Failure of rural job plan? "Pro-Modi" economist finds deep urban-rural differentials in Gujarat, other states

By Rajiv Shah
A recent research work by a well-known pro-Narendra Modi economist, who many say is one of the key contenders for an authoritative posting in the Government of India in case the Gujarat CM becomes India’s next prime minister, has found that while urban Gujarat has seen a sharp rise in worker-population ratio (WPR) compared to any other part of India, the rural counterpart has suffered. Prof Ravindra Dholakia drawn the conclusion in a recent research paper, “Urban – Rural Income Differential in Major States: Contribution of Structural Factors”, co-authored with two Gujarat government officials.
While Prof Dholakia is a faculty at the Indian Institute of Management, the others, Manish B. Pandya and Payal M. Pateriya, are with the department of economics and statistics, notorious for poor standards in analysing data. The study finds that Gujarat’s WPR in urban areas was 37.7 per cent in 2004-05, reaching 38.4 per cent in 2011-12. But the rural WPR of Gujarat has gone down sharply – it was 51.4 per cent in 2004-05, sharply plummeting to 44.7 per cent in 2011-12. Dholakia is known for his neo-liberal views, and believes that market forces will automatically “adjust” other sectors, including human development.
As a result of the sharp fall in rural WPR, if the calculations made by Dholakia and others are to be believed, Gujarat’s urban-rural income differentials (URID), too, have gone up sharply. Thus, the differential, on a scale was one, was 0.73 in 2004-05, and in 2011-12, it reached 0.86. The URID in Gujarat, the calculations suggest, is one of the highest in India – higher than several states, including Karnataka (0.84), Maharashtra (0.75), Tamil Nadu (0.81), Madhya Pradesh (0.80), Rajasthan (0.77), and so on.
The team headed by Dholakia says that, in the country as whole, the URID have shown an rising trend over time in most of India, adding, in Gujarat and several other states has particularly gone up (since 1993-94, after which the data have been analyzed) particularly sharply. Other states which show a similar “consistency” are Bihar, Maharashtra, Tamil Nadu, Uttar Pradesh, Madhya Pradesh, Rajasthan and West Bengal.
The scholars admit, interestingly, that the urban-rural differential would have been even higher, but for the programmes such as the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which promises 100 days of employment to anyone in the country’s rural areas at state expense. Had this programme not been there, rural worker-participation rate, they seem to suggest, would have gone been particularly very low.
If one goes by this logic, analysts say, it would suggests that states like Gujarat are not implementing MGNREGS well enough! While the authors do not say so in so many words, they warn, “If targeted programmes aimed specifically at increasing rural labour productivity in different sectors are not implemented, the URID will show tendency to increase in future.” They add, the differential suggests that the structure of the work force in the economy as a whole “would change because of possible differences in the urban-rural population.”

As a result of the urban-rural income differential, Dholakia and others find, while there have been very sharp changes in employment pattern in Gujarat’s urban areas – one of the highest in India – it is not as high the state’s rural areas. In fact, in the rural areas, change in the employment structure is given the unit 0.045, which is lower than several states, including Kerala (0.126), Punjab (0.048), West Bengal (0.055), Maharashtra (0.052), Tamil Nadu (0.053), and so on.
In monetary terms, Prof Dholakia and others believe, the rural per capita gross state domestic product (GSDP) in Gujarat comes to Rs 64,499 in 2011-12, which is lower than Tamil Nadu (Rs 71,648), Kerala (Rs 75,128), Punjab (Rs 73,418), and Haryana (Rs 87,614). As for the urban areas, ther per capita GSDP in Gujarat comes to Rs 1,53,434, which is lower than two states – Maharasthra (Rs 1,68,178) and Haryana (Rs 1,75,960).

Significantly, these are average income levels, and hide the difference in income levels between different classes. Even then, the authors seek to conclude, these calculations would help “various development efforts undertaken by government and private sector entities by properly evaluating and monitoring long term programmes.”

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