An analysis of the progress of Gujarat in the Modi era

Here is an alternative view on a recent (another) (rudimentary) #statistics hit-job ‘Modi’s myths about Gujarat’s growth and other hype’ http://www.rediff.com/business/column/modis-myths-about-gujarats-growth-and-other-hype-column/20120711.htm

The progress of Gujarat in the Modi era (2002-2003 till 2011-2012 and continued..#) has been lauded so much that critics are going out of their way to undermine his impact on the state of Gujarat. Well-directed critiques are welcome as they help the administration in refocusing on the task at hand. But a cynical article like this raises a different question – Was the data correct? Was the math right? We take a re-look at the mathematics behind the calculations and try to reaffirm the veracity of the Gujarat’s growth story.

Critiques of Modi are so desperate to prove the man wrong that they selectively twist data and use it out of context to validate certain biases. In this article as well the author selectively uses data to present a fallacious alternate reality. We use the state-wise adjusted data (for the base year change that was done thrice 1993-94,1999-00 and 2004-05) for year on year growth rate data available from the planning commission website[1] to prove our point. Adjusted data is data adjusted for the base year change for calculating GDP that was done thrice since 1990’s – 1993-94, 1999-00 and 2004-05. Without taking this adjusted growth data CAGR calculation would be faulty.

We divide the available adjusted data into two parts – Pre-Modi (1994-95 to 2001-2002) and Post-Modi assumed office through now (2002-2003 to 2011-2012). Though Modi joined office in October, 2001 we assume that his administrative decisions would only start showing results from the financial year 2002-2003. A calculation of the growth rate for the two periods described above is being presented for the five states mentioned in this article.

State 1994-95 to 2001-02 2002-03 to 2011-12*
Gujarat 6.22 10.22
Maharashtra 4.89 9.8
Tamil Nadu 5.47 8.91
Karnataka 6.22 7.8
Andhra Pradesh 5.63 8.23

We can clearly see that the growth rates of Gujarat are significantly different in the two periods. Gujarat has done a lot better in the Post-Modi era as compared to Pre-Modi. One should also understand that sustaining a 10 percent growth is not easy. Economists world over believe that sustaining a high growth rate is extremely difficult and it is a commendable feat by the Gujarat government to maintain such a high growth rate year after year. It takes extreme will power and exemplary coordination to push forward reforms for growth at any level as can very well be seen by the present situation at the centre.

Sustaining a high rate of growth demands the creation of a positive outlook by the government supported by infrastructure developments. Gujarat has provided for roads, ports, SEZs, power and easier regulatory framework to attract investment. At a time when states like Maharashtra have created a mess out of the Dabhol power project, the ease with which Tata Motors were able to start operations in Gujarat after their problems in West Bengal clearly indicates the focus of the state government towards economic growth. That decision has led to the creation of a new automobile hub in the area with players like Ford, Maruti and Hero joining in. A number of special economic zones have been created in the state to facilitate investment. Not only has the industrial growth been robust but the agricultural growth in the last 10 years in Gujarat has also surpassed any other state of India suggesting a success story in all the important sectors of the economy. This is reflected in the per-capita GDP for Gujarat which is the highest among these five states.

Now let us turn towards the poverty data of the report. On one hand, the author claims that poverty alleviation is through centrally funded schemes rather than state interventions. The author contradicts herself in the very next line that “without growth, people won’t part with their money for the poor”. We would very much like to know who “these people” are. Both Maharashtra and Andhra Pradesh , being Congress led states receive a favorable bargain from the center. Also, it is widely known how the Central government readily parts with money it doesn’t have (burgeoning fiscal deficit)! The Gujarat government under Modi has focussed on countering poverty through economic growth which provides increased employment opportunities to its citizens rather than direct dole out of funds obtained from the central government. Such a growth is sustainable because it directly empowers the people of the state. Funds are invested in developing social infrastructure like schools, health centers, etc. which are instrumental in long term development of the population. While the reduction in overall poverty for Gujarat in the period between 2004-05 to 2009-10 is a respectable 8.6%, its rural poverty reduction is a much higher, 12.4%. It shows that economic growth in the state has certainly trickled down.

We must also not forget the context in which this progress has been achieved. The state was reeling under the devastating effects of the earthquake in 2001. Rebuilding the state after that calamity and getting the economy back up-to speed is no simple task. So, as the author claims, Gujarat was not a shiny object handed over on a platter to Modi. He took over the reins of the state when the growth was consistently low (1999-00 and 2000-01) and when the morale of the public was in tatters post the earthquake. Currently, fiscal deficit of the state is the lowest among these five states despite the fact that a considerable share of revenue in other states is also gained through taxes on liquor sales which is not the case with Gujarat (as it is the only state in India where there is prohibition on manufacture and sale of liquor).

So, whether one may like it or not, the impact of Modi’s government on the state’s economy cannot be undermined by simple rudimentary statistics. The state has grown through leaps and bounds in the last decade. There will always be room for improvement in social and economic development. However, Gujarat’s story in the last 9 years has something for every other state to learn rather than to criticize and envy.


# This post was titled ‘The progress of Gujarat in the Post Modi era’ meaning the time period post Mr. Modi assuming office in 2001 till now. @NR_Tatvamasi made a very interesting point on twitter that 2001 on-wards is the Modi era and continuing…..we have changed the title because we also believe the same !

*We take the data for GSDP growth rates for the year 2011-2012 for Maharashtra as 8.5%[1] and Gujarat as 9.1%[2].[1] http://www.indiainfoline.com/Markets/News/Maharashtra-2011-12-GDSP-at-8.5-percent-versus-11.3-percent-year-ago/5382469477

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