Gujarat's high growth trajectory has meant development of corporate sector, neglect of poor: Economist

In a recent analysis, Shipra Nigam, consultant economist with the Research and Information Systems for Developing Countries, Ministry of External Affairs, New Delhi, has said that “there is little that is new in Gujarat’s developmental model.” Quoting extensively from a book, “Poverty Amidst Prosperity: Essays on the Trajectory of Development in Gujarat”, published this year, Nigam says, “Gujarat’s market led growth operates within the new-liberal paradigm that has for some decades been touted by the IMF, World Bank and inc as the panacea for all ills in developing countries. It is a frame that has been widely contested, critiqued and discredited for its abysmal failure in bringing in sustainable, equitable and participatory growth within the developing world.”
“In fact, the paradigm has been held responsible for inducing and aggravating the enormous difficulties faced by many of the developing countries. As the analysis in the book confirms, the ‘Gujarat Development Model’ is nothing more than a fervent adaptation and implementation of this chosen path favoured by the Indian state itself since the mid-1980s. Hence, along with the imminent candidature of Narendra Modi as BJP’s prime ministerial nominee, the celebration of this developmental model by India Inc assumes ominous significance.”
Nigam says, “While Gujarat’s average GDP growth rates in the past decade are higher than the national average and slightly above those of other high performing states, the gap has been narrowing overtime, which also coincides with an ‘investment fatigue’ that has set in recently. Since Gujarat’s infrastructure is not markedly different from other industrially competitive states, the substantial difference in investment levels is frequently attributed to the ‘investor friendly governance structure’.”
Giving the instance the biennial Vibrant Gujarat Global Investors Summit, she says, it “is often highlighted as an example of the state’s proactive role in promoting investment. However its success seems to be waning in recent years. Out of the total MoUs signed under these successive summits, the share of projects implemented and under implementation have continuously declined from about 73 % in 2003 to 13% in 2011. Moreover, the state’s share in investment intentions in terms of IEMs ( Industrial Entrepreneur Memorandum), letters of intent (LOIs) and Direct Investment Licences (DILs) has declined from early 20’s in percentage in 2005 to less than 10 % in 2011.”
Quoting Atul Sood, who has edited the book, Nigam points out, “In Gujarat the investor is no longer just the source for resources but the one who determines the priorities of development and this has had serious consequences for the sustainability and distributive justice of the entire growth process. The path of growth, its trajectory, is not defined by the state, or any planning body of economists; it is decided by investors, financial institutions, and corporate firms. The book shows how the economy of Gujrat has been given over to the corporates. They invest in it and they also sing all the praises of the development model.”
Thus, “37% of the total investment in Gujarat in the last two and a half decades has been in infrastructure development. The state’s infrastructure development strategy involves two basic components: (1) promoting private integrated investment to develop ports, rail, road and power sectors and (2) developing large enclaves for industrial and service sector growth as ‘greenfield sites’ with world class infrastructure. In all cases this is sought to be done through massive concessions, rebates, subsidies and even direct handing over of financial control over revenues to attract the private sector.”
She adds, “These include initiatives like the Investor Support Systems (ISS), the Public Private partnership (PPP) model, establishment of Special Economic Zones (SEZs) and Special Investment Regions (SIRs) to create ‘world class infrastructure’ and several mega projects (units with minimal investment of Rs 1,000 crore in core industrial sectors and Rs 5000 crore in infrastructure projects). The 2009 industrial policy of the Gujarat state locates these initiatives within a larger central government framework to create Delhi-Mumbai Industrial Corridor (DMIC), utilizing its coastal proximity and geographical location within this project. The DMIC plan itself is full of references to setting up industrial areas and infrastructure in Greenfield sites at Dhar, Pune, Alwar, Surat, Rewari and Muzzafarnagar and is integral to Gujarat’s own infrastructure and development strategy.”
Pointing towards the huge environmental and human costs, she says, “The DMIC plan on groundwater indicates that Gujarat would have to allocate water for industrial uses by diverting water away from irrigation and domestic purposes. Further, the plan envisages migration figures of 94 million workers by 2039. But nowhere in its sweeping grandeur does the plan state how the consequent multiplication of urban demand for scarce water and other resources would be met, how would the water be distributed and who would pay the price? But the answers are not difficult to guess. In implementing this development strategy Gujarat has sought private investment across the board. Key sectors – traditionally held to be the preserve of the state – such as ports, roads, rail and power have been handed over to corporate capital. This has meant, inevitably, that the government has abdicated all decision making powers, as well as functional and financial control over such projects.”
Further: “Nowhere else in the country has this abdication of responsibility been so total, nowhere else has the state given over the economy so entirely to the corporates and private investors. For instance, the BOOT (Build Own Operate Transfer) policy initiative for port development involves royalty holidays instead of revenue sharing, permission to investors to adjust royalty against capital costs, freedom to developers to collect charges and tolls, land acquisition for private investors, 30 year window to make profits, special arrangements of forward linkages to private consortiums and SIRs and so on. The policy restricts the role of government to minimum and allows complete operational and tariff freedom to the investor. Not surprisingly, Gujarat leads the country in terms of private investment flows in projects implemented and underway for port development.”
Nigam quotes Sood as saying in the book, “Road and rail expansion is less focused on increasing access of human settlements but more about improving and strengthening access to SEZ’s and minor ports… In addition the private investment in infrastructure is dovetailed and integrated with the industrial corridor, which in itself is suspect in terms of gains it will bring to the local people and its implications for groundwater in water scarce regions… Gujarat seems to have internalized the two falsehoods mentioned earlier, to turn to private sector for addressing infrastructure and second to give preference to ‘Greenfield sites’ rather than address the aggregative challenges of infrastructure inadequacy.”
Coming to the speculation in land fuelled by legislative changes brought about ostensibly to promote infrastructural and agricultural development, Nigam quotes Sucharita Sen and Chinmoyee Malik’s chapters how in Gujrat, the number of households of the smallest farmer group has increased, but not the acreage they control, while the largest farmer groups have gained in acreage, indicating worsening inequalities. “This is contrary to the trend at the all-India level. The position of STs and SCs has also deteriorated overall except in case of SCs in the highest income size class leading to a rise in intra-caste inequalities within the latter. While incidence of landlessness has reduced overall (though starting from a much higher initial base as compared to national averages), it has increased in tribal areas ( in particular in the Panchmalals, Dahod and Dang regions ). These also happen to be the most underdeveloped regions in the state.”
Nigam quotes from the chapter by Ruchika Rani and Kalaiyarasan to map the stagnant and socially discriminatory employment conditions that persist in this period of high output growth. “There has been a significant mismatch between sources of income and employment leading to low employment elasticities of output and ‘jobless growth’. Employment growth in manufacturing and services turned negative in the last five years. Whatever growth in employment occurred in the last decade was largely in the category of casual- and self-employment indicative of rising informalisation. There were sharp regional differences in employment outcomes with rural Gujarat experiencing negative growth rates in the last five years. Employment was also unevenly spread across social groups and minorities. Upper caste Hindus and a small proportion of SCs had a proportionately large share in regular employment within manufacturing and services, with most of the rise for SCs in services being in casual employment.”
Nigam, whose analysis was published as a blog in an online journal, says, “While urban poverty levels for Muslims stagnated, those for Hindus declined by around 4 percentage points. Again, while per capita expenditure grew by 2.5 % p.a in the last five years, the increase for STs was a mere 0.14%, with an exponential widening of gap in growth rates of per capita income levels between STs and the rest. In urban areas poverty has increased for both SCs and STs while rural poverty has declined. However the extent of poverty for STs in rural areas is still two-and-a-half times higher as compared to others . While overall poverty for SCs as a group has declined and they seemed to have gained more than STs, intra group inequalities within SCs have again risen substantially.”