High­way to Growth

The eco­nomic growth story of Gu­jarat is let down some­what by the state’s show­ing on so­cial pa­ram­e­ters

India Today - - GUJARAT - Ajit Ku­mar Jha and Sur­jit Bhalla

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.




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