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The Gujarat Model – Some Facts

 By- Ravi Nair, in moneylife

The famous ‘Gujarat Model’ development has been a topic for debate ever since the term was coined in the second half of last decade. While economist Jagdish Bhagwati strongly endorsed the model, Nobel laureate Amartya Sen strongly criticised it and pointed out its basic flaws and has strongly articulated a model which pushes inclusive growth.

Historically, as a state, which was more into trade and commerce because of its geography and arid climate, Gujarat had better growth rate compared to other states, except for a brief period of four years from 1998.
Towards the end of this period, Mr Modi took over as the CM of the state and within two years came the first Vibrant Gujarat Summit
As per the latest reports, in all the eight editions put together, the Gujarat government has declared that it has signed 51,378 memorandums of understanding (MOU) since the first summit in 2003, worth a whopping Rs84 lakh crore. The government in initial years used to publish the data, but of late no such efforts are made and mere statements are given.
It will be apt to remember, the GDP of India currently stands at nearly Rs170 lakh crore. The government claims, 57% of these signed MOUs are either implemented or under implementation. We have no option but to believe this claim as no concrete data is available in any of the Gujarat government websites including www.vibrantgujarat.com. But they forgot to remove the data from one place, the website of the Commissionerate of Industries, government of Gujara

 

It gives an honest picture by putting out the actual data. From 1 January 1983 to 30 September 2016, a total of 6,251 projects were implemented in Gujarat with a cumulative investment of Rs2.76 lakh crore. It generated 10.67 lakh jobs. Further, it states, another 4,033 projects are under implementation with a total investment of Rs951,980 crore, which is projected to generate another 9.30 lakh jobs. Note the stark difference in the generation of employment. In the already implemented projects, every one crore rupees invested generated approximately four jobs whereas the projects under implementation will generate less than one job for every one crore rupees invested!

 

Let us go back to www.vibrantgujarat.com and check the tab, which says approved projects. Approved projects are those, which have signed LOIs and MOUs committing to start a new business in Gujarat with fresh investments. Once opened, a lot of different heads can be seen like urban development, road and railways, etc. Just for a fact check, open the road and railway tab and you will see a lot of construction companies’ names with address. I checked one particular company.

Let us check then how come the Gujarat government is projecting so many MOUs and letters of intent (LOI), which is in stark contrast with the actual figures? This is a very interesting story.

 

Out of curiosity, I went  to www.zaubacorp.com  and http://www.mca.gov.in/mcafoportal/checkCompanyName.do to check the details of this particular company, which turned out to be a new one (three years old), formed as a subsidiary of an infrastructure development group with a paid up and share capital of Rs5 lakh each. I was wondering what kind of investments a company with such small paid up capital will make in roads and railways. Then this name caught my attention – NHAI. Wow!
NHAI signed an MOU with the Gujarat government! That was the eureka moment. Just visit www.nhai.org and check “establishment” and “vision” to get a clear idea.

National Highway Authority of India-NHAI is the nodal agency, which takes care of the development and maintenance of National Highways. There are two things to be noticed here –

a) National Highways are a central government subject under Ministry of Road Transport & Highways and b) NHAI never invests directly in any project. NHAI, once it identifies the area for either re-development or new construction, auctions the project and invites tenders. Technically and financially qualified bidders will get the contract for the construction.

 

Then how come NHAI signed an MOU with the Gujarat government to invest in the state? The answer is that NHAI is not investing anything. Technically and financially sound engineering construction companies who already won the contract from NHAI after bidding will offload their big projects to small companies like the one mentioned earlier. NHAI gives funds to start a project, called mobilisation advance. With that the sub-contractor starts the work and submits his bills monthly and claim the dues in a stipulated time till the project is finished.  In a nutshell, what the Gujarat government is projecting as investment generated through its much hyped Vibrant Gujarat Summit is a central government funded highway development project, which has nothing to do with either Gujarat government or the Summit.

 

To clarify the unusually high number of MOUs, let us check one more head – Urban Development. Check the name and details of the companies mentioned. After checking more than 37 companies mentioned and speaking to 14 companies over phone, we can say these are small-time builders who have been asked by officials to sign up MOUs for the small-scale housing or commercial buildings they are developing in their respective localities. One gentleman, requesting anonymity, said almost all the builders in Ahmedabad signed up MOUs, irrespective of the size of the company. And whether they sign up these MOUs or not, that is the business they are into since years!

The state government says all investments came to Gujarat through foreign direct investment (FDI) route. That is what Mr Modi claimed as Gujarat CM, “Gujarat is the growth engine of India, which attracts maximum FDI.”
Let us check that now. The Reserve Bank of India (RBI) and central government data clarify that Gujarat is far behind, in a distant fifth position, much behind Maharashtra, Haryana, Tamil Nadu and Karnataka. This link (http://dipp.nic.in/sites/default/files/india_FDI_June2015_0.pdf) will show the actual amount Gujarat received in 15 years, starting 1 April 2000. Gujarat attracted less than one sixth of FDI than Maharashtra. Let us not forget, in these 15 years, Mr Modi was Gujarat CM for 13 years. Did you think, most of the investments are made by private companies? A check shows Gujarat is at a distant 4th place. (http://www.mca.gov.in/DataPortal/Ministry/DataPortal/PUC_Provisional_Consolidated_StateWise.xls) (https://data.gov.in/catalog/state-wise-distribution-number-active-companies)
In gross state domestic product (GSDP) growth, Gujarat stands at 5th position; (http://planningcommission.nic.in/data/datatable/0306/table%20168.pdf)
Similarly, Gujarat was not in top position since 2004-05 to 2014-15 in GSDP growth rate. (http://niti.gov.in/content/gsdp-constant2004-05prices-percent-growth-2004-05-2014-15)
In case of GDP, with Rs10.94 lakh crore, forget other states, Gujarat is even behind UP.
The Gujarat’s public debt has grown nearly 3.6 times since 2006 and almost five times since 2001. The State is paying Rs44.15 crore per day as interest on outstanding debt, which is again public money. The latest available data on this is the Government budget document. The total interest outflow (http://financedepartment.gujarat.gov.in/Documents/Bud-Eng_716_2017-2-23_167.pdf) and the interest Gujarat is paying on its debt is one of the highest in the country. Interest payment on public debt as percentage of revenue receipt stands at 14.32% on 2016-17. And total liabilities stands at Rs2.43 lakh crore as on 31 March 2017.
Mr Modi had a dream to clean up India when he became Prime Minister. A state in which he was the Chief Minister for more than 13 years stands at 21st place in the country when it comes to in-house latrine facility. Small and poor North Eastern states are much ahead of Mr Modi’s home state. Interestingly, all the states where Bharatiya Janata Party (BJP) was in in power for long are lagging much behind. And the states where BJP was in power at some point of time is the worst in this count.
A “developed” state like Gujarat has only 53.8% households with a TV. In this case also a couple of smaller and under-developed North Eastern states are ahead of Gujarat, which stands at 19th place in India. (http://niti.gov.in/content/distribution-households-having-assets)

The same report shows that the state has just 8.8% of population owning a computer or laptop and Gujarat stands at 19th position in the country in this parameter. And the same state stands at 13th place in the number of households, which uses computers or laptops with internet connection. In mobile and fixed line, Gujarat is at 20th place. Fifteen states are ahead of Gujarat when it comes to families owning a car. If one counts the number of families who owns all of the things mentioned here, 18 other states are richer than Gujarat.
Developed Gujarat stands at 16th place when it comes to electricity as the primary source of lighting in households. Remember, the three biggest corporate houses have put up massive power plants in the state for which Mr Modi gave them the land at such a price that was never heard of before, besides other tax soaps.
It holds 27th place in usage of solar power as primary source of energy for lighting. In usage of Kerosene oil for lighting, still at 14th highest. Gujarat is fifth from the bottom when it comes to no lighting facility at all! See the data here in this link (http://niti.gov.in/content/distribution-households-source-lighting)
It holds the 17th place when it comes to the population having their own houses. (http://niti.gov.in/content/ownership-status-households-percent)

Literacy rate? A proud 17th place in overall literacy rate (Population of 7-plus age group). And the amazing fact is that in his first 10 years as Chief Minister, Mr Modi managed to bring down the overall literacy rate from 79.31% to 69.14%. About 87% of the male population was literate in 2001. It came down to 79.66%. And females? It fell from 70.73% to 57.8%. A good 12.75% reduction. (http://niti.gov.in/content/literacy-rate-7years)
About 112 out of every 1 lakh women die in Gujarat during child birth.
 (http://niti.gov.in/content/maternal-mortality-ratio-mmr-100000-live-births) Gujarat stands at sixth position out of 20 states, which is not bad. And this is one area they have achieved decent growth. Though the national best is 60, Gujarat brought down MMR from 160 in 2004-06 to 112 in 2011-13. The latest report from the state says it has further gone down to 52. But the authenticity of that report is questioned. (http://niti.gov.in/content/maternal-mortality-ratio-mmr-100000-live-births)

But in the case of neo-natal mortality rate (NNMR), Gujarat has a dubious distinction of being 15th out of 20 states from where independent data is available. (http://niti.gov.in/content/neo-natal-mortality-rate-nmr-1000-live-births)
Under-5 mortality rate is another area where the state has performed badly. Fifty-two out of every 1000 children born in Gujarat die before reaching their 5th birthday. (http://niti.gov.in/content/under-5-mortality-rate-u-5mr-1000-live-births)
In the case of female children, Gujarat is a bit better than Chhattisgarh and Jharkhand, at 10th place, but below West Bengal.

Infant Mortality Rate is a very important parameter in HDI ranking. As per the last data available (2013) Gujarat stands at 9th with 36 out of 1,000 live birth. West Bengal Stands at 6th with 31 while Kerala tops the chart with 12. If we divide same parameter gender wise, state has the ratio of 35 and 37 for male and female infants respectively. All India ranking is nine for both category. (http://niti.gov.in/content/infant-mortality-rate-imr-1000-live-births)
In sex ratio — number of females per 1,000 males — Gujarat had a marginal improvement in 10 years, from 2001-2011, though it is still one of the worst performing states. Overall numbers improved from 918 to 920. That puts the state at 19th position out of 28.
Now let us see the performance of the state in sex ratio of children under 5 years — the number of girl children for every 1000 boys. From 2001 to 2011 Gujarat improved from 883 to 886, 28 numbers below the national average and 5th position from the bottom of 28 states. (http://niti.gov.in/content/sex-ratio-0-6-years-female-children-1000-male-children)
Education is an arena where Gujarat government felt it not necessary to spend money. In gross primary school enrolment, Gujarat stands at 22nd position.
(http://niti.gov.in/content/gross-enrolment-ratio-primary-level). In upper primary enrolment, Gujarat is 3rd from the bottom (http://niti.gov.in/content/gross-enrolment-ratio-upper-primary-level). The State has one of the worst student – teacher ratios. In primary education, the number of teachers per 1,000 students was 42 in 2001. The Modi government reduced it to 31 by 2011. And the overall student- teacher ratio came down to 29 teachers for every 1,000 students.  (http://gujecostat.gujarat.gov.in/wp-content/uploads/Publication/ser1112e.pdf)

Health was a totally neglected sector by Gujarat government under Mr Modi. He never thought of spending money to improve the sector. In fact, Gujarat’s allocation for health came down from 4.25% on 1995-00 to 0.77% in 2005-10. (http://wcd.nic.in/sites/default/files/RHS_1.pdf)
But we have other sources which shares the actual data of the government. This link will open the latest National Health Survey report of Ministry of Health & Family welfare and gives a clear picture. Immunisation is another area Gujarat is far behind and is one of the states in the mid bottom level of the table.
Only 64% of Gujarat population have access to safe drinking water facility. Out of this 64%, 39.9% get tap water from a related source. (http://niti.gov.in/content/distribution-households-availability-drinking-water-facility). This is another sector to which the Gujarat government kept reducing the budgetary allocation over the years.
The supposedly most developed state in India is still at 16 out of 22 in the poverty index, with Goa and Kerala topping the chart (http://www.in.undp.org/content/dam/india/docs/MDG%20-%20India%20Report%202014.pdf)
The latest report suggests that Gujarat has severe manpower shortage in government-run rural health systems, whether it is normal physicians or gynaecologists or any other specialised doctors. The same goes with nurses and trained midwives. For example, total specialists needed is 1,280. Out of these, 1206 positions are vacant. Look at any health related parameters in Gujarat and it is one of the worst in the country. (https://data.gov.in/catalog/rural-health-statistics-india-2011)
Some 44.6% children under 5 are suffering from malnutrition. And 54.9% female population between 15 to 49 years and 40% children under 5 are underweight. 70% are anaemic. Just because the current PM was the CM of the state for 13 years and still Gujarat is at the bottom of the table in these parameters, as per various newspaper reports, government did not publish the data from Gujarat. Select any district of Gujarat once unopened the link and Check to verify yourself. You will see no data at all. (http://niti.gov.in/file/675/download?token=-cWumkeD)
Gujarat charged maximum VAT from farmers on agri equipment and fertilizer, started at 4% and later increased by one percent. https://www.commercialtax.gujarat.gov.in/vatwebsite/download/schedule/VAT_Schedule2.pdf
Gujarat pays the third lowest wage for agricultural labourers in India. Compare that with what Kerala pays for the same work. For industrial workers
(http://labourbureau.nic.in/WRRI_JAN13.pdf) and for skilled, semi skilled and unskilled workers too Gujarat pays the lowest.
http://www.moneylife.in/article/the-gujarat-model-ndash-some-facts/51106.html

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Comment (1)

  1. K SHESHU BABU

    The Gujarat model has been projected as a ‘ model ‘ to be followed by other states. But there are many flaws as Amart

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