Gujarat: What Miracle?

By Dipankar Gupta

[Note from The South Asian Idea: This article forms part of the series (Governance in Pakistan) on this blog that deals with issues of analysis. The preamble to this piece by Professor Dipankar Gupta is an article on Narendra Modi by Robert Kaplan in the April 2009 issue of Atlantic Monthly (India’s New Face). The bottom line of Kaplan’s article is that “Under Modi, Gujarat has become an economic dynamo.” Professor Gupta’s op-ed originally appeared in the Times of India on January 31, 2009 under the caption Credit Misplaced. Note how much difference it makes when all the evidence is taken into account and the starting point is not chosen arbitrarily. Note also the varying explanations for the same set of events. Readers are invited to join this discussion and give their opinion on which of these two analyses is more robust.]

Gujarat grew at approximately 12 percent in 2006-7 against India’s overall growth of about 8 percent that year. Fantastic, said Montek Singh Ahluwalia, and lauded Gujarat’s achievement. He must have stuttered on this praise, because all credit on this score would go to Narendra Modi.

But wait! What is so great about this statistic? In 1994-1995 Gujarat surged at the rate of 13.2 percent. Where was Narendra Modi then? In the years 1994-2001, Gujarat’s state domestic product registered a growth average of between 10 and 13 percent. At the tail end of this period Modi stepped in as Chief Minister. What then has Modi done that is so special?

Let us take a long look at Gujarat. This state was already among the top three in India by 1990. It took Gujarat 20 years after it was created in 1960 to climb up from the eighth rank to the third spot. Twenty years of hard work, led primarily by Congress governments, it may be added. Over 35 percent of its infrastructural augmentation for power generation happened between 1995 and 2000. If Gujarat today can show off its treasure chest, it should gratefully remember its pre-Modi past.

Besides other riches, Gujarat processes 49 percent of the country’s petroleum products. It also has India’s largest shipyard in Bhavnagar, as well as the giant Reliance refineries in Jamnagar. Even on something as pedestrian as Soda Ash, Gujarat is responsible for 90 percent of India’s production. All this happened well before Modi cut his political incisors.

So what is so dazzling about Gujarat’s current prosperity? Nothing really! In spite of decades of growth as usual, as much as 93 percent of Gujarat’s workforce toils in the informal sector. This is why growth is not always development. In fact, on the Human Development Index, Gujarat fell one place in 2003-2004, and now ranks below Kerala, Punjab, Tamilnadu, Maharashtra and Karnataka. In terms of rural prosperity Gujarat is at number five and well behind Punjab, the front ranker.

Now this is a hard one. Workers employed under the National Rural Employment Guarantee (NREG) scheme in Gujarat receive half of what their counterparts get elsewhere. Interestingly, this fact was recently released by a Parliamentary Committee headed by none other than Kalyan Singh, a one time BJP stalwart.

Ernst and Young, consultants for Vibrant Gujarat conclave of 2005, ranked Gujarat’s investment climate behind Kerala, Maharashtra, Tamilnadu, and on par with Karnataka. In terms of Workforce Quality, however, the same professionals gave Gujarat a very average “B grade” as it failed to measure up on a number of counts. It may be recalled in this connection that the Asian Development Bank in 1996 had ranked Gujarat as number two in India in terms of its investment climate. But in 2005, it was rated at number five. Perhaps the 2002 riots had something to do with this. 

Why then does it seem that Modi invented Gujarat’s golden wheel when it was already spinning? There are probably two reasons for this.

The first is the simplistic assumption that all communalists are intellectual clunks who can’t hold two ends of a book together. Modi was read as a one-talent wonder, good at leading riots from the front, but little else. Hence, Gujarat would soon show negative economic figures and, before long, its heirloom would be up for sale. But when that did not happen, Modi’s skills at book keeping, rather than bloodletting, began to draw attention. Instead of serving just death by culture, Modi cleverly stirred Gujrati garv (pride) into the pot. This made the state’s usual growth rates taste nicely different.

It was Modi’s highly personalized executive style, rather than his tidy store minding that attracted Indian corporates. They gave as much thought to Gujarat slipping in the development index as they would a drain inspector’s report. What mattered to them was the manner of delivery. Modi did not just give Nano shelter, but also readied permits for Ratan Tata in three days flat. Democratic stage fright? Never heard of it! Here was a man who could bend the law at will, but you had to be good to him. Sweetening politicians is easier than playing by the book.

So when Modi welcomed private capital to Gujarat, many Indian entrepreneurs, big and small, rushed to his side. They had at last found the patron they always longed for. The one feature that has endured India’s liberalization regime is the way our native entrepreneurs crave for political goodwill and protection. It was not as if only the riff raff ran to Modi, the big shots did too. And some of them were regular four star generals of corporate governance. So much for Business Ethics!

True, Modi is partial to business, but this isn’t news either. Gujarat consistently attracted a disproportionate slice of India’s private investment. But Modi’s tune was hard to resist not because it was new but because he delivered it with a bang. The first to sing along was Anil Ambani. After splitting from his brother he found an uncle in Amar Singh. But today he is a card holding Modi groupie. In the Vibrant Gujarat conclave he even advocated him as India’s Prime Minister. Sunil Mittal soon joined in, and then the chorus began. CEO’s now look at Modi just as ancient Israelis must have looked at Moses.

Beauty, in such cases, does not lie in the eyes of the beholder. It rather lies in the eyes of the beholden.

Dipankar Gupta is Professor of Sociology at the Center for the Study of Social Systems, Jawaharlal Nehru University, New Delhi, India.

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7 Responses to “Gujarat: What Miracle?”

  1. Rita Jalali Says:

    The arguments presented are persuasive however I would also add that Modi’s reputation for being a clean politician who does not accept bribes must all add to his aura of an efficient administrator and explain why he gets reelected.

  2. Vinod Says:

    Well analyzed. This site is fast becoming a favourite of mine.

  3. suresh Says:

    Laveesh Bhandari’s analysis in the Indian Express here:

    http://www.indianexpress.com/news/riotseconomic-growth/228419/0

  4. SouthAsian Says:

    This is to archive here a different perspective on Narendra Modi and a different scenario for India: Purification Rites by Pankaj Misra in The National, 27 March 2009:

    http://www.thenational.ae/article/20090327/REVIEW/384079579/1008

  5. SouthAsian Says:

    A study documents the lopsided nature of growth in Gujarat that leaves poverty amid prosperity:

    “Gujarat provides a window to understand the limits of market-led growth and an insight into a policy regime that does not attempt to mitigate the most brutal consequences of this specific mode of production. The paradoxes of this development model are writ large. They are a precursor for things to come in other parts of India unless there is a change in policy direction at the Centre or, alternatively, the States begin to negotiate the growth agenda in a substantially different manner.”

    http://www.thehindu.com/opinion/lead/poverty-amid-prosperity/article4147478.ece?homepage=true

  6. SouthAsian Says:

    Arvind Subramanian (Senior Fellow, Peterson Institute for International Economics and Centre for Global Development) brings data to bear on assessing the performance in Gujarat and putting it in comparative perspective.

    http://www.business-standard.com/india/news/arvind-subramanian-ismodi-miracle-overrated/499668/

    “In terms of economic governance, is Mr Modi Gujarat’s greatest gift after Mahatma Gandhi and Sardar Vallabhbhai Patel, as Anil Ambani recently gushed? Is he merely a good but not Great Leader? Or, is there an underside to Mr Modi’s Gujarat governance miracle that might only become evident in the future as the tax metric discussed here suggests?”

  7. SouthAsian Says:

    Amartya Sen does not want Modi as Prime Minister – says his record in Gujarat is not good enough:

    http://www.thehindu.com/news/national/dont-want-modi-as-my-pm-amartya-sen/article4941075.ece?homepage=true

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