Gujarat Development

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Gujarat

Governance for Growth and Development
A preview of the book*

Growth
There is a remarkable lack of objectivity in discussing Gujarat and governance, growth and development there. The economics gets enmeshed in the politics and the politics gets entangled with the economics. While this is perhaps inevitable and unavoidable, this book is about the economics. What has happened in Gujarat? Is there a story there? Why has it happened? Is this is a story that can be replicated elsewhere in India? Is there a lesson for other States?

The first broad-brush growth story is as follows. Compared to 1994-95 to 2004-05, from 2004-05 to 2011-12, real GSDP (gross State domestic product) growth rates have increased, from an all-India average of 6.16% to an all-India average of 8.28%. Second, with an increase from 6.45% to 10.08%, the increase has been more for Gujarat than for all-India. Third, since 2004-05, there are other States that have also grown fast and Bihar, Maharashtra, Sikkim, Tamil Nadu, Uttarakhand, Chandigarh and Delhi are examples. That growth story in other States is sometimes used as an argument against the Gujarat growth story and that’s a bit strange. After all, Gujarat accounts for a n estimated 7.5% of Indian GDP. If all-India averages have gone up that much, it is unreasonable to expect growth has been pulled up by Gujarat alone. However, in making inter-State comparisons, t here is a legitimate question one should ask. Should small States be compared with large States? Should special category States be compared with non-special category States? Smaller States tend to * Gujarat: Governance for Growth and Development, Bibek Debroy, September 2012. Published by Academic Foundation, New Delhi; hardcover, pages 166, all colour– includes maps and photographs; ISBN 13: 9788171889815; Rs 795; US $39.95. www.academicfoundation.com

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Gujarat: Governance for Growth and Development

be more homogeneous, with relatively fewer backward geographical regions and districts. Chandigarh, Delhi, Puducherry, Goa and Sikkim aren’t quite comparable with larger States. With that caveat, it is also true that there has been a growth pickup in Bihar, Maharashtra, Tamil Nadu and Uttarakhand as well. There has been a discernible pick-up in Gujarat’s growth performance since the 10th Plan (2002-07), the five-year Plans being natural periods for breaking up the time-line. It’s tempting to argue that there is nothing exceptional in this. Gujarat grew fast during the 8th Plan (1992-97) too. While that’s true, one should accept that as development occurs, it becomes more difficult to sustain higher rates of growth. Among larger and relatively richer States like Maharashtra, Haryana, Gujarat, Kerala, Punjab, Tamil Nadu and Karnataka, it is more difficult to find sources of growth. Growth tends to taper off. Relatively poorer States like Bihar, Orissa, Madhya Pradesh, Assam and Jharkhand find it easier to catch up. Had historical trends alone provided the momentum for growth, Karnataka should have also grown extremely fast. Fifth, too often, discussions focus on growth trends alone. Moving to a higher growth trajectory is important. But reducing the volatility of growth is no less important. Growth rates in Gujarat have become much less volatile. Given Indian conditions, volatility is fundamentally a function of what has been happening to the agricultural sector.

Equity
In line with all-India trends, overall poverty and urban poverty have declined in Gujarat between 2004-05 and 2009-10. But the real story is in rural Gujarat, where there has been a very sharp drop in poverty, significantly more than all-India trends. In rural Gujarat, the benefits of growth have trickled down. Subject to all those problems a bout data and measuring inequality, there is no evidence that inequality has increased.

Fiscal consolidation
Elimination of deprivation requires public intervention and
expenditure, over and above a...
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