In his second stint as chief minister since 2016, Pinarayi Vijayan, in an exclusive interview with Fortune India, says Kerala is now focussing on attracting futuristic sustainable businesses that create high-value and low-volume businesses.

Edited excerpts:

Kerala had to navigate cyclone Okhi in 2017, two big floods in 2018 and 2019, and then the COVID-19 pandemic. Despite those natural disasters and the resultant big economic losses, you were able to attract investments into the state. What were the big investments and industries that came to the state since you assumed office in 2016?

Kerala implemented proactive policies to strengthen the MSME sector, with an initial focus on attracting investments. The government facilitated ₹250 crore in capital investment, enabling an MSME system. Through the YOE (Year of Enterprise) scheme, which has been hailed by the Government of India, we have generated more than ₹22,000 crore as investments in the just three years. Kerala's diverse, inclusive and robust MSME sector continues to thrive across industries, driving economic resilience and employment.

Expansion in IT, shipbuilding, food processing, aerospace and defence, and a thriving start-up ecosystem has also helped us immensely. As far as big names go, IBM, Infosys and IBS have expanded their presence in Kerala. To name a few newcomers into Kerala, Airbus, Nissan, Taurus, Tech Mahindra, Tata Elxsi, NOV and so on have established themselves here since 2016.

Kerala got the No.1 ranking in ‘Ease of Doing Business Reforms', as per the ranking of the Union Ministry of Commerce and Industries. What were the major focus areas where your Government brought in changes? What has been the result?

Kerala's top ranking in ‘Ease of Doing Business Reforms' is a result of comprehensive improvements in key areas. The government has simplified approvals and policies, ensuring faster licensing, policy enhancements and MSME-friendly reforms. Digital and governance reforms, including K-SWIFT - the single window clearance system, and an efficient grievance redressal system, have streamlined business facilitation. K-CIS, which streamlines inspections, have also made a marked impact.

Additionally, the state has expanded industrial infrastructure with the development of industrial parks like the Kerala Life Sciences Park, Science Parks and sector-specific hubs, creating a stronger foundation for industrial growth. We have even paved the way for private industrial parks to operate in the state. These reforms have significantly improved business efficiency, reduced procedural delays and strengthened Kerala's investment appeal.

Now almost all states are competing with each other to attract big investments. A delegation led by your industries minister went to the World Economic Forum (WEF) Davos. For an ecologically fragile state like Kerala where huge tracts of land cannot be offered to industries, what are the big positives and types of industries and business sectors are you highlighting to attract investments?

Services, tourism including healthcare tourism and IT are sectors in which Kerala offers world-class opportunities. One of our biggest attractions is our skilled talent pool. It is a key advantage for industries focused on technology, R&D and innovation-driven sectors. We are targeting, ''high value - low volume'' industries that require innovation, technology and highly skilled manpower rather than large tracts of land.

At the World Economic Forum, we showcased Kerala's vision for responsible and sustainable industry. Responsible business promoted under the tagline 'Changing the Nature of Business'' highlighted Kerala's commitment to sustainable industrial growth. We are encouraging ESG-driven investments, positioning Kerala as a leader in ESG standards ensuring sustainable and ethical business practices.

In the changing climate scenario, Kerala's industrial development, especially in the travel and tourism sector and for hill destinations like Munnar, has to be rooted in sustainable development. What are your plans and vision for the future of Kerala?

Tourism is one of Kerala's major focus areas, contributing 12% to 20% to the state's GDP. Kerala attracts both international and domestic tourists. To cater to their needs, we have prepared tailor-made tourism circuits, and provided the highest number of five-star hotels in India. (50 plus).

Kerala is committed to responsible tourism. Our tourism initiatives ensure sustainable development that benefits local communities while preserving the environment. This model will continue to guide future initiatives especially in ecologically sensitive destinations like Munnar, balancing economic growth with environmental conservation.

Now you have one of the best Mother Vessel calling ports in Vizhinjam, which has the potential to become India's primary international port. What are your plans to develop an infrastructure ecosystem for this port and feeder ports in the state?

Vizhinjam is India's first deep-water container transhipment port, strategically located just 10 nautical miles from the East-West international shipping route ensuring direct access to global trade lines. With a nautical depth of 18-24 metres, the port requires minimal dredging and can handle Ultra Large Container Ships (ULCC) exceeding 24,000 TEUs. The commencement of MSC's (Mediterranean Shipping Company) operations mark a major milestone, positioning Vizhinjam as a key global maritime hub. It will enable industries such as logistics, warehousing and manufacturing.

To maximise the port's potential, we have announced the Vizhinjam-Kollam-Punalur Growth Triangle (VKPGT). It is a visionary initiative aimed at boosting trade, manufacturing and logistics with a massive investment of ₹1,000 crore. Also, the Government of Kerala is committed to realise the Trivandrum Outer Ring Road (ORR). It is a proposed 77-kilometre-long six-lane access-controlled road, connecting Navaikulam, Thekkada, Vizhinjam and Mangalapuram. The ORR will be a boon for the activities of Vizhinjam port in general and freight transport in particular.

The Government is also implementing land pooling initiatives and developing industrial townships, creating an integrated industrial and trade ecosystem. Kerala's Export and Logistics Park policy and Industrial Policy focus on strengthening trade infrastructure, boosting exports, and attracting investments, These initiatives will drive economic growth, establish Kerala as a global logistics hub and create new opportunities for businesses and industries.

Kerala was one of the first states to announce Green Hydrogen Valley Hubs in Kochi and Thiruvananthapuram. Similarly, Kerala is one of the leading states to go for rooftop solar. How far have you progressed, especially in green hydrogen?

I am happy to mention that Kerala's Green Hydrogen Valley has been included in the recently concluded World Economic Forum's Transitioning Industrial Cluster Initiative, which aims to cut emissions, create jobs and achieve economic growth. Ours is one among 33 industrial clusters from 16 countries across the world.

It is the first time that an initiative from Kerala has been featured so prominently on the international economic stage. So naturally, we are now receiving strong interest and enquiries for green hydrogen projects. The ongoing Invest Kerala Global Summit (IKGS) is expected to further drive investments and partnerships in the green hydrogen sector.

Kerala's current economy is heavily dependent on receipts from the Centre and quite often we hear the State has run out of funds to manage development. Your comments?

This is a misconception. Let me illustrate a few figures to bust this myth. In 2020-21, the state's own revenue was ₹54,998.15 crore. Our share of central taxes and grants was ₹42,628 crore in that year. That is in our total revenue of ₹97,616.83 crore, the state's share was 56% and the central share was only 44%.

Now take a look at the figures for 2023-24. The state's own revenue was ₹90,674.97 crore and our share in Central Taxes and Grants was merely ₹33,811 crore. That is, in our total revenue of ₹1,24,486.15 crore, the state's share was 73%, while the Central share was a paltry 23%.

The real issue is that Kerala is not getting what is rightfully owed to us and the bizarre logic used by the Union is that we are better off than other states. We are in fact being penalised for our exemplary achievements in population control, health and education, as compared to the rest of the country.

According to RBI reports, the states are having to cover a substantial 65% of the country's total expenses, with the Union contribution being only 35%. But when it comes to revenue sharing, it goes in the reverse direction. At the same time, let me just state without naming any, that there are states that are dependent on receipts from the Union.

Kerala Investor Summit

Kerala is future-ready to attract big investments: CM Pinarayi Vijayan