Lessons to be learnt from Narendra Modi's Gujarat

Written by Surjit S Bhalla | Updated: Oct 26 2013, 17:18pm hrs
Almost a year ago, on December 13, 2012, I published an article, The Modi Metric (http://goo.gl/XHq4oT), in the Indian Express with the explicit goal of evaluating Gujarats development in terms of both economic growth per se and improvements in living standards. Gujarat was just about to go to the polls, and there had been a constant debate (and continuing) about whether under Narendra Modis stewardship, the much-hyped economic growth had also delivered results to the poor. Of particular interest was the improvement in the lives of the Muslims. Gujarats record since 2002 has been scarred by the Godhra riots of February 2002Hindu-Muslim riots which took place just six months after Narendra Modi became chief minister in 2001.

In the 2012 article, I had offered an index of inclusion, an index that revealed how the poverty decline for a particular disadvantaged community (e.g., Muslims) compared to the poverty decline among the non-disadvantaged (not-SC-ST and not-Muslims group). For all groups, the reference calculation was the decline in absolute poverty between 1999-2000 and 2009-10. If a state achieved a higher decline in poverty reduction of the disadvantaged relative to the advantaged, it obtained a higher rank. According to this index, Gujarats rank was 15th out of 18 big states, i.e., Gujarat was the fourth-worst performer for poverty reduction of Muslims relative to the non-disadvantaged. Hence, I concluded that Gujarat has delivered growth under Mr. Modi; equally emphatically, growth in Gujarat has neither been equitable nor inclusive.

Today, the contours of the debate have changed somewhat. Mr. Modi has been elected as the BJPs prime ministerial candidate and the Gujarat development model has come under increasing criticism. Sometimes, this criticism comes in the form of fantasy, as Congresss shooter for all occasions, Mr. Digvijay Singh, recently claimed that not only was Gujarats performance worse than Rajasthan, but also that the number of poor had increased under Modi!

Others, including Nobel laureate Amartya Sen, and most of the glitterati, have been equally critical about Gujarats economic performance. Some like me based their analysis on the then latest 2009/10 NSSO data. Others used inappropriate data to draw conclusions, e.g., using data on the population-sex ratio to make inferences about the sex ratio at birth. No doubt this discussion will continue into the elections next year, and it is entirely appropriate, indeed required, than an intelligent debate take place about development, and models of development.

This debate takes on heightened importance for another reason. Two of Indias leading economistsJagdish Bhagwati and Amartya Senhave been positing their distinct and separate models of economic development. While both desire and want development, their prescriptions have an important difference. Simply put, Mr. Bhagwati would let economic growth do most of the work while Amartya Sen would want active government intervention in the form of doles, preferably doles by right, to make right the misfortunes of the poor.

The debate about performance is particularly obtuse in India. There is a considerable amount of molestation of statistics going around (e.g., Digvijay Singhs comment referred to above) and when that is not enough, many in India take recourse to debating, in Madhav Dhars words, the existence of gravity. Surely, an interesting subject for rich and other wannabe-rich Scandinavians to debate but clearly not as important as determining what is the best strategy for reducing absolute poverty in India.

This, and subsequent articles, will attempt to transparently (just as my 2012 article referred to above) discuss economic performance in India. Which model has delivered growth Reduction in inequality Education Health Poverty reduction This first article looks at the most talked about, and possibly the most important, indicator variable for inclusive growth, i.e., reduction in absolute poverty in India over the period 1999/00 to 2011/12. (The beginning point is chosen for two reasons it is a decade away and it also presents a reliable and convenient initial conditions set for Gujarat chief minister and PM-contender Modi).

The standard source used for the analysis of poverty decline are the NSS surveys for these two years. Data for 2009/10 are also reported for ease of comparison with my earlier article, and conclusion, about Modis Gujarat. The results are presented for different population groups. In addition, the data are aggregated into two population groupsthe disadvantaged, consisting of Muslims, SC and STs, and the non-disadvantaged (consisting of OBCs and upper-caste Hindus).

As is well known, the NSSO conducted a new large sample survey in 2011/12 to counter the biased influence of the 2009/10 drought year. Note, the marked decline in national poverty rates (a decline of 7.7 percentage points over 2009/10 at the national level) and in Gujarat (a decline of 6.3% for the same period).

The latest 2011/12 NSSO data radically changes the conclusions and interpretation of the nature of inclusive growth in Gujarat. The sharpest decline in poverty between 2009/10 and 2011/12 is observed for the Muslims, the very community against which a Gujarati-Modi bias is assumed and presumed. The poverty ratio for Muslims, which had not shown much change between 1999/00 and 2009/10, now collapses to only a 11.4% level from the high 37.6% level observed just two years earlier. At this level, the Muslim poverty rate is marginally below the 12.4% poverty rate of the non-disadvantaged group consisting of OBCs and upper-caste Hindus.

In the accompanying table, the lower panel B reports on the performance ranks for the different population categories. The rank for each category is based on the poverty decline in that category with reference to the decline observed for the non-disadvantaged. For Gujarat the non-disadvantaged have a poverty decline of 15 percentage points between 1999/00 and 2011/12. For SC-STs, the poverty decline is 28 percentage points (ppt) for the same period. So, the excess poverty decline for SC-ST is 13 ppt, and this is the third-largest excess decline in the country for SC-STs. In the case of Muslims, Gujarat was the second-best performing state, with West Bengal as the state where Muslims had the largest relative decline. (However, the poverty level for Muslims in West Bengal in 2011/12 was more than twice the level observed in Gujarat and near identical to the national Muslim average of 25.5%).

Election 2014 should be about development, and about the aspirations and improvement in the lives of the bottom 40% of the population (the proportion of disadvantaged in the national population in 2011). If one looks jointly at poverty reduction and poverty levels, the preliminary conclusion has to be that the Gujarat model of development seems to have performed much better than most models on offer.

The author is chairman of Oxus Investments, and a senior advisor to Zyfin, a leading financial information company. Twitter: @surjitbhalla