Gujarat model of development: More hype than substance

A report of the Comptroller and Auditor General of India on various socio-economic indicators of Gujarat that was tabled in the state assembly on March 31 has highlighted what was common knowledge to many -- which is that the much-talked-about Gujarat Model of Development under the stewardship of Narendra Modi is more hype than substance.

With facts and figures, the CAG report has highlighted how Gujarat was far from a role model for states across India, and that the progress made in this province in western India in improving agriculture, education, healthcare and empowerment of women and children, was not exactly creditable.

What is particularly amazing is that despite the tardy progress made by the state in improving many important socio-economic indicators, the spin doctors of the Bharatiya Janata Party and Narendra Modi, who was chief minister of Gujarat for nearly 12 years from October 2001 and is now prime minister of India, were able to paint a completely different picture.

The power of propaganda and the selective use of facts aside, what is equally amazing is how the political opponents of the BJP and Modi were unable to convince many Indians that the so-called Gujarat Model of Development was not a ‘prescription for the country's economic upliftment’ -- a phrase used by the UK-based Economist (external link) weekly -- nor was it factually correct that the state had "outperformed" most other states.

The section in the CAG report on women and children points out that the 2011 census indicated that while the all-India sex ratio improved from 933 females to 1,000 males to 943:1,000 over a decade, during these 10 years between 2001 and 2011 the ratio in Gujarat deteriorated from 922 to 919. Why?

The state performed poorly in implementing the Preconception and Prenatal Diagnostic Techniques Act which was enacted in 1994 to stop female foeticide and to arrest the declining sex ratio. In Gujarat, out of 181 individuals who were accused of violating the law that bans prenatal sex determination, only six were convicted.

The CAG report points out that the state government had not been particularly successful in checking child marriages, that the Right to Education Act was ineffectively implemented, that the mid-day meals scheme was poorly executed and that Gujarat had a less-than-impressive pupil-teacher ratio. All of which does explain why the state's gender ratio declined (external link).

It was not just the Gujarat government that tom-tommed its achievements in spurring agricultural growth in the state. Here's what Ashok Gulati, chair professor for agriculture, Indian Council for Research on International Economic Relations, and former head of the Commission on Agricultural Costs and Prices, wrote in the Times of India (external link) in April 2014:

‘Going by the agri-GDP (gross domestic product) growth registered at state-level during the 2000s, Gujarat tops the list with 9.8 per cent per annum growth, up from a meagre two per cent during the 1990s. The former is almost three times the growth rate registered at all-India level. So, if one wants to discuss the Gujarat model of development, it (is) ... an 'agriculture turnaround model'. Compare this with the Kerala model, where agri-GDP growth has been zero for the 2000s (down from 1.3 per cent during 1990s). Or with UP (Uttar Pradesh) or Tamil Nadu or West Bengal models, all of which registered less than three per cent growth in agriculture during 2000s’.

A chapter in a book, Growth or Development: Which way is Gujarat going?, published by Oxford University Press in 2014 and edited by Indira Hirway, Amita Shah and Ghanshyam Shah, provides a different picture about agriculture in the state.

In the chapter, Amita Shah and Itishree Patnaik write that the growth of agriculture in Gujarat since 2000 has been mainly led by shifts in cropping patterns, improved productivity and price effects. While these are all positive developments, the authors observe that these benefits have not really reached the poorer regions in the state, since the benefits of growth have been confined to those who are able to access irrigation through canals and groundwater extraction.

Primary surveys suggest that marginal cultivators and farm labourers have also not benefited from this growth through higher incomes, though it has certainly benefited the state economy as a whole.

Other essays and reports in the same book suggest that it will be difficult for Gujarat to attain the Millennium Development Goals related to infant mortality and maternal mortality.

Leela Visaria found very slow progress in the immunisation of children, while under-nutrition and malnutrition, particularly among women and children, had hardly improved over a decade till 2011. As far as nutrition indicators were concerned, Gujarat ranked 13 among 17 major Indian states, the lowest among all "high-income" states and below even Odisha and Uttar Pradesh. Nearly 45 per cent of children below five are undernourished in the state, she pointed out.

Sudarshan Iyengar pointed out in the book that while the primary school infrastructure (condition of school buildings and electricity connections) in Gujarat was above the national average, the state lagged behind others in terms of availability of drinking water, access to toilets and library facilities.

The poor student-teacher was reflected in the low performance of students in reading, writing and mathematics. The dropout rate among girl students was higher than the all-India average. Privatisation of education had increased but this had not improved the quality of education.

Narendra Modi with industrialists Anil Ambani and Ratan Tata.

Modi and his supporters have often pointed out that in the period between 2001 and 2012 when he was chief minister of Gujarat, gross state domestic product grew at nearly 10 per cent which was significantly faster than the rest of India.

Much has been made out of the state’s decisiveness on the economic front after the Tata group decided to leave Singur in West Bengal and set up its Nano car manufacturing plant at Sanand in 2008 after the then group chairman Ratan Tata received a short message on his mobile phone from Chief Minister Modi offering him a factory-ready plot at attractive rates.

Chapters in the OUP book cited highlight the lack of improvement in workers’ conditions in the state. In their article, Jeemol Unni and Ravikiran Naik show that during a period of rapid GDP growth, employment remained almost stagnant in Gujarat while the quality of jobs deteriorated because of "informalisation" of labour.

Wage rates increased only marginally, much less than the increase in labour productivity, they add. When compared with neighbouring Maharashtra, Gujarat is considered "peculiar" because the status of labour in the state deteriorated in spite of rapid income growth.

Data from the National Sample Survey Organisation indicate that while Gujarat’s per capita income is around 20 per cent higher than the per capita income for India as a whole, rural wages are about 20 per cent lower than the all-India average while urban wages are 15
per cent lower. Clearly, the bargaining position of workers in Gujarat, in both cities and villages, is very weak.

The unequal pattern of growth is reflected in the imbalanced pattern of urbanisation. In the book, Darshini Mahadevia noted that large industrial investments and incomes have not translated into concomitant urbanisation because industrialisation has been capital-intensive and has not generated much formal employment.

Urban beautification projects have been executed by demolishing slums and displacing the poor. One example is the Sabarmati waterfront development project in Ahmedabad. Rehabilitation schemes for the project-affected people were located outside the city, pushing the poor to the periphery away from their workplaces.

Urban Gujarat, like much of urban India, now presents a paradoxical picture of high growth and low human welfare, particularly among the dominant population of informal workers, Mahadevia added.

This writer has been visiting the capital of Gujarat frequently over the last decade to teach at the Indian Institute of Management, one of the most prestigious business schools in the country. Over the years, the temporary shelters for the poor that existed just outside the gated colony of the world-class IIMA campus have disappeared to make way for flyovers and rapid bus transport corridors.

Gujarat has had a long tradition of establishing textile factories and its people have been commercially inclined, thanks to its long coastline which has facilitated sea trade historically. Many of the state's capitalists have been considered enlightened and have supported the establishment of hospitals and educational institutions.

The contributors to the OUP book, however, state that the setting up of job-creating small-scale industrial units have been sacrificed in favour of larger industrial units and mega-projects, without adequate attention to the employment generation effects of such projects.

Jamnagar is where the country's biggest (and one of the world's biggest) petroleum refinery has been set up by Reliance Industries Limited headed by Mukesh Ambani, India's richest man.

The Gujarat government granted large tracts of land to the Adani group led by Gautam Adani at throwaway prices to set up India's biggest private port at Mundra, allegedly in violation of environmental norms.

Media reports that have not been challenged point out that the Adani group won 30-year leases for getting 7,350 hectares around Mundra for as little as one cent a square metre and then re-let the land for $11 per sq.m.

Mundra is where the world's largest coal unloading facility has been built in a special economic zone -- an area where project promoters don't have to pay taxes. In January, the Union government tweaked the land-use norms in SEZs, the prime beneficiary of which is the Adani group.

Building in the zone, which contains a power plant, private railway lines and a private airport, had to be stalled due to court orders. Formal environmental clearances were eventually granted by the Supreme Court after Modi became prime minister.

An earlier report of the CAG, tabled in the Gujarat assembly in July 2014, highlighted how the state government granted "undue benefits" to the extent of Rs 1,500 crore to companies in the Reliance, Essar and Adani groups.

The CAG noted that the Gujarat Maritime Board applied incorrect wharfage rates in an agreement with Reliance Petroleum Limited which resulted in short recovery of Rs 649.29 crore to the government.

Tata Nano rolls out of Gujarat

The Gujarat Urja Vikas Nigam Limited did not fix delivery points after the finalization of a power purchase agreement resulting in an "undue benefit of Rs 587.50 crore to Essar Power Gujarat Limited."

Further, the non-monitoring "of the construction quay in phase 1 of Adani group-owned Mundra port led to short recovery of Rs 118.12 crore".

The CAG censured (external link) the Gujarat government for "...contracting excess capacity under (its) solar (energy) policy by the GUVNL (which) led to (an) excess (financial) burden of Rs 473.20 crore on the consumers of the state".

Many analysts have pointed out that the strategies of incentives and subsidies given to large industrial projects in Gujarat have promoted crony capitalism, with a few favoured industrialists becoming major national players through state patronage.

The book edited by Hirway, Shah and Shah, argues that multiple favours given to large industrial units have distorted factor markets and promoted the misallocation of resources by private investors thereby reducing the public funds available for expenditure that would benefit other segments, particularly small and medium enterprises that also do not get sufficient institutional credit.

The state government's policies have also sharply reduced the public money available for social spending so that Gujarat has much lower per capita public spending on social sectors even when compared with other states with lower per capita incomes and slower growth.

It is also worth noting that in the process of implementing this strategy of subsidising large private investment, the government of Gujarat has built up a large burden of debt, which is unsustainable and will be paid for eventually by its citizens.

In effect, this is a model of crony capitalism that promotes and incentivises big business through all sorts of explicit and implicit subsidies, keeping wages low and suppressing collective action by workers in the name of primacy of economic growth, the book has argued.

To be fair to the Modi administration in Gujarat, certain schemes have done remarkably well. One such scheme that was introduced soon after Modi became the chief minister is the Jyotigram Yojana that aims at providing 24x7 electricity in rural areas. The scheme has been lauded (external link) as viable model that comes without doles and subsidies.

A number of political observers have remarked how in the run-up to the 2014 general elections Modi was able to successfully "market" the Gujarat model to a large number of ordinary Indians, many of whom had never visited the state. It was almost as if Gujarat was a different country, a place where power was available round the clock.

This is what the Economist observed: ‘In a hyperactive pre-election year, the state was widely projected across the media for its effective and decisive governance with a focus on basic infrastructure and public goods and the use of information technology in making bureaucrats accountable. The state was hailed for its economic freedom with a flair for marketing the state to business investors.’

A lot has been commented on the biennial Vibrant Gujarat Investors' Summit -- the seventh of which was organised in Gandhinagar in January -- which was launched in 2003 after the state witnessed intense Hindu-Muslim riots, and how many of the memoranda of understanding signed at the gala meets did not eventually translate into investments on the ground.

After the riots, Modi was criticised by particular businesspersons affiliated to the Confederation of Indian Industry. At that time, Gautam Adani took the lead in assembling other entrepreneurs from Gujarat -- he even threatened to form a parallel body of industrialists -- to rally around Modi who played down the communal conflagration while promoting his state as an attractive destination for international investors.

Modi loves to think big, be it about bullet trains or the proposed statue of Sardar Vallabhbhai Patel. But the track record of his government in providing basic social amenities leaves a lot to be desired.

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