When Gujarat Model Fails, Bring In "Padmavati"

"The Gujarat Model" is back in the news as the election in the state approaches. Elections in a major state like Gujarat are important anyway, but in this instance, there is an added factor: Narendra Modi's rise to the national stage was entirely based on the supposed success of the Gujarat Model under his Chief Ministership for 13 years.

Now beauty, as they say, lies in the eyes of the beholder. The same, it seems, applies to the Gujarat Model. You don't have to go further than the recently-published Reserve Bank of India's Handbook of Statistics of Indian States for a handy guide to this question.

If you look at economic statistics reported in the section on State Domestic Product, e.g. at average state income or its growth rate, then there is no doubt that Gujarat is one of the top states. If you delve deeper and look at things like measures of infrastructure, such as power per capita (reported in the section on Infrastructure), once again it is a leading state. In these matters, Gujarat might seem to offer a "model" for others to emulate.

However, when you look at social indicators, reported in the section on Social and Demographic Indicators, the picture changes dramatically. Whether it is the percentage of people below the poverty line, infant mortality rate, life expectancy, or gender ratio, Gujarat is no model - it is a below-average state.

What is even more striking is that this basic picture has not changed much since the state began to outpace the rest of India in terms of growth in the early '90s following liberalization. By the mid-90s, Gujarat was a leading state in terms of economic indicators and a lagging state in terms of social indicators. Unfortunately, two decades of growth has not trickled down to improve the economic conditions of the average person.

This is a puzzle and cannot be easily dismissed as partisan criticism. In the end, per capita income, its growth, infrastructure, or ease of doing business are not important in and of itself. They are means to an end. And the end has to do with the quality of life of the average citizen.

Unless the benefits of growth percolate down to the masses - through greater employment opportunities, higher wages, or increased budgetary resources that can be used to improve public services relating to health and education, or directly targeted to alleviate poverty - these statistics are just dry numbers to everyone except the affluent. A rising tide can lift all boats only when the smaller boats are able to float, and the tide has spread to the nooks and corners where most people live, and not just to the cosy coves with the luxury liners. Growth is necessary for long-term poverty alleviation, but to take advantage of growth opportunities, the younger generation of those from poor backgrounds need the required skills. And to develop their human capital, the key inputs are education and health.

One can live on hope for some time when one sees that the tide is rising at a distance, but eventually, if one remains stranded, patience runs out. Two decades is a long time and no wonder there is rising voter discontent in Gujarat as the election approaches.

Why did the benefits of growth not percolate down to show an improvement in the social statistics? Again, a quick look at the official statistics provided by the RBI Handbook provides some clues. If we look at employment in medium and small-scale industries, then Gujarat is not in the top 5 of the 20 major states (in terms of total population) either in terms of the level of employment (adjusted for population) or its growth rate. What is even more alarming is that if we look at state-wise social sector expenditure per capita, Gujarat's rank is 12th among the 20 major states.


No surprise, then, that Gujarat's rank in terms of percentage of people above the poverty line was 10 in 2011, the latest year for which state-wise numbers are available. This suggests that, under the Gujarat model, growth has not led to employment generation, nor has it created enough fiscal resources to invest in human resources. It has largely involved facilitating big industries that are capital-intensive and do not generate growth of employment. Often, this is accompanied by strong fiscal exemptions to big industries that use up budgetary resources that could be devoted to social schemes.

Leaving aside statistical details, the Gujarat Model is analogous to a situation where a small number of children in a school get all the attention and exclusive access to the facilities and end up doing very well in exams, earning the school fame in terms of its high-profile toppers as well as higher average scores. However, most other students languish with below-average scores and little hope. For some time, one can argue that the apparent success will bring in more resources and this will help everyone. But if this does not happen year after year, eventually the promise starts sounding false and rumblings of discontent become audible. We can hear this in the frustration in the Patel community and its Hardik Patel-led agitation, unrest among the Dalits, despair among the minorities, and the increasing urgency in the tone of the BJP's campaign in the state which was supposed to be an electoral cakewalk for them.

It is fair to ask, given all this, how did the BJP manage to win successive state elections in Gujarat (it is likely to win the coming one as well despite the jitters that are on clear display). The answer to this lies in the fact that political outcomes are not just driven by economic fundamentals. If we look at the list of the longest-serving Chief Ministers in India, the person who beats Narendra Modi convincingly to a second position is the late Jyoti Basu of West Bengal, whose tenure was not exactly synonymous with economic prosperity for the state, despite early success in rural reforms.

After all, electoral contests are also a reflection on the opposition's ability to offer a credible alternative to the electorate as well as on non-economic issues that can divide up the electorate along ideological lines of whatever colour.

It is not an accident that the headline news for the past few weeks has been about a certain film called "Padmavati".

(Maitreesh Ghatak is Professor of Economics at the London School of Economics, and earlier taught at the University of Chicago. He writes regularly on economic and political issues with a special focus on India.)

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