Kunal Delwadia (PGP13029) IIM Kashipur, Uttarakhand 8th December 2013

Indian Economy MODIfied: is the Gujarat model sustainable at national level?

Ending weeks of the back-room maneuverings at the bidding of the RSS, the formal announcement came when the BJP Parliamentary board, that Mr Advani skipped, rubber sealed the nomination when RSS made it loud and clear. BJP Party President Mr Rajnath Singh proclaimed most arguable and hyped politician, current Chief Minister of Gujarat Mr Modi (NaMo) as a next PM candidate for Lok Sabha election 2014 on Friday September 13th 2013. This moment may be sparked the continued dialogue of replicating Gujarat development model at national level. Replicating the expertise of Gujarat across a diverse population of one hundred twenty billion would be a challenging prospect for NaMo, who lead the booming Gujarat state since 2001, as a result of his marketing efforts, he is being projected as a potential candidate to claim to lead India and form the government in 2014. NaMo was appreciated and got compliments even from non supporting political experts for reducing bureaucratic procedures, creating efficient response system and certainty with in government, several elements of Gujarats development story were in place since 1980s, well before NaMo took chief ministerial ship in 2001.Historically, Gujarat is one amongst the foremost economically developed state of Independent India since its birth. Especially, the industrial development and per capita income have remained notable as compared to the nations growth. Lets come back to the age when it had been separated from Maharashtra on May 1st 1960.
50 40 Growth Rate % 30 20 10 0 -10 -20 -30 Year

Source: Who really developed Gujarat, when and how much trends in economic growth
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Gujarat state treasury was pumped in with INR 738 Cr to run its operations. The Statistical information depicts that advancement rate of Gujarat in terms of State Domestic Product was negative for six years in 1960-1980. Through out 1973 and 1977 expansion rate was slumped with two-digit figure. Solely five years in these twenty years since origination of Gujarat shown a double-digit rate of growth. However, with in 3 decades, rate of growth was negative for 1981 and 2001. In fact, throughout this time frame the state never experienced a huge negative downturn as it did throughout till the first twenty years since its inception. It reflects that the economic process of the state was imperishable and it had attained potential to soak up the unpredictable impacts on its economy. Since 2001, it has never experienced negative downfall. Throughout 1980- 1990, state earned two-digit advancement progression in 1981, 1985, 1987 and 1989 where it toughened two-digit progression of development in 1991,1993,1994,1996, 1997 and 1999 in consequent 10 years of time frame. Statistical data numbers show the real image of state Gujarat that toughened the main growth trajectories throughout the regime of Madhavsinh Solanki, CM congress during the period 1981-1990 and during the Chimanbhai Patels regime in 1990-94 at 16.73 % However, Mr Modis regime has experienced average growth rate at 10.3 dripping in to single digit seven times since he took over the office. Out of these number SDP went right down to 6.8% in 2008-09 considering the very fact that world economy was on its down flip.
1961-71 Jivraj Mehta, Balwantrai Mehta, Hitendra Desai, 4.7 2005-11 Narendra Modi, 9.35 1972-80 Hitendra Desai, Ghanshyam Ozha, Chimanbhai Patel, Babubhai Jashbhai Patel, Madhavsinh Solanki, 3.89

2001-09 Narendra Modi, 10.3 1995-2001 Keshubhai Patel, Suresh Mehta, Shankarsinh Vaghela, Dilip Parikh, 8.82

1981-85 Madhavsinh Solanki, 16.29

1990-94 Chimanbhai Patel, Chhabildas Mehta, 16.73

1985-90 Madhavsinh Solanki, Amarsinh Choudhary, 13.63

Annual Growth in SDP, Gujarat

400000 300000 200000 100000 0

Rs. in Crore

1972-73

1984-85

1960-61

1962-63

1964-65

1966-67

1968-69

1970-71

1974-75

1976-77

1978-79

1980-81

1982-83

1986-87

1988-89

1990-91

1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

2004-05

2006-07

2008-09

Source: Who really developed Gujarat, when and how much trends in economic growth Sectorial contribution from different sectors in to the states economy measures the development of any state. These sectorial contributions contains of primary sectors like agriculture, fishery, forest products and animal husbandry products. Primary agriculture contribution to state domestic product fell drastically from 24% to 16% during the period 1961-80. Gujarat nearly experienced equivalent trends in service and industrial sectors throughout this era. However, when the CM Shankarsingh Waghelas regime (1994-1997) the state failed to see any very important structural changes in terms of economic reforms. The share of primary sector was merely decreased to 1pc with in the state economy. Considering the very fact that, the contribution of the primary sector in the Gujarats economy is almost similar since 1980s. In 2001, nearly 77.60 hundred thousand individuals were directly associated to agriculture and that they represent nearly forty-third of the entire workforce. In recent survey of NSSO, statistical information shows that the wages of causal worker in rural and urban India rose at the faster pace in 7 years at an annual growth rate of 16% and 14.8% respectively in these years. Kerala topnotch the list in rural and urban areas 14.8% and 13.6% increase in casual wages, followed by Mizoram, Sikkim, Arunachal Pradesh and Jammu & Kashmir for rural wages and Delhi, Mizoram, J&K and Tamil Nadu for urban wages. However, Gujarat stands in lowest causal wages list in rural as well as in urban area lower than BJP dominated state MP and Chhattisgarh. The average causal wages in most of the states (Rural Area) appear to be beyond the common wages paid beneath MANREGA. However, Gujarat has average urban wages below the national urban average. This implies that factors aside from MANREGA driving the rural and urban wage growth. As per the analysis by commission for agriculture concluded that rising construction activity, higher subsidy for farm product that trickled right down to farm laborers and MANREGA are the three main key components of rise in causal wages of the rural population. Mr Narendra Modi stated in India Today enclave that agriculture growth of Gujarat has been drastically increased in his regime. However, the facts and figures replicate utterly totally different image even for Industrial and service sectors in Gujarat.

2010-11 3

Services
1980-81 1975-76 1970-71 1965-66 1960-61 0 5 10 15 20 25 30 35 40

Agriculture
1980-81 1975-76 1970-71 1965-66 1960-61 0% 20% 40% 60% 1980-81 1975-76 1970-71 1965-66 1960-61 0

Industries

10

20

30

Sectorial contribution in SDP during 1961-1980

Services
2007-08 2000-06 1999-2000 1997-98

36

37

38

39

40

41

42

43

Agriculture 2007-08 2007-08

Manufacturing -

2000-06

2000-06

1999-2000

1999-2000

13.5

14

14.5

15

15.5

16

16.5

28

29

30

31

32

Primary (Agriculture etc.)

2007-08 2000-06 1999-2000 1997-98 17.5 18 18.5 19 19.5 20

Secondary (Industries)
2007-08 2000-06 1999-2000 1997-98

34

36

38

40

42

44

Sectorial contribution during 1997- 2009 The above facts and figure clearly indicates the financial condition of the Gujarat state is not a new phenomenon that has been vastly marketed by Mr Narendra Modi. GoG has been the contributor to Indian economy through the business skills since last three decades. Industrial and service contribution has been nearly similar in the last three decades. Moreover, the period of 1980 -1998 was the building block of the sustainable growth of Gujarat. With the above historical perspective one can assume that leader came with a possible potential or while not with potential, growth of the Gujarat has been on extremely positive in last 30 years of time frame. It is often marked that the era of eighties and nineties were the foremost significant time for the commercialization of industrial revolution of state. It certainly implies that industrial revolution was not succeeded only after 2001 with NaMo as CM.

During the Regime of Mr. Modi (2001- till present) When NaMo took over chief ministers office in 2001, Gujarat economy was flourishing at constant pulse. However, expansion was not spectacular. There also were many issues lurking. Narendra Modi remains the foremost polarizing politics figure of the last decade. No individual in Indian Politics has earned the popularity and admire as him. Modi is honored for his development creed, for promoting Gujarat as investment and ease of doing business hub for the country. However, say that each one thats buncombe, linking his pro- business attributes to indicate guardianship and perseverance use of promoting to erase dark red spot of his early career as Chief Minister in 2002 Gujarat riots. By merging the pieces along sober reflection hide somewhere vainly. The real Modi is invisible to either man himself or to the Public. The numbers tells totally different story for the Gujarats growth. Gujarat has grown steadily, however not miraculously. Gujarats growth is not spectacular compared with different states in India. Numbers tell that Gujarat development agenda is more hype, and less substance. A report on vibrant Gujarat, Modis biennial showpiece summit to draw in investors reflects that in 2003 GoG has signed 76 MOUs worth INR 66,068 cr out of which 42 projects come enforced on ground (55.26%) worth Rs. 37,746 (57.23%). In subsequent years, 2005, 2007. 2009 and 2011 the MOU numbers have increased from 76 to 8,380 but the actual investment gone to almost 1.43% of promised investment of INR 20,83,047 Crore. NaMo has extended the headline figures time to time by highlighting the proposed figures in media to woe his voters. However, critics do argue that Gujarats development was gift to its people by numerous potential CMs. It would wrong if the credit is identify with modis rule alone. The cultural factors and placement of Gujarat has traditionally enjoyed the location advantage as a result to 1600 km coastline and good soil for money crops. Gujarat is noted for his inclination towards ease of doing business skill of each Guajarati. Capitalism, merchantry and business are in veins of each Gujarati. But these days, this facet is mooted when Gujarat is mentioned in speeches. While other states were taking small mark in industrialization, Gujarat was remarkably on the run of taking the giant revolution in industrialization. Surat and Ahmedabad were the first cities of Gujarat to commission a Port and a textile mill respectively after Mumbai in the pre-independence period. They are conjointly better inclined for their support for industrialization evolution. Gujarat has tradition of upper producing manufacturing growth than national manufacturing growth. However, we cant neglect the facts that Mr Modi doesnt highlight in public forum Gujarat have loss making PSUs, recent CAG report calculated GSPC loss at 7000 Cr and 4216.53 Cr losses for state PSUs in the three years to March 31, 2011. Gujarat has its share of problem like other states; the only difference is that they are hardly highlighted in public forums.

Real Positives Robust Power Sector As Gujarat is a power surplus state the power sector is beyond a question successful story of Modi; when he took over the office in 2012 the Gujarat state had generation capability of 8500 MW, which rose to 15,306 throughout Modis regime until 2012. The Gujarat secured the 6,700 MW power through competitive bidding at less than INR 2.85 per unit. The GoG has shown its concern about the environment and implemented alternative energy generation, wind power generation stations from production of 148 MW in 2001 to 2884 in 2012. The new solar power commissioned at 634 MW capacities. The network of overhead transmission line increased to 15,000 km in last ten years. Transmission and distribution losses are reduced to 35% to less than 20%. State power utilities posted 700 Cr of profit in 2012 from net loss of 2543 Cr in 2001. Drop Out rate in Primary Education When Modi took over, the dropout rate was still as high as 22.30% for both boys and girls from standard I to IV. When Modi took over the office in 2001, he started couple of schemes to cut back the drop out rate in female and male candidate. He has started education fare scheme with mandatory participation from district magistrate, government officials, teachers and school to promote the primary education among the feminine candidates. In 2002-03, it results were fruitful and dropout share settle down to 19.12 pc and drastically fall to 2.08pc in 2010-11. However the recent survey by National University of Education and Planning reported that the quality education of higher secondary education in Gujarat has been dropped from 8 th rank to 14th rank overall. India Since Independence and Comparison with Gujarat Growth Model The Gujarat government is very different in its operation, it consists of 6 crore population while India has diversified population of 1.2 billion. The states economic development has very different trend and affects by the different factors at national level. Let us consider the scale and different sectorial to analyze that weather Gujarat model will be sustainable at national level or not. Health Since the time of independence in 1947, longevity in India rose to sixty-five years in 2012 from 32 years. But its infant mortality rate is 50 deaths each a thousand births, which among the worse in the world. According to Indias National Family Health Survey in 2006, nearly one half of the kids beneath the age of five are registered as chronically malnourished, and more than a third of citizens in India aged between fifteen and forty-nine are
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undernourished. A 2011 wall street journal investigated into Indias governing healthcare system represented public hospitals as inadequate, insufficient number of Nurses, medical staff and obscene. Lack of governments budgetary contribution to this sector is to blame for our ailing healthcare system. India invests only 1%, one of the lowest in the world of its GDP budgetary contribution in health sector. With greater investment in the healthcare it is essential to revitalize available facilities in the public hospitals. Recruit more doctors and nurses in the rural and remote corner of India. Rural India either dont have healthcare facilities or not adequate. The government should move to privatize this sector and ought to denationalized this sector and move to policy reforms to facilitate the large population with adequate healthcare. In link to above arguments, it is noted that India is turning into loaded by value of the GDP but the large section of population is living in poor health conditions. However, Mr Modis Gujarat Model also failed to provide such healthcare facilities at state level. In Gujarat, 44.6% of children below five who suffers from malnutrition, the numbers are worse than poorest African sub Saharan countries of Somalia and Ethiopia. . 70% of children in the state Gujarat suffer from anemia. 48 per thousand, infant mortality rate, which is tenth worst in India and almost near to the average mortality rate of India. In Body mass index it is 7th worst in India, one third of Gujarat's adult men have a body mass index of less than 18.5 and high maternal mortality rate about 33%. When NaMo was encountered with this he said that girls in Gujarat are very health and figure conscious and they are vegetarian, etc. The question remains, should the Gujarati children eat the factories, roads and electricity Modi has created? If he would not be able to provide such healthcare and standard of living to 6 Cr populations then the question remains that what model will he implement at national level to provide adequate healthcare facilities to masses. POVERTY As per the record of World Bank, India accounts for a third of the worlds poor. India has almost 325 of the population below poverty line with wages lower than US$1.2 a day. As per the date of World Bank in

2010, about sixty-eight percentages of the people earn less than a US$2
a day. Indian government at center has spearhead number of schemes but has been unsuccessful to eradicate the poverty from India. Central government came up with number schemes from providing food grant to employment schemes to eradicate poverty, a chunk of Indias population are still malnourished and unemployed. The government has number of program on the paper but miserably fail to alleviate economic condition of poorer. The new food security bill proposed the guarantee subsidized food grains to nearly 70% population with state run Public Distribution system network along with direct cash transfer. This will definitely attract and revamps the
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bureaucratic channels and bring transparency in the system. Modis Gujarat model is failed to e radicate Poverty from Gujarat as it is assumed that less diversified state than India. Rural poverty is fifty one percent in Gujarat; this consists of 57% among SCs, 49% among STs, and 42% among OBCs collectively. According to the Indira Gandhi Institute of Development studies, Gujarat has 51.18% level of poverty in east part. Gujarat is gifted with industrial corridor and good economic condition since 1980s still Mr Modi was neither able to reduce poverty nor able to run any program to help improving the economic condition of the minority, SCs and STs in this rule since 2001. Employment More than half of the population is employed in primary sector like agriculture, fishing and animal husbandry. Despite Indias considerable dependency on cultivation, primary sector accounted for less than 15% of the Indias GDP. 55% of the labor force accounts for service sector in Indias GDP. However, the seasonality of the crops always makes the farm labor depends on the season. However, As per the NSSO data revels that rural and urban casual labor wages Gujarat ranks in lowest five states among the 30 states. Gujarat ranks after 8 other Indian states in terms of healthcare facility, employment opportunities and education levels. Gender equality. In 2013 survey, India has bias sex ratio of 927 female per 1000 male. India ranked 132 out of 187 countries on its gender inequality. As per The United Nations Human Development 2013, except Afghanistan, other south Asian countries are better place for women. India doesnt represent significant numbers of female in workforce and it is merely to blame for the gender inequality. India has a culture of society in which father or eldest male is head of the family, it is deeply grass rooted in Indias culture. People with two daughters always would like to go for another baby. However, large section of the population with 2 boys did not want any more children. Even Gujarat doesnt have good facts and figure about the gender equality. Gujarat ranks 11 among all the states in India Human development report 2011. It is evident from series of events took place in last 13years that very serious human rights violations are committed by state government which includes 2002 riots, fake encounter cases and removing the scholarship schemes for minority community. As per the survey done by NDTV, this community is neither get basic amenities like roads, educations, and security nor efforts are taken to improve their standard of living. Education Since 1951, Indias literacy levels were rose about 16%. As per the recent survey conducted in 500 districts by Partham, found that a one fifth of the 10 years old students could not read sentences. Almost 50pc of the
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students below the age of 7 could not read the alphabetical letters and more than 50% of the students above 14 years old were not having adequate math ability to divide the numbers. Higher education estimated that only 10pc of the graduate student had gone for the masters degree program. Millions of students are going to school on record but they are really learning is a question mark on the system and right to education. The Gujarat model has been successful to eradicate dropouts in the state however; quality of the education fell sharply in recent times and ranked slipped to 14 among the states in India. Democracy, Law and Order Since Indias independence, It is been uninterrupted democratic rule except during the 1970s emergency during the Indira Gandhis regime. Indias democracy has reinforced over the period of time. Voter turn out ratios has been marked up among the underprivileged section of society, male, women and lower casts. The poor people in India out number the voter turn out ratio of upper caste voters. In addition to that, lower caste population has better representation in the Parliament. Women reservation in parliament has increased the number of women participant in parliament. Central government recently tabled and passed the right to information act 2005 which has strengthened the democracy however it exempt the political parties. The Gujarat state government agencies were recently in news for misusing by the head of the government officials for keeping an eye on a woman. However, more than 12 Indian Police services (IPS) senior officers are accused of fake encounters and miss use of power. Two of the party workers Mrs Maya Kodnani and Babu Bajarangi have been jailed for lifetime in presentment for found guilty in 2002 riots. The Gujarat CM has not appointed the Lokyukta and passed the legislation that governor cannot by pass chief minister to appoint a Lokayukta with out his consensus. In addition, the law and order situation in Gujarat has been often at the hand of chief officials of government who have misused for their personal gain. The former home ministers death in circumstances conditions is evidence of it. India, the worlds largest democracy, is possible super power of the next decade. India is a very diversified country in terms of culture, religion, and languages. Each state of the republic of India is gifted by unique cultural tradition and language. Each state demands is different from one another, the geographical conditions are different, one state might be facing flood while on the other end state might be facing the draught. In this linguistic and venerable country called India, It would be a tough time for Mr Modi to replicate the Gujarat growth model for diverse 1.2 billion people. Gujarat is gifted with long coastline and enough of infertile land that is easy to turn into industry. The power in Gujarat comes with the full majority with 115 MLA in the assembly of 182 seats in December 2012. However Indias diversified population of republic of India would never give mandate at center to run the country with out coalition of the parties. Moreover, what measures the performance of system is between the hurdles of improving the standard of living if not, constant efforts has to
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be put forward to raise those basic facilities and standards for the resident. NaMos marketing strategies are fortunate in promoting Gujarat Shining image under his regime since 2001. But the harsh reality hides behind the big industrial development, roads and infrastructure projects. As compare to Indias present condition and problems, Mr Modis Gujarat model has not sustain to eradicate problems in Gujarat than how would it work at National level. Mr Modi has hyped the development agenda without any substance. Modi neither have supported the Goods and Service tax regime, which could contribute to GDP at intense substance nor given any suggestion to improve the tax systems. Mr Modi is against National Counter terrorism centers in state, the brainchild of Mr Chidambaram. Mr Modi hasnt had a path for Indias economy neither he has any sufficient background to understand the economics nor there is any evidence that he could be the great economic reformer for Indias falling economy. No doubt NaMos ease of doing business attribute provides privilege to companies for land acquisition, by equipping them necessary government approvals and Power Supplies etc. However, model has failed to provide basic standard of living and facilities to minority; SCs and STs. The insights given above have painted with totally different colors. Above data reveals that Gujarats development model was reformed in 1980s and since then the economic condition of Gujarat had been on extremely positive growth trajectory and Mr Modis development model was never existed in Gujarat. It is the legacy of the people of Gujarat, demographic and geographical location. Moreover, Mr Modis development model has failed to address the Healthcare, Poverty, Education, Gender Equality, democracy, Law and order. Which is even worse in India. If he could not have address these issues in 6 Cr populated state then what would be his model to address these issues at National level. All in one, the Gujarat growth model of Mr Modi is more of a hype of marketing and less of the substance.

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Works Cited
Professor Dr. Shad Hemantkumar ,(spetemeber 15th 2012). Who really develped Gujarat- trends in economic growth, available on : http://counterview.org/2012/09/15/who-really-developed-gujaratwhen-and-how-much-trends-in-economic-growth/ access on 8th December 2013, 5 PM Karat, (10th March, 2013). Modi's Gujarat Model can never become a national model City: Patana, The Hindu. availabel : http://www.thehindu.com/news/national/other-states/modis-gujarat-model-cannever-become-a-national-model-karat/article4494630.ece access on 7th December 2013. Jutice Katju, F. (20th decemeber 2012). Satyam Bruyat, on Gujarat Development, available : http://justicekatju.blogspot.in/2012/12/on-gujarat-development.html access on 8th December 2013. Bhalla Surjit S, Lessons fron the Gujarat Model, October 26, 2013, Indian express available: http://www.indianexpress.com/news/lessons-from-the-gujarat-model/1187332/ Tony Munroe and Shah Aditi, 10th January 2013, Analysis: Modi's Gujarat Growth Model might not work across India, Reuters, Available: http://www.reuters.com/article/2013/01/10/us-india-economygujarat-idUSBRE90903W20130110 Guruswamy Mohan, Myth of the Gujarat Model Miracle, 13th February 2013, available : http://orfonline.org/cms/sites/orfonline/modules/analysis/AnalysisDetail.html?cmaid=48115&mmac maid=48116 Rana Preetika and Joanna Sugden, India's record since Independence, The wall street Journal, India available: http://blogs.wsj.com/indiarealtime/2013/08/15/indias-record-since-independence/ http://data.worldbank.org/country/india#cp_wdi http://www.tradingeconomics.com/india/gdp-growth-annual Politic, Tuesday Novemeber 19 2013, Mint Article, The Rural wage boom, NSSO insights Gujarat samachar, Local News paper article, Gujarat Rank fall from 8th to 14th report by National University of Education and Administration. Binoy Prabhakar & Mitul Thakkar, The Economics Times, Magazine cover story, July 1st -07th, 2012, Modi Inc. growth real & Apparent

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