A new study conducted by Columbia University, New York, in collaboration with the National Institute of Public Finance and Policy (NIPFP), New Delhi, brings a lot of clarity with regard to some aspects of growth and development in Indian states. Broadly, Prof Arvind Panagariya of Columbia University and Pinaki Chakraborty of NIPFP have empirically established that the fastest growing states between 1993-94 and 2009-10 were Haryana, Maharashtra, Gujarat, Karnataka and Andhra Pradesh, and each of these states had brought down poverty ratios by 15 to 23 percentage points during this period. The long-term average of GSDP (Gross State Domestic Product) from 1993 to 2009 will naturally show some of the early starters like Maharashtra, Gujarat, Andhra, Karnataka and Tamil Nadu in a much better light. However, in the more recent boom period of 2002 to 2009, many traditionally laggard states are catching up quite fast.
The study shows that in the phase of 2002 to 2009, the boom years, Orissa?s GSDP grew at the same rate as Gujarat?s?at 10%. In this phase, Maharashtra grew at 10.4% and Bihar (undivided) at 9.1%. Undivided Uttar Pradesh and Madhya Pradesh also grew at 7%. It now seems these formerly backward states have gathered some momentum, off a lower base of course. This momentum, if sustained through balanced and inclusive policy reforms, can do wonders for these states as well as for India.
Interestingly, a separate study done by economists Utsav Kumar and Arvind Subramanian of Peterson Institute of International Economics, published in EPW recently, shows that after the global economic crises of 2008, for the first time, growth rates in the traditionally developed states dipped below that of newly developing states like Bihar, Uttarakhand, Orissa and Tripura. These formerly laggard states are growing faster than Gujarat, Karnataka, Andhra and Tamil Nadu. This trend is likely to consolidate as some of the developed states are indeed witnessing the phenomenon of growth plateauing on a higher base. This is a bit like the OECD growing at 1.5% average even as the emerging market economies incrementally register 5%-plus growth rates.
Arvind Panagariya?s growth data series from 1993 to 2009 reveals another interesting feature. Gujarat?s much hyped growth story over the past decade is not borne out by hard data. Gujarat is not an outlier economy in any of the two phases shown by Panagariya?1993 to 2002 and 2003 to 2009. In both these periods, Gujarat?s growth story broadly corresponds with those of other developed states like Maharashtra, Andhra, Karnataka and Tamil Nadu.
For instance, from 1993-94 to 2002-03, Gujarat, Maharashtra, Tamil Nadu, Haryana and Andhra have average growth rates ranging between 5.2-5.8%, with Gujarat at 5.3%. Similarly, from 2002-03 to 2009-10, the average growth rate for Maharashtra is 10.4%, Gujarat is 10%, Haryana is 9.7% and Tamil Nadu 8.9%. Gujarat?s position only marginally improves in the grouping of the developed states, though no dramatic shift happens. The only difference is during this boom period (2003-2009) states like Orissa and Bihar also enter the 9-10% average growth club. Orissa, in fact, registers the same growth rate of 10% as Gujarat in this period.
Similarly, Gujarat follows the broad trend of growth rate decelerating significantly during and after the global crises of 2008. So, the conclusion that emerges is Gujarat is no way an outlier in any substantive manner. This study should take the unnecessary noise out of the largely ill-informed debate on Gujarat?s performance during and before Narendra Modi. Even Maharashtra has witnessed a sharp deceleration in growth post 2008.
One possible reason why most of the developed states are slowing down after the 2008 global crises is that exports contribute a lot to their value-added output. According to a research paper presented by economists Ravindra Dholakia and Archana Dholakia at the Columbia University-NIPFP seminar, exports contribute to 55% of Gujarat?s GSDP. If this is so, then it is not surprising that after the export markets shrank post 2008, Gujarat?s value-added output was adversely affected. The same must have happened to Maharashtra, Tamil Nadu, Haryana and Karnataka.
During this period, formerly laggard states were still building roads, power and other local infrastructure, which had no link to global trade. So these states started outperforming the better-off states in growth rates.
Dholakia?s research presents another interesting paradox. While Gujarat did hugely better than the national average in agriculture growth from 2000 to 2008, the state?s human development indices improved at a rate below the national average. How does one explain this? Dholakia speculates this could be because tribals constitute 15% of Gujarat?s population, twice the average of other states. And typically human development indices are very poor among tribals due to both cultural factors which are compounded by inadequate institutional outreach to these regions. So, possibly, the big tribal population brings down the rate of improvement in HDI in Gujarat.
Generally, Dholakia argues, Gujarat has historically had a robust and decentralised entrepreneurial culture which predates Narendra Modi or any other politician. For instance, his research paper shows by far the biggest surge in manufacturing and employment growth (much higher than national average) in Gujarat happened in the 1990s, just as the biggest surge in agriculture growth happened during 2003-2009. So, it is analytically futile to see Gujarat in pre-Modi or post-Modi terms. The Gujarat story is largely a continuum.
mk.venu@expressindia.com