Non-resident Indians are really the wealth of our nation and the

strength of Kerala. The number of persons going abroad for employment

and in search of better opportunities has shown a remarkable increase
since independence. The effect of this migration is felt in every aspect of
the economy and the society ir Kerala.
The prosperity and ecor~ornicgrowth of the state have a correlation
with the remittances from non-resident Keralites. During the last quarter of
the 2othcentury, the cash remittances received by Kerala households from
abroad showed a tremendous growth. The contributions and supports from
the NRls to our national and state economy are very high. Remittances
from the NRls of Kerala have emerged as the most dynamic single factor
that contributes to the economy of the state.
In the context of continued failure on the agricultural front,
stagnation in industrial sector and the shortfall in employment opportunities
resulting is gruesome unemployment among the educated youth, migration
from Kerala has contributed more than any other factor to poverty
alleviation in the state.

Need and Importance of the Study

Kerala, the southernmo:;t state of the Indian Union, was formulated
on the basis of Malayalarn language on November 1, 1956. Since then its

progress in various fields has been remarkable. With 38,863 sq.kms of

land area, it now accomnlodates nearly 32 million people. The
development

experience

witnessed by Kerala for the last few decades is

often called the Kerala model of development. The model has attracted
the attention of social scientists, planners and administrators across the
world, including the international development agencies. The attraction of
this model is its uniqueness, arid it is in sharp contrast to the conventional
development models followed by the developed countries of the world.
The conventional model of development devised by Collin Clark and
Simon Kuznets implies that a country, in its course of development
process, has to pass through three stages. In the initial stage, the entire
economic activity of the cour~tryrevolves around agriculture and other
primary activities and a large rnajority of people find their employment in
the primaly sector. As the economy grows, there may be a shift of both the
economic activity and employnient in favour of the secondary or industrial
sector. In the third stage the economic activity and employment may
further shift in favour of the service or tertiary sector.
The miracle of Kerala riodel of development is that development
has occurred even before growth in productive sectors. Kerala economy
and society fulfil the parameters of the physical quality of life index (PQLI),
high literacy, high life expectancy, low infant mortality and minimum ruralurban differences. In physical quality of life index, Kerala stands at par with
the developed countries of the world. It is worthwhile to note here that

Kerala economy has fulfillecl the parameters of development without

achieving a rapid growth in prcductive sectors
The achievement of high physical quality of life in the midst of
stagnation or near stagnation in agriculture and industrial sector is due to
the huge remittances from abroad by our NRls and its unproductive
utilisation.
The economic status 2f Kerala remains low, as there is either
stagnation or even negative development in the primary and secondary
sectors. The growth rate in SClP at current prices in 2002-2003 is 14.7 per
cent while it was 14.6 per cent in 2001-2002. So also the growth rate in per
capita income at current price:; is 13.7 per cent in 2002-2003' while it was
13.6 per cent in 2001-02.
In the sectoral distribution of the state income, the tertiary sector
continues to dominate. The contribution of the tertiary sector increased
from 57.1 per cent in 2001-02 to 58.2 per cent in 2002-03. The contribution
of primary sector declined from 19.3 per cent in 2001-02 to 17.6 per cent
in 2002-03 while the share of secondary sector had a marginal increase
from 11.7 per cent in 2001-02 to 12.5 per cent in 2002-03.
In the agricultural sector, there is an unexpected decline in income
from almost all food and cash crops of Kerala. Low prices of cash crops
like rubber, coconut, arecanut, pepper, cardamom, tea and coffee

Economic Review 2003, State Planning Board, Thiruvananthapuram, p.23

shattered the hopes of the m,ajority. Agricultural labourers are also in a

pathetic situation. Recent developments in global trade have adversely
affected a wide spectrum of economic activities and Kerala is one of the
worst hit states suffering the impacts of globalisation.
In the industrial sector, the performance of Kerala is not satisfactory.
Traditional industries such as coir, handloom, and cashew also have
become the victims of liberalisation. In 2002-03 the contribution of
industrial sector is only 24.2 per cent, while the contribution of the tertiary
sector during the period was 58.2 per cent.
The total number of job seekers in the registers of the employment
exchanges is increasing year after year. The total number of job seekers
registered in employment exchanges in the state was 38.56 lakh in 2003.'
In spite of the poor contributions from agricultural and industrial
sectors to state domestic product, the tertiary sector is very active in
Kerala owing to huge remittances from abroad and its unproductive
utilisation. Real development requires the development of industrial and
agricultural sectors. This can t)e made possible in Kerala by channelising
the foreign remittances to prod~dctivepurposes. Only very few studies have
been conducted among the NRls of Kerala about their investment
peculiarities, effectiveness of major saving schemes and about major
investment problems encountered by the NRls of Kerala.

Ibid., p. 382.

Though a few studies were conducted among the NRls of Kerala,

they were mainly for estimaling the number of persons migrated to
different countries, the activity status of the migrants and returnees,
determinants of migration, consequences of migration on Kerala society,
etc. Majority of the limited number of research studies carried out among
the NRls of Kerala are of general nature. Several important aspects of
investment decision-making aniong the NRls of Kerala such as the impact
of education on investment dec:isions, place of employment on investment,
place of residence on investment, the effectiveness of major saving
schemes in channelising NRI funds, the major investment problems
encountered by the NRls etc. have not been examined so far. Under these
circumstances, a study on the various aspects of investment decisionmaking among the NRls of Ket-ala is relevant and significant. The present
study is comprehensive and e:<planatory in nature. It is expected that the
study will provide insights into investment decisions of the NRls of Kerala.
It is hoped that the findings of tile present study and the suggestions made
thereon will have practical utilitv in channelising NRI remittances of Kerala
to productive sectors and will, thereby, boost up the economic growth of
the state and check the high rate of unemployment.

Scope and Coverage of the Study

Every aspect of Kerala economy is influenced by the actions and reactions
of the NRls of Kerala. Their educational levels, place of employment, place
of residence etc. have an influence on investment decisions. The universe of

the present study is the NRls of Kerala. This study is exploratory in nature
and is the first of its kind n Kerala. Therefore the study has been
conducted mainly to explore the influence of education, the place of
employment and the place of residence on investment decisions of the
NRls of Kerala and to identify the major investment problems encountered
by the NRls of Kerala.

Statement of the Problem

Kerala is one of the major contributors of foreign exchange
resources in India. The Government and our Financial Institutions are very
keen on designing suitable investment schemes for attracting NRI
investments. The number of the NRls of Kerala has been increasing at an
alarming rate. This shows that the structural framework is favourable in
attracting NRI investments. But it is doubtful whether sufficient contribution
has come from NRI investment to the economy of Kerala as expected by
our planners. The researcher doubts whether NRI investments in Kerala
are diverted to productive c~iannels.Here comes the relevance of the
study, "Investment Decision-niaking among NRls of Kerala." The study has
its thrust on the following pertinent issues related to NRI investments:
a.

Do the NRls have a significant role in the economy of Kerala?

b.

What are the important variables influencing NRI investment in

Kerala?

c.

What is the level of variations of investment preferences of the

NRls of Kerala residing in Gulf and other countries?

d.

What is the level of effectiveness of major saving schemes among

the NRls of Kerala?

e.

What is the level of variation of investment preferences of NRlS of

Kerala having different educational backgrounds?

f.

What is the level of variation of investment preferences of the NRls

of Kerala belonging to different regions?

g.

What are the major factors attracting NRI investments?

h.

What are their opinions about and suggestions for enhancing NRI
investment in Kerala?
These are some of the questions that are to be answered

Objectives of the Study

.
.
.
.

The main objectives of the study are:

To study the influence o4 NRI investment on Kerala economy.
To analyse the effect of the country of employment on investment
decisions of the NRls of Kerala.
To judge the influence of the place of residence on investment
decisions of the NRls.
To study the influence of the educational background of the NRls on
their investment decisions.
To study the preferences of NRls towards major saving schemes.
To identify the major investment problems encountered by the NRls
of Kerala and to make suggestions and recommendations based on
the findings of the study.

Hypotheses of the Study

The hypotheses formulated for the present study are the following:

Investment preferences are independent of educational levels of

NRls of Kerala.

Investment preferences are independent of NRls of Kerala residing

in Gulf and other countries.

Investment preferences; are independent of NRls belonging to

different regions of Kerala.

All major saving schemc?sare of equal effectiveness

Methodology
The study is explorato~in nature and is meant for discovering new
insights into the investment decision-making among the NRls of Kerala.
Several issues related to the rnain aspects of the study were discussed in
detail with experts, researchers and other eminent personalities in the field
of finance, banking and investment to have an idea about the subject
before the collection of data. The information and ideas obtained from
the discussions were well utilised for the formulation of a framework for
this study.

Sources of Data
Both primary and secor~darysources of data were collected for this
study.

Primary data
The primary data have been collected through interview method
from 900 respondents with the help of a 'structured interview schedule'.
Interviews started on 1 April 2001 and continued till 30 December 2003.

Secondary data

At the exploratory stage of this study, a detailed survey of literature

was undertaken in order to dentify the various aspects of ~nvestment
decisions of NRls. The secondary data were very helpful in evolving an
appropriate methodology for the study and in formulating a conceptual
framework for the study. For these purposes, various secondary sources
like books and periodicals, rlssearch articles, seminar reports, working
papers, study reports of government agencies, news papers, study reports
of expert committees, plan documents, web sites etc. were surveyed. A
careful survey of literature helped the researcher to collect and synthesise
prior studies and to discover the important variables relevant to the
problem.

Pilot study

A pilot study was conducted with the help of a draft interview

schedule for evaluating investment decision-making among the NRls
of Kerala. The respondents were randomly selected for the pilot study.
Based on this pilot study, the questions found irrelevant in the draft
interview schedule were deleted and questions found vital were added.

10

After conducting a thorough analysis of the data collected from the pilot
study, the forms of some of the questions were modified to avoid probable
ambiguities and to obtain more reliable, unbiased and accurate answers.
Slight rearrangements in the logical order of the questions were also done.
The entire text of the interview schedule is given in Appendix I.

Sampling Design
The NRls of Kerala have been selected as the universe of this
study. The respondents were .selected on the basis of multilevel stratified
random sampling. In the first level, the fourteen districts of Kerala were
divided into three regions: southern region, central region and northern
region. Southern region consists of Thiruvananthapuram, Kollam and
Alappuzha districts. Central region consists of Pathanamthitta, Kottayam,
Ernakulam, ldukki and Thrissoor districts. Northern region includes
Malappuram, Kozhikode, Wyanad, Palakkad, Kannur and Kasargodu
districts. In the second level, one district each is selected from each
region. The districts selected at random were Thiruvananthapuram from
the south, Pathanamthitta froni the central region and Malappuram from
the north. In the third level, from the districts selected one taluk each is
selected on random basis. The taluks selected were Chirayankeezhu from
Thiruvananthapuram

district,

Mallappally from

Pathanamthitta

and

Thiroorangadi from Malappura~ndistrict. In the fourth level 25 per cent of

the villages of the respective taluks were selected for the required sample.

II

Out of the 28 villages of Chirayankeezhu taluk, 7 villages were selected,

from 9 villages of Mallappally taluk. 3 were selected and out of 18 villages
of Thiroorangadi taluk, 5 were selected on random basis. From these
selected villages coming under the three regions 300 respondents each
were selected and the necessary information was collected at random
through an interview schedule.

Collection of Data
The data were collected by conducting interv~ewswith the samples
selected for the study. Multiple choice questions, open-ended questions,
ranking by the respondents anti a five point ranking scale developed by the
researcher specially for this study in conformity with statistical methods
and principles were used wherever necessary.
Before the commencenient of the interview, the sample schedule
was given to each respondent and a brief explanation about the study was
given. The interviewer himself asked the questions to the respondents with
sufficient explanations in order to elicit correct information from them. Care
was also taken to give sufficierit time to the respondents to think over and
answer the questions. The respondents were encouraged to talk freely and
frankly about their opinions a r ~ dsuggestions about investment decisions
and the various investment problems encountered. Open discussions were
also conducted with the respoqdents. The respondents were interviewed
taking into consideration their time and availability.

12

The researcher collected all the responses personally from the

respondents. This ensured the secrecy of the responses and the privacy of
the identity of the respondents

Analysis of the Data

The data collected from the respondents have been. classified,
tabulated and analysed by applying appropriate mathematical and
statistical techniques. Since ihe sample size is large (N=900), tables,
diagrams and statistical results have been derived with the help of the
computer software called SPSS (Statistical Package for Social Sciences).
The statistical tools used for analysis are percentages, mean,
standard deviation. Chi-square, analysis of variances (ANOVA). Z-test,
and correlation coefficients.
The following types of arialysis have been made
1.

A profile of the selectee respondents has been drawn by adopting

statistical tools like tables and percentages.

2.

Influence of education on information on investment avenues has

been analysed with the help of rank correlation. For comparative
purposes rank correlation matrix is also constructed.

3.

Influence of education on availing modern facilities such as Internet

for getting information on investment has been tested with
Chi-square.

13

4.

lnfluence of education on respondents who have constructed

buildings with foreign remittances has been analysed with
Chi-square.

5.

lnfluence of place of occupation on availing modern facilities for

getting information or

investment has been analysed with

Chi-square.
6.

lnfluence of migration on standard of living of the respondents by

education, place of employment, and place of residence has been
analysed with the help of standard deviation, mean, ANOVA, Z-test
etc. Tables were also used wherever necessary.

7.

lnfluence of place of residence, and place of occupation on

investment preference h,sve been analysed with rank correlation.

8.

For analysing the major .factors influencing NRI investment ANOVA,

Z-test, etc. were applied. Tables, percentages, standard deviation
etc. were also used whei-ever necessary.

9.

For determining the etfectiveness of major saving schemes Z

statistics was used.

Limitations of the Study

Since the study is an individual effort, the investigation is likely to
show some limitations. They are the following:

14

1.

The primary data req~~ired

for the study are collected from 900
respondents only and (are subject to such normal errors inherent to
social surveys.

2.

The study takes up only the NRls of Kerala. NRls of Kerala are
persons of Kerala origir~and working abroad.

3.

The findings of the study are based on expressed opinions of the

respondents, which may have their own limitations. The possibility of
hiding certain facts from the part of the respondents could not be
ruled out, although all possible efforts have been made to elicit
correct information.
The primary aim is to focus attention on the broader aspects of

investment decision-making arnong the NRls of Kerala and it is hoped that

this study will provide a base for further researches.

Chapterisation
1. NRls and Kerala Economy
2 . Investment Decisions of NRls: An Overview
3. Analysis of Data

4. Findings
5. Suggestions and Recommendations