Top US-based think-tank opines there is nothing exceptional about Gujarat growth over last decade

Investment projects under implementation

By Rajiv Shah
A top expert with the Carnegie Endowment for International Peace, a foreign-policy think tank with centres in Washington DC, Moscow, Beirut, Beijing and Brussels, has strongly disputed those who tout Gujarat’s growth over the last decade as exemplary, saying whether it is foreign direct investment, overall investment in the economy, or governance, the state has been an average performer. Milan Vaishnav, associate, South Asia Programme, and previously with the Columbia University with primary research focus on the political economy of India, neither was there what the Gujarat chief minister called “pro-people good governance” nor “minimal government, maximum governance,” as he claimed before India’s largest business houses.
Vaishnav said, “A closer examination of hard data reveals that Modi’s growth and investment record in Gujarat is impressive, in line with the boasts of his most ardent supporters, but it is also clear that it is not exceptional”, adding, even before Modi came to power, “Gujarat enjoyed the highest per capita income growth rate of any major Indian state in the decade immediately preceding Modi’s rise to power in October 2001.”

Average growth net of state domestic product (NSDP) per capita

In fact, between 1992 and 2001, “per capita income in Gujarat grew at a rate of 5.5 percent, more than half a percentage point greater than Kerala, the next-fastest-growing state. When one looks at the decade from 2002 to 2011, when Modi was firmly entrenched as chief minister, Gujarat again ranked first among states in terms of per capita income growth.”
However, Vaishanav argues, “The 2000s were the boom years for India’s economy overall, and all states did better than they had in the 1990s. Thus, the growth gains in Gujarat during the 2000s compared to the prior decade are solid but hardly unheard of; several states posted larger improvements (including high-growth states like Maharashtra and Haryana as well as traditional laggards like Bihar and Odisha). If other state leaders have engineered greater improvements in their states’ growth rates, can Modi’s supporters really claim that he is exceptional?”

Literacy gains per 1% increase in NSDP per capita (2001-11)

Saying that “even more than the pace of growth, it is Modi’s investor-friendly reputation that has won him plaudits”, the expert says, “From 2000 to July 2013, Gujarat alone received more than Rs 40,469 crore ($8.8 billion) in foreign direct investment (FDI). The state accounted for roughly 4 percent of all FDI flows into India during that period.” But while this represents an impressive haul, “Maharashtra received eight times and Delhi more than four times as much FDI. Gujarat also lagged behind the states of Tamil Nadu and Karnataka, and it just barely outpaced Andhra Pradesh.”
Beyond foreign investment, Vaishnav says, the picture is also not that clear-cut for all investment projects, regardless of investor class. “Gujarat’s share of investment projects (in value terms) during Modi’s decadelong tenure has hovered just above 8 percent, which is impressive given that Gujarat accounts for less than 5 percent of India’s population but is roughly on par with Gujarat’s share of the overall economy”, he points out.

Infant mortality reduction per 1% increase in NSDP per capita (2001-11)

 In fact, the expert says, “the share of investment projects under implementation in Gujarat between 2001 and 2011 almost perfectly mirrors the all-India trend; there is no clear indication that Gujarat deviated sharply from India as a whole. There has also been a large gap between lavish project announcements made at Modi’s biannual investor gathering, Vibrant Gujarat, and the projects that materialize. Indeed, when it comes to tallying projects that actually break ground, Gujarat is outshined by its neighbor to the south, Maharashtra”.
As for social development, the expert looks at two of the most widely cited indicators of social development: literacy and infant mortality. “In 1991, Gujarat’s literacy rate stood at roughly 61 percent, 9 percentage points above the all-India average. By 2001—the year Modi came to power—the gap between Gujarat’s literacy rate and the national average had narrowed by half. With Modi at the helm, the literacy rate improved another 10 percentage points over the next decade, increasing the pace of its gains in line with the all-India trend”, he says.

Change in literacy rate

On infant mortality, the expert says, “Gujarat’s progress had largely flatlined in the years leading up to 2001. Despite this stagnation, in relative terms its infant mortality rate (60 deaths per 1,000 live births) still fared better than the all-India average (see figure on infant mortality). Between 2001 and 2011, Gujarat’s progress largely tracked that of India’s as a whole (the infant mortality rate declined substantially to 41 and 44 deaths per 1,000 live births, respectively).”

Pointing towards the need to analyse Gujarat’s “progress” on social development from the angle another angle , the expert believes, it should be seen “more directly measuring how well it has maximized the social development bang for the growth buck—in others words, looking at how a 1 percent gain in per capita income has affected literacy and mortality.” This, he suggests, would show how the state’s rulers have governed the state. 

Change in infant mortality rate

“Here, the relative shortcomings of the Gujarat model are more readily apparent: the state is situated toward the bottom of the pack when it comes to harnessing greater wealth for improved social welfare (see figures respective). Relative to how much growth it has enjoyed, Gujarat’s social development performance has not been particularly noteworthy”, he says.

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(Charts reproduced from the original study by Milan Vaishnav)