Can Kerala Become India’s Next High-Technology Hub
While Kerala has a skilled workforce, it needs to reform labor policies to attract advanced technology companies says Sunil Mani
May 12, 2025
By Sunil Mani*
For more than a century, Keralites have been the most highly educated workforce in India. But, since the 1950’s, the state has been unable to attract private businesses which offer high-paying jobs, as is typically found in regions with an educated workforce.
With few jobs in the state, highly skilled Keralites pursue careers in other parts of India. Or they migrate to Saudi Arabia and other Persian Gulf countries; also, to the United States and Canada.
Kerala thus faces a paradox: the state invests in education and skills development but cannot retain its top talent. In turn, the lack of local skilled workers hampers the state’s ability to attract private investments in information technology, biotechnology, and other advanced technology businesses.
Kerala, which has a population of 36 million, produces a substantial pool of highly skilled labor. Each year, the state turns out more than 25,000 graduates and more than 15,000 postgraduates in Science, Technology, Engineering, Math and Medicine (STEM). Advanced educational institutions include the Indian Institute of Technology, Palakkad, the Indian Institute of Information Technology and Management-Kerala, the Kerala University of Digital Sciences, Innovation, and Technology, and advanced programs at the Cochin University of Science and Technology.
However, more than a quarter of the STEM postgraduates are unemployed; the unemployment is far worse among non-STEM graduates. A 2012 study found that nearly a third of the engineering graduates from Kerala relocate outside the state within five years of completing their degrees.
In 2020, the Kerala Knowledge Economy Mission (KKEM), was launched to provide gainful employment skills to two million high school graduates by 2025, in data science, cybersecurity, and other advanced technical areas. The curriculum is developed in collaboration with input from Microsoft, IBM, and academic institutions; faculty are certified professionals; and training is delivered through a hybrid of online and in person programs.
So far, only about 450,000 youths have received training. Also, while the program boasts a 60% initial placement rate, independent reports suggest that less than half remain employed after six months.
In 2021, Kerala launched an effort to introduce AI and Robotics in about 1,000 schools to around 20,000 students. Only about a third of the schools have the faculty to deliver the new content. Similar efforts at the university level have also fallen short, with only a sixth of university projects establishing industry collaborations.
Roughly every five years, Kerala has been run by governments led alternately by the Communist and Congress parties respectively. When in power, governments run by either party invest in education and skills development.
Kerala though faces a second and major paradox. The Communist parties lead major, powerful unions of workers, including in technology industries. Communist party led governments, one of which currently rules the state, also promote and protects unions.
Unsurprisingly, Kerala has struggled to attract significant private Indian and foreign investment, largely due to the presence of powerful trade unions. In 2023, for instance, private companies proposed investments of only around $50 million in the state—less than 0.1 per cent of their total intended investments across India.
Over the past decades, numerous efforts by the state to attract high technology businesses has had a limited impact. There are information technology hubs like Technopark in Thiruvananthapuram and Infopark in Kochi, which host major Indian private firms such as Tata Consultancy Services (TCS) and Infosys. Overall Technopark has about 75,000 employed by about 500 companies, and Infopark around 60,000 workers in about 600 companies. The annual export revenues from each of these parks is around $1.2 billion.
Then there is the Kochi Industrial Corridor, centred in Ernakulam, which is a key part of Kerala’s industrial economy. It hosts offices of electronics and IT companies including Tata Elxsi, Wipro, and UST Global. With a total of roughly 15,000 employees, annual exports of these technology companies exceed $1.2 billion. But the bulk of the jobs in the corridor, around 50,000, are in shipbuilding and petrochemical companies, which are government-run like Cochin Shipyard and BPCL’s Kochi refinery.
The corridor reflects Kerala’s unionization of employees: regular wage negotiations, accompanied by work stoppages, led by major national unions, in the shipyard, refinery, and other traditional industries. At technology companies, labor issues are resolved mainly through internal dispute resolution. However, they face the constant risk of employees joining unions, which would impact their costs, productivity, and hiring.
A major example of how unions have hurt Kerala’s ability to become a high-tech hub is seen from the history of KELTRON, Kerala State Electronics Development Corporation. Established in 1973 by the state government, it specializes in high-tech electronics, including radar systems, electronic voting machines, solar solutions, LED lighting, and aerospace and defence components. With over 1,000 engineers and technical staff, the company’s annual revenues total around $65 million.
Official records indicate that KELTRON has suffered financial losses for most years since its inception, in part due to high operating costs resulting from a unionized workforce. The other factors for the losses are bureaucratic inefficiencies and competition from private players.
(Photo: Ayurveda resort, Kerala. Courtesy Wikimedia Commons.)
Assuming Kerala can turn business friendly, there is a potential path to creating several hundred thousand skilled jobs in the state. A glimpse of this future is seen from businesses in the state which operate in medical devices and diagnostics, aerospace and defence, and modern applications of ayurveda.
For instance, medical device businesses operating in the state include Agappe Diagnostics, a manufacturer of in-vitro diagnostic products; SFO Technologies’ medical electronics division; Japanese owned Terumo Penpol, which provides blood management solutions; and dentcare dental lab.
In aerospace and defence, the Vikram Sarabhai Space Centre in Thiruvananthapuram has been a catalyst for the founding of several private firms to supply components to the Indian Space Research Organization (ISRO) and defence organisations. Notable examples include BrahMos Aerospace, a Department of Defence joint venture, manufacturing missile components and propulsion systems; Tata Elxsi’s aerospace division which develops avionics for ISRO missions; SFO’s production of cable harnesses and precision components for rockets; and EMC which supplies electronic payloads for space missions.
In Kerala, and across India, businesses are pursuing ways to find modern applications for ayurveda. The ancient medical practice, which uses herbs and other natural solutions, evolved in the state. It is currently a booming $10 billion global annual market. Companies pursuing this market, which are based in Kerala, include ITC’s Wellness Foods and Kottakkal Arya Vaidya Sala; Tata Power supplies solar microgrids for some Ayurvedic hospitals in the state.
The rise of medical, space and ayurvedic businesses have led to the founding of several startups in Kerala. They include Genrobotics, which makes robots, Sascan Meditech, specialising in AI-based cancer detection; Taurus Aerospace; M2 Optix, which makes lenses for ISRO satellites; and Verdant Telemetry, a vendor of antennas and advanced composites for aerospace applications.
Many of the startups are backed by the state government’s Startup Mission. It supports over 4,000 startups, which collectively employ more than 50,000 professionals, including more than 15,000 engineers. They contribute more than $585 million annually to the state’s economy.
The state government provides the startups with up to $175,000 in seed capital, scale-up funding of up to $600,000, low-interest loans of 4% to 6%, and tax incentives, including a five-year state tax holiday.
There are gaps in internet access, power, transport, and other infrastructure which make it hard for Kerala to compete with rival global high technology hubs in India like Bengaluru and Hyderabad.
During the current fiscal year, the Kerala government plans to allocate funds to expand and enhance the state’s IT infrastructure. It also plans to invest to attract more IT companies to the Kochi Industrial Corridor; set up an Aerospace Park in Thiruvanthapuram, and IT parks in Kollam and Kottarakkara.
These projects require several hundred million dollars in investments. While the goals are commendable, the funding, or much of it, may not materialize since the state faces a rising budget deficit.
So, Kerala needs to attract private capital and businesses by reforming its policies, especially those dealing with labor. Yes, policies to protect staff from exploitation by unscrupulous business owners are necessary. In addition, the policies must ensure that unions do not make wage and service condition demands which will result in businesses incurring financial losses.
The success of medical devices, aerospace and Ayurveda related businesses demonstrates what can be achieved in Kerala. The state’s healthcare system, high literacy rates, and scenic landscapes, ought to appeal to professionals as well as to private investors and business owners.