Highway to Growth
The economic growth story of Gujarat is let down somewhat by the state’s showing on social parameters
The growth story of Gujarat is one of a state punching above its weight. With only 6 per cent of India’s land mass and barely 5 per cent of its population, Gujarat has managed to account for 7.6 per cent of the country’s GDP and 22 per cent of its exports. Its annual Gross State Domestic Product (GSDP) growth from 2001 to 2013 (growth has slowed down since) averaged nearly 10 per cent, which is faster than India’s. This is an extraordinary accomplishment. Between 1980 and 2013, Gujarat grew at an average rate of 5.1 per cent. If Gujarat were a country with a 10 million-plus population, this would be the third-fastest growth rate in the world, after China and South Korea.
What were the factors that helped Gujarat accomplish this extraordinary growth? Was it geography, native entrepreneurship, a historical edge in commerce and trade or simply good governance? The reasons for Gujarat’s growth can be debated. Did the fact that Gujarat has the longest coastline—1,600 km—contribute to its rapid growth? Gujarat has served as an integral native trading hub for centuries, one of the most dominant in the Arabian Sea. After all, in India, most coastal states have shown higher growth than the BIMARU (an acronym for Bihar, Madhya Pradesh, Rajasthan and UP, referring to their poor economic standing) states. A coastal state has the twin advantages of greater global access as well as lower transportation costs. Other coastal states, such as Maharashtra, Tamil Nadu
and Kerala, have also performed well. But sustaining rapid growth, as Gujarat has done, is not easy. Almost 25 per cent of India’s sea cargo passes through Gujarat’s ports.
Was it the renowned Gujarati entrepreneurial spirit that helped bring about Gujarat’s transformation from being only the seventh richest big state in 1980-81 (in terms of per capita GSDP) to the third richest in 2013-14? Gujaratis have dominated businesses all over India for centuries. The Indian diaspora is dominated by Gujarati businessmen. Or was it good governance under successive regimes in Gujarat that brought about such development?
Gujarat has been among the fastest growing states even in the past. Despite poor rainfall, it has made strides in agriculture. Unlike Punjab and Haryana, states which launched the first Green Revolution with government support, Gujarat’s agricultural transformation came via the market route. Cash crops such as cotton, oilseeds and tobacco dominated the farm growth story. A milk revolution and largescale exports of fish accompanied the growth in horticulture and sharp increase in agricultural productivity. The agricultural turnaround— with growth rates as high as 11.1 per cent between 2000 and 2013—was accomplished despite water scarcity. Gujarat knows the art of turning every calamity and tragedy into an opportunity. Despite the plague in Surat and the earthquake in Kachchh, the state’s economic growth rate has surged in the last one-and-a-half decades. The
good governance story of Gujarat, however, takes a knock when it comes to inclusive growth and social sector development. Gujarat is a ‘model state’ in economic growth but a ‘middle state’ in social sector growth. Both agricultural and manufacturing growth is in double digits, but of the 20 major states in India, Gujarat’s ranking is always between 9 and 12 on all major social sector rankings. This is irrespective of how the measurements are done. Education, health and other social sectors have grown much more conservatively. The challenge for the leaders in Gujarat is finding ways to
bring about inclusive growth, alongside the remarkable growth rate. State of the State report With a firm belief that the future of the country lies in its states and Union territories, the State of the State (SoS) survey, started in 2003, emerged as the gold standard for analysing the performance of states. The State of the State report was the next logical step. It analyses the performance of districts in each state over a period of time, and across various categories. Each category is usually a composite index of a few parameters, which are measurable across time, provided data is available. In the case of Gujarat, ideally one should compare all 33 districts. Seven of these districts were created in 2013, and eight were created over the period of 1997 to 2010. Data for the recent seven is not available. For the eight districts created earlier, data is available sporadically. Thus, the district analysis presented in this report is for the 18 ‘original’ districts. Gujarat versus six states How well has Gujarat performed in terms of GSDP growth, education, health and in other key categories can be best assessed by comparing its performance with that of other states; in particular, states closest to it in terms of socio-economic development. If 19992000 is taken as the ‘base’ year, it is found that across a wide array of indicators, Gujarat is closest to these six states—Haryana, Himachal Pradesh, Kerala, Maharashtra, Punjab and Tamil Nadu. Three of them are coastal states, like Gujarat. These states will be referred to as C7 (comparable seven). Performance is measured in terms of various indicators of improvement (e.g. growth) over the period of 1999 to the latest year for which there is data— generally 2011 (latest year for National Sample Survey, NSS, data on education) and 2013 (latest year for GSDP).
Per capita GSDP growth: This is where Gujarat has excelled. The analysis of GSDP performance is conducted over two time periods— 19801999 and 2000-2013, for which there is data. The intention behind the comparison between the two time periods is to analytically separate the influence of history from good governance in later years. If per capita GSDP is the criterion, Gujarat was the seventh richest big state in India in 1980-81, fifth richest in 1999-2000 and third richest in 2013-14.
In per capita growth, Gujarat was the third-fastest growing state among C7. The fastest growing state was Maharashtra (4.3 per cent), followed closely by Tamil Nadu (4.1 per cent) and Gujarat (4 per cent). Despite being a relatively rich state, Gujarat pushed itself into becoming the second-fastest growing state for the period 2000-2013 (average of 6.5 per cent annually). The fastest growing state was Uttarakhand (9.2 per cent), a relatively smaller and newer state.
Inequality: Was growth accompanied by growing inequality in the C7 states? Yes. Six of these states witnessed a rise in inequality (measured by the Gini index, which assigns a value of zero if everyone has equal income and a value of 1 if one person has all the income). Only one state, Tamil Nadu, witnessed a decline (-0.3 per cent annual decline for the 12 years from 1999 to 2011, according to NSS data). Gujarat was the thirdbest performer, with an annual Gini increase of 0.7 per cent.
Education: Gujarat hasn’t performed well here. NSS data on educational
achievement (highest class attainment) is a much better index of educational attainment than provided by the literacy variable. Literacy tells whether a person is literate; educational attainment offers a measure of educational achievement.
In 1999-2000, Gujarat had about the same educational level (average educational achievement of 5.3 years) as Haryana, Punjab and Tamil Nadu. In 2011-12, the state improved its average education level to 6.3 years; however, this improvement was the second worst, behind Kerala. It should be emphasised that Kerala had the highest education level in 1999-2000 (7.4 years) and maintained its highest education level position in 201112 (8.8 years). As with income, there is a catch-up phenomena with education (and health), i.e. higher attainment states tend to improve at a lower rate. Hence, that Kerala improved its educational attainment at a rate of 1.4 years per annum is not a surprise; that Gujarat’s rate of growth in education was only 1.5 per cent per annum is a big, negative surprise.
Health: If measured by improvement in (the lowering of) the infant mortality rate (IMR), Gujarat does better in health than education—a decline in IMR by 3.6 per cent per annum, identical to Haryana’s achievement. Kerala has the lowest rate of improvement (a decline of only 1.3 per cent per annum, from 14 deaths per 1,000 births in 1999 to 12 deaths in 2011). Himachal Pradesh, too, has a low average rate of decline (IMR fell from 54 to 38 deaths per 1,000 births or by 2.9 per cent per annum).
Regional analysis of Gujarat Gujarat was formed in May 1960 with 17 districts. Over the next six years, two more districts were added, one of which became the state’s capital. Another 14 districts were formed from 1997 to 2013. Consistent data for all variables is only available for the initially created 17 districts and for most variables for 18 districts. The analysis is done at the district level, taking these 18 districts as individual units, and at a regional level by classifying them into groups as described below. For ease of analysis, the entire state has been divided into three broad regions: Western Gujarat, Central Gujarat and the Eastern Corridor. The demarcation is done on the basis of income and poverty levels in 1999, weighted by the population of each district. Such an exercise shows Central Gujarat as most prosperous, followed by Western Gujarat and the Eastern Corridor (see graphic: Centre Drives Growth). Any regional data provided is computed as a simple average of all the districts in the region. Overall income: Since overall income comprises three categories—real wages, per capita household consumption and absolute level of poverty—we look at all of these individually. The most prosperous area, Central Gujarat, has shown maximum improvement in wages—an increase from an average wage of Rs 136.7 (2011-12 prices) to Rs 200.9 in 2011—as well as per capita household consumption. In terms of wages, Central Gujarat was followed by the Eastern Corridor (Rs 124.1 in 1999 to Rs 163.4 in 2011) and then Western Gujarat. Western Gujarat, which used to be best in wages in 19992000, shows maximum improvement in reducing absolute poverty (from average absolute poverty of 26.5 per cent in 1999 to 9.5 per cent in 2011). In consumption, Western Gujarat is most improved, followed by Central Gujarat, then the East.
STATE OF STATE: GUJARAT GUJARAT’S HIGHWAY NETWORK IS BOTH WELL DEVELOPED AND WELL MAINTAINED
A HIGHWAY CUTS THROUGH FARMLAND IN THE GUJARAT COUNTRYSIDE
THE STATE HIGHWAY NEAR GODHRA IN THE PANCHMAHAL DISTRICT