economy. One that is built on skill, talent, clean infrastructure and sustainability. A far cry from the sweatshop economics that defines garment factories.
Tech giants like IBM, EY, HCL Tech, and Fujifilm are setting up large campuses in Kochi and Thiruvananthapuram—not out of charity, but because they recognise Kerala's core advantages: a skilled, English-speaking workforce, superior education institutions, clean and green cities, and an abundance of water and power.
Just last week, HCL Tech inaugurated its new delivery centre at Technopark Phase III, Thiruvananthapuram. In just three years, it has gone from one unit in Kochi to two full-fledged delivery centres across Kerala employing over 1,500 people in engineering and R&D services.
In November 2024, IBM launched its biggest Gen-AI Innovation Centre in India at Infopark, Kochi. With 1,500 employees already onboard and expectations to reach 5,000, the centre is built around cutting-edge AI research and development on IBM's WatsonX platform. IBM now calls Kochi its fastest-growing campus in the world.
EY Global Delivery Services, another heavyweight, employs 10,000+ people in Kerala, with plans to double this number and house 20% of its India workforce in the state. That's not a statistic you associate with a state hostile to business.
From Back Office to Brain Trust
Kerala's industrial arc resembles the BPO boom of the late 1990s, when US firms chased labour arbitrage in India. Cities like Bengaluru and Hyderabad flourished. Kerala, despite starting early with Technopark in 1990, missed that first wave.
But this new tech-led, AI-powered wave is different, and Kerala is riding it smartly.
Minister P Rajeeve, the driving force behind Kerala's proactive industrial policy, frames it clearly: "Work from Kerala is the new policy. Our cities are clean, connected, and the talent is world-class."
Under his watch, Kerala topped India's Ease of Doing Business Reforms index and attracted investments from Allianz, Strada, Zoho, and even an Italian tech firm named Dynimated, which opened a futuristic "phygital" studio on Kochi's outskirts.
Rural Revival, the Zoho Way
A prime example of Kerala's inclusive, innovation-driven future is Zoho Corporation's rural model. The company has set up a tech hub in Kottarakara, offering AI and robotics training, turning sleepy towns into talent accelerators. As Sridhar Vembu, Zoho CEO, famously remarked: "Kerala has the potential to become the Taiwan of India."
The environment—clean air, clean water, livable cities—is becoming a crucial competitive advantage in the AI age. Capital is now seeking intelligence over infrastructure, innovation over cheap labour.
Garments Go, Innovation Grows
The emotional reaction to Kitex's expansion outside Kerala misses this structural shift. The state has no reason to cling to industries that no longer match its economic DNA. Low-wage, low-skill garment manufacturing will go where it's viable — just like coir, cashew, and seafood did. And that's OK.
In their place, Kerala is attracting high-end players, creating jobs that pay more, demand more, and do more for its people and economy. As Balagopal Chandrasekhar summed up: "Let low-end industry go. What's coming in its place is better."
Kerala is not being bypassed—it's being upgraded. The migration of garments is not an indictment, but an indication that the state is moving up the value chain. And that is exactly where the future lies.