A new book, “Gujarat Development Model: A Reality Check”, by Prometheus Publications (click HERE to download), has revealed certain glaring anomalies between the talk and the walk. At the last Vibrant Gujarat summit of 2013, Gujarat chief minister Narendra Modi stated that “Gujarat has become the global gateway to India”. In the 2011 summit alone, agreements worth a mindboggling Rs 20.83 lakh crore were signed between the Gujarat government and the industrialists from India and abroad. But ground realities tell a different story. Excerpts:
Let’s keep aside the debate on whether FDI is a valid parameter to measure development and rather, focus on the veracity of the claim. The Department of Industry Policy & Promotion (DIPP) study reveals that Gujarat’s share in actual cumulative FDI inflows to India between 2000 to 2013 – coinciding with Mr.Modi’s rule – was only 4%. Gujarat garnered only Rs. 39,000 crore out of the cumulative national FDI inflow of 9.1 lakh crore. More significantly, Gujarat’s share in the FDI kitty has been on the decline in the last 3 financial years: from 3.4% in 2011 to 2.9% in 2012 to 2.4% till Jan 2013.
While MoUs (Memorandum of Understanding – a bilateral agreement between two entities expressing common intention & line of action) close to Rs 21 lakh crore were signed in the 2011 summit, a study by Gujarat state government itself shows that just above 1% of the promised investments have actually come in so far. Curiously, the promised investment figures for the 2013 edition are not available on the Vibrant Gujarat portal.
Even though the Gujarat CM claims a large number of foreign investors to the Vibrant Gujarat summits, a look at the statistics available on the official website shows that the number of domestic investors is significantly higher than foreign players.
In an interview with The Economist in September 2012, the Gujarat CM stated: “We are the only state to put our policy draft on the net. We invite people to go through our draft policy to give suggestions. Then we discuss, then we finalise. Have you heard of this, such a democratic way?” But, a relevant question pops up: Why did Gujarat government stop giving out any MoU (Memorandum of Understanding) figures of the Vibrant Gujarat Global Investors Summit, especially after eyebrows were raised over the state’s poor project implementation?
In Aug 2013, statistics from the Ministry of Corporate Affairs revealed a surprising fact. In terms of capital inflow due to the creation of new private companies, in 2011-12, Gujarat came only 5th behind Maharashtra, Delhi, Tamilnadu and hold your breath, West Bengal where even Ratan Tata was forced to beat a hasty retreat due to farmer protests! So, is Gujarat really a preferred destination for new entrepreneurs?
This trend is confirmed in Oct 2013 by another study carried out by the Global Initiative for Restructuring Environment and Management (GIREM) and DTZ, a property services company. The study found that Bangalore has emerged as the ‘hottest business destination in India’ on the basis of infrastructure, human capital, city culture and basic quality of living.
Ahmedabad came 8th in the list of 21 business destinations with Chennai, Mumbai, Pune, Indore, Bhubaneshwar and Coimbatore racing ahead.
While Gujarat is indeed a leading exporter in gems & jewellary, pharma products, textiles and chemicals, with an overall contribution of about 22% to the total exports from India, it is still behind Maharashtra. More importantly, the President of the Federation of Indian Export Organisations (FIEO) has recently articulated that “Compared to other states where the percentage of exports from manufacturing is a mere 20, in Gujarat, it is 80”.
So, the bottom-line is, Gujarat’s leading position in exports is because of exporting most of what’s produced and not by producing too much.
A World Bank report expects India to receive around Rs.4.4 lakh crore worth of NRI remittances by the end of 2013, the most by any country in the world. Since one in every five Indian Americans is a Gujarati, it raising the prospects of NRI-driven inflows in Gujarat significantly. However, an IIM Bangalore study in 2011 reveals that around 40% of the NRI remittances actually flow to Kerala, Punjab and Goa. Gujarat ranks only 7th in terms of NRI remittances.
Gross State Domestic Product (GSDP)
“Gujarat has maximum contribution towards the country’s GDP,” the chief minister has claimed (IBN Live, Jun 28, 2013). However, Gujarat’s contribution to GDP of the country in 2012 was only 7.3%.
Again, let’s keep aside the debate on whether GDP is a good indicator of development to focus only on verifying the claim. A close scrutiny of data published by the Central Statistical Organisation (CSO) – which works with the Directorates of Economics & Statistics of respective state governments – reveals that Gujarat stands fifth in terms of state-wise GSDP in 2011-12 with Maharashtra, UP, AP and TN ahead of Gujarat.
A Planning Commission report shows that under Modi’s rule, between 2004 and 2012, Gujarat witnessed a GSDP growth of 10.1% which is higher than the national GDP growth rate of 8.3%. But, the same report further shows that in the same period, Maharashtra grew at 10.8% and Tamilnadu at 10.3%. It is significantly behind Nitish Kumar’s Bihar, which grew at 11.4% during this period (see Table 8).
Dr Vidyut Joshi, economist and former vice-chancellor of Bhavnagar University, points out that Gujarat GDP growth was up to 16% during some of the previous non-Modi regimes. Worse, Gujarat stands 5th in terms of annual growth rate in 2011-12 which is a serious blow to Mr.Modi’s claim of the growth rate of Gujarat’s economy being the highest.
In terms of per capita income, Gujarat fares worse coming in a poor 9th in the country which means an average person in Gujarat earns lesser than his counterparts in 8 other states.
Public Debt of Gujarat
Public debt of a state refers to the total debt of the state government raised through bonds, securities etc.. Quoting RBI report on state finances published in Jan 2013, Modi supporters have pointed out that Gujarat’s total outstanding debt is only 4th in the country at Rs.1,76,490 crore led by Maharashtra, UP and WB in 1st, 2nd and 3rd position respectively – all three being non-BJP ruled states. Further, citing Planning commission databook released in Dec 2013, they state that Mr.Modi has actually brought down the public debt to GSDP ratio by about 14 percentage points from 38.8 to 25.2 in 10 years (2001 to 2011). These achievements look remarkable. Let us dig deeper to find out where Gujarat stands in comparison with other states in India.
While Gujarat is 4th in public debt, it is only 4th in revenue receipts as well. But, more importantly, the top 3 states have 1.5 to 3 times more population than Gujarat. It is very likely that larger states will have larger debt and smaller states will have smaller debt. Hence, the measure of per capita debt (debt per person) ensures a better comparison in such cases and significantly, Gujarat emerges as the state with highest per capita debt among all the major states in India. In other words, on an average, Gujarat is borrowing more money than rest of the states in India.
Even though Gujarat has brought down the public debt to GSDP ratio by 14 percentage points in 10 years, its current ratio is still worse than 12 other states and also the national average as per the same planning commission statistics. In fact, some other states have done much better than Gujarat in reducing the public debt to GSDP ratio. For example, Orissa has cut down this ratio by a massive 51 percentage points while Bihar has achieved a commendable 36 percentage points reduction.