Is Gujarat’s red hot economy a myth?

2 May

Is Gujarat’s so-called red-hot economic growth a myth peddled by the government of the controversial chief minister Narendra Modi?

Mr Modi, who was blamed for not doing enough to stop the horrific 2002 anti-Muslim riots in the state after the burning of a train carrying Hindu pilgrims, has modelled himself as a no-nonsense economic reformer leading one of India’s fastest-growing states.

In March, a senior minister of his cabinet told me that Gujarat has been recording scorching double-digit growth, prompting even The Economist magazine to call it India’s Guangdong. “Modi Means Business” said Time magazine when it put him on the cover recently.

But a raft of recent articles in the Indian media suggest that that Mr Modi’s claims may be overblown.

Examining data on the economic performance of Indian states during a seven-year-period – 2004-11 – AK Bhattacharya, editor of Business Standard, is puzzled by Gujarat’s performance.

He finds that its economy grew by 6.3% annually during this period, up from average growth every year of 3.6% – a relatively low base – in a 10-year period ending 2003.

‘Breakout’ state?

More interestingly, states like Uttarkhand (13.2%), Bihar (10.9%), Maharashtra (10.7%), Tamil Nadu (10.4%) and Haryana (10.1%) recorded double-digit growth in the seven-year period under review.

None of these states have the kind of hype associated with them as does Mr Modi’s Gujarat, which is often called the most business friendly state in India.

Of the five states with double-digit growth, Mr Bhattacharya notes, three are ruled by the Congress party, which has come under fire in the capital for going slow on economic reforms!

So is Gujarat really the “breakout” state that Mr Modi wants the world to believe?

“It has seen the most stable of governments for the last several years,” Mr Bhattacharya writes. “And yet, it has seen its growth hovering around 6% for the last seven years.” Is there something amiss?

Analyst Salil Tripathi has written about how “of all the hype surrounding Mr Modi, the oddest are some of the claims concerning the state’s economic performance”. Gujarat, he says, “has done well in recent years, but it lost ground soon after the riots, picking up pace only later”.

Mr Tripathi writes about how states like Maharashtra, Tamil Nadu and Uttar Pradesh have bigger economies, and Gujarat actually spends more than it has earned, thus depleting its surpluses.

Gujarat also signed on to a fiscal responsibility law only after five other states did, and 20 states preceded Gujarat in implementing value added tax.

I have written in the past on how Gujarat fares the worst among Indian states in terms of overall hunger and malnutrition – 45% of children there are malnourished, according to the latest Indian Human Development report.

The state also has a poor record in checking infant and maternal mortality. And as journalist Hartosh Singh Bal pointed out recently, Gujarat’s ranking among states in terms of literacy (18th) had actually slipped one place, the year Mr Modi took over.

“These figures belie Mr Modi’s reputation as an efficient administrator” he wrote. “But you wouldn’t know it reading the foreign media.”

So is Mr Modi a spinmeister or is there something everybody is missing?

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