The perils of conflating Modi with Gujarat

For some strange reason, the media and many other informed circles continue to conflate Gujarat's economic progress with the superior performance of Narendra Modi as chief minister of Gujarat. In a two-part article recently (read them here and here), we showed that Gujarat was one of the top performing states long before Modi arrived on the scene.

Modi acolytes quickly countered that. Their Modified refrain was to say that Modi had been successful in maintaining a very high growth and moving it further towards faster growth, albeit by a small percentage. That self-serving argument collapsed when we showed that Gujarat's twin next door had a GSDP not 25 per cent but 2.50 times higher than that of Gujarat AND still clocked a higher growth rate in GSDP in the last five years without the benefit of a demigod in the chief minister's chair. What accounts for this conflation of Modi's performance with Gujarat's long-term trends in development except poopganda and hype?

We recently read an excellent article by Arvind Panagariya in The Times of India wherein the Columbia professor made a point about separating the politics about Gujarat from its economic performance. There was a period of time, just after the 2002 riots, when Modi was afforded a certain amount of leeway, by the media and others, in hyping up Gujarat's economic performance as a way of rebuilding Gujarat's shattered morale and self-confidence. 

For instance, Gujarat used the 2001-03 severe drought years to form the base year for appraising its agriculture growth. And to top up the folly, it failed to take the inflation out of the nominal agricultural production to show fabulous growth rates achieved by Modi. It took a lot of public, on record, berating from the Planning Commission before the numbers were rectified and scaled down. Furthermore, the Narmada Dam was close to 20 years in building and actually came on line with irrigation canals et al in 2002. This gave a huge, but one-time, step up to agriculture in the state. Need proof? Take look at this table. 

Removing the drought and bounce years from the data series for Gujarat, we take a look at growth in agriculture over seven years, from 2004-05 to 2010-11, for Gujarat and comparable states comprising Andhra Pradesh, Karnataka, Maharashtra, Tamil Nadu and West Bengal. The all-India compounded annual growth rate [CAGR] was 3.31. The highest rate recorded was by Karnataka (10.89 pc), followed by Tamil Nadu (8.64 pc), Andhra Pradesh (7.81 pc), Gujarat (5.58 pc), Maharashtra (2.43 pc) and, lastly, West Bengal (2.15 pc). This is the recorded growth over a seven-year period, not a flash in the pan; and the comparator states are large and populous ones. Where is Modi's chamatkar? 

Gujarat has done as well as it always did before Modi, and will continue to do so after him. That then is our problem with buying into the conflation of Modi with Gujarat and vice versa. Note, Maharashtra's colossal failure in agriculture despite Shard Pawar being the Union agriculture minister. Maharashtra failed to add a single acre to land under irrigation in the last 20 years and the results reflect that abysmal failure.

But let's get back to Gujarat and the latest twist to its story in manufacturing where a few dramatic gestures in land allocation to large industrial houses have made Modi the darling of corporate honchos. Take a look at the table again. Here are the CAGR numbers: Maharashtra (14.37 pc), Gujarat (13.47 pc), Andhra (10.90 pc), West Bengal (8.80 pc), Tamil Nadu (8.49 pc), Karnataka (7.76 pc). Again, these are CAGRs over 10 years and hence unbiased by random fluctuations. The all-India growth rate in manufacturing over the period was an abysmal 7.86 pc, reflecting India's archaic labour laws and other regulations.

To round off the growth debate in Gujarat under Modi, take a look at the overall GSDP growth number over the last seven years. This data is available on the Planning Commission website. And here is the most salient feature of this set of numbers. All, repeat all, the larger states, except West Bengal, did well over the last seven years [CAGR 2004 to 2011], there being little to choose between them. Let the numbers speak for themselves: Maharashtra 10.69 pc, Tamil Nadu 10.34 pc, Gujarat 10.06 pc, Karnataka 9.14 pc, Andhra 9.09 pc and West Bengal 7.21 pc. All the major states clocked between nine and 10 pc. Where is the miracle in Gujarat except in the hype?

Gujarat's relative lag on social indicators of development relative to its peer comparator states is often explained away as being not too bad relative to others, especially in the context of Modi's miracle on growth. Well, there is no growth miracle in Gujarat; rather it is business as usual. And to be honest, Gujarat does no better, and certainly no worse, than other comparator states in such things as poverty reduction, literacy, child mortality, and nutrition. The data relating to these parameters is available on the Planning Commission website. The literacy rate in all the large comparator states range from 67.66 pc [Andhra] to 82.91 pc [Maharashtra], with Gujarat at 79.73 pc. Panagariya makes a great point in drawing attention to the fact that Gujarat has done well to catch up with its peer states in literacy. However, note that this trend has been in progress ever since 1981 in terms of data cited by him. It's not something unique to Modi.

Now take the total reduction in poverty between 2004-05 and 2009-10. Maharashtra reduced total poverty by 13.7 pc, followed by Tamil Nadu 12.3 pc, Karnataka 9.7 pc, Gujarat 8.6 pc, Andhra 8.5 pc, while the all-India reduction in poverty was 7.4 pc. Gujarat was above average but well behind the leaders and fell short in relation to its growth numbers.

So whether you take hard economic growth numbers or social indicators, two facts stand out. First, as we showed earlier, Gujarat's growth rate has always been high, much before Modi came on the scene. Modi has at best maintained the growth but certainly not accelerated it. And in the last few years many other larger states have beaten Gujarat in the race. Maharashtra in particular, with a GSDP 2.5 times that of Gujarat, has not only clocked a higher all-round growth rate [except in agriculture] but also is right at the top in social indicators of development like poverty reduction or literacy. 

But the second aspect is more worrisome.  Not only has the Gujarat story been hyped out of all proportion, but also the hype is being used to promote a fascist personality cult around Modi, making him out to be some kind of a super performer in economic development. This proposition is without basis. As the data above shows, Gujarat's performance is good but there are others who have done far better without any demi-gods at the helm. 

Of the other BJP-ruled states, with the exception of Karnataka, none of them figure anywhere in the top performance rankings either in terms of growth or social development. So Modi may well be the tallest leader in the BJP. But being tall in the BJP means nothing when-run-of-the-mill politicians in next door Maharashtra outperform you despite serious policy failures like zero, yes zero, investment in irrigation over the last 20 years. 

The fact is that by conflating Modi with Gujarat the larger lesson in development --  economic reforms -- is being sidelined and lost.  As we showed in our earlier articles, it was the economic reforms of 1991 that almost doubled the growth rate of GSDP of all states, big and small. It is reforms that lead to higher productivity and higher growth and not this or that personality cult. The short cut to nirvana through Modi or any other demi-god simply doesn't exist. 

As we have seen, Modi himself is not an economic reformer.  His philosophy of development is centred around a command-and-control authoritarian model that rams through projects and programmes by sheer administrative fiat that is simply not scalable to an all-India level given the country's diversity and cultural mores.

Rather than promote dubious personality cults, Gujarat's growth story, with that of Maharashtra, Tamil Nadu and Karnataka, is better used to promote economic reforms that will do us much greater good. The lag in reforms is causing us to miss great opportunities to pull our people out of poverty through faster growth.

Sonali Ranade is a trader in the international markets and Shaelja Sharma is an HR professional