India, Aug. 13 -- Kerala, with a staggering 94 per cent literacy rate - the highest in India - should be an economic powerhouse. Instead, it faces a sobering reality: nearly 30 per cent of its youth are unemployed, the highest rate in the country. How can the most educated state in India struggle so deeply to provide jobs for its own graduates?

This is Kerala's paradox. For decades, it has been a darling of development economists, hailed as an outlier in India's uneven progress story. The state built public health systems that rival Western Europe, achieved near-universal literacy, slashed infant mortality, and empowered women in ways rare in much of India. And yet, behind these gleaming human development numbers, the economic engine is ...