Gujarat's development dilemma

By Rajiv Shah
A few days back, I received an email from a non-resident Indian, working as an expert researcher in a US consultancy firm which provides different types of financial services. He said he was googling around on Gujarat development issues and chanced to see my story, based on analysis carried out by an IAS officer who retired as additional chief secretary, Gujarat government, CJ Jose. He was “helping out” Aam Aadmi Party (AAP) in any possible way he could, and had followed Arvind Kejriwal’s visit to Gujarat closely. And, he had begun doing “some research” on the Gujarat development model, about which so much was being talked about. I am not revealing his name, as he asked me not to quote him.
Referring to my story, his email said, “I know Kejriwal has questioned Modi’s claims of more than 10 per cent agriculture growth, and has said Gujarat agriculture growth has been 1.18 per cent compound annual growth rate (CAGR), whereas you claim the growth to be 0.82 per cent. Could you please let me know where I could get the Gujarat agriculture data from so that I could do my own research? I went tohttp://agri.gujarat.gov.in/ (Gujarat agriculture department website) but couldn’t find any data there.”
I forwarded him another online story on Gujarat agriculture, based on the data provided to me by the state agriculture department, but not made public. It did not give any consolidated figure but suggested that between 2003-04 and 2012-13 Gujarat’s foodgrains production grew by 3.27 per cent per annum, cotton by 2.45 per cent, and oilseeds went down by (-) 2.71 per cent. The expert researched data online, and found that data till 2011-12 were available. But he again complained, he couldn’t get data for 2012-13. He wondered: “How did you get data from agriculture department? Did you file RTI?” I didn’t know what to say. Actually, I had obtained it from an official, who wanted the “latest real picture” to be made known.
The interaction with this researcher didn’t end here. I forwarded him a few more data on gross state domestic product (GSDP) of Gujarat, one of which said that, at current prices, Gujarat’s growth rate in 2012-13 was 13.98 per cent, based on which a Gujarat-based expert had guessed that the state’s real growth rate (at constant prices, after deducting inflation) wouldn’t be more than 7 per cent. The figure is based on advanced estimate in a budget document released in February 2013. I wondered, as the Gujarat government had still not released GSDP growth rate at constant prices, whether he could work it out.
His reply stunned me. He said: “The data you are using 13.98 per cent seems to be outdated.” These are based on Gujarat government’s fiscal responsibility report, which is “dated February 2013.” He added, “The GSDP of Gujarat was Rs 6,70,016 crore (at current prices) in 2012-13 as against 6,20,044 crore in 2011-12. That is a growth of 8.1 per cent (at current prices). The Rs 6,70,016 crore figure is from the Gujarat finance minister’s speech in February 2014. Also, I have Rs 6,20,044 crore figure for 2011-12 from the Wikipedia.” So, what would be the real growth rate of Gujarat, if it’s 8.1 per cent at current prices? Presuming the GDP deflator for Gujarat at 165.0, the real growth, he said, should be about 1.8 per cent!
Of course, he added a caveat: “Unfortunately, deflator is based on own judgment. Usually, it should be close to the consumer price index, but there has been divergence in the past. I read somewhere Gujarat inflation was below national average in 2012-13. Anyways, GDP deflator is known to be subject to manipulation by various governments. Given this is election year, I wouldn’t be surprised to see governments playing around with GDP deflator. Using a reasonable deflator of 165.0 (as against India’s 171.3), it seems real GDP growth (at constant prices) of Gujarat was not even be 2 per cent. Even if Gujarat plays around with deflator, real GDP growth doesn't look too good.”
I was left wondering: Why have experts in India, keenly debating Gujarat model, failed to see this simple fact? I decided to look at Gujarat finance minister Nitin Patel’s budget speech of February 2014, which had “proudly” proclaimed, “The GSDP (at current prices), which was Rs 1,11,139 crore in the year 2000-01, has increased to Rs 6,70,016 crore in the financial year 2012-13.” Indeed, the researcher was right. The Gujarat government had revised downwards its own estimate of GSDP for 2012-13 (at current prices) from Rs 6,97,298 crore to Rs 6,70,016 crore! I didn’t rely on Wikipedia figure for 2011-12, which mentions no source. I, instead, decided to refer to the current price GSDP data released by the Planning Commission.
What I got was this: Gujarat’s current price GSDP for 2011-12, according to the Planning Commission, was Rs 6,11,767 crore (as against Wikipedia’s Rs 6,20,044 crore). Gujarat was one of the three states which had not handed over their current price GSDP for 2012-13 to the Planning Commission – others being Kerala and Rajasthan. If one takes into consideration the state finance minister’s data of February 2014 – of Rs 6,70,016 crore GSDP in 2012-13 – the growth rate (at current price) would come to 9.52 per cent, as against the all-India average of 13.25 per cent. And this is the lowest compared to all major states!
This is the picture you get for other states (as reported by the Planning Commission) – Andhra Pradesh 13.83 per cent, Assam 13.45 per cent, Bihar 24.96 per cent, Chhattisgarh 14.82 per cent, Haryana 14.90 per cent, Himachal Pradesh 12.95 per cent, Jammu & Kashmir 12.72 per cent, Jharkhand 14.34 per cent, Karnataka 13.47 per cent, Madhya Pradesh 16.85 per cent, Maharashtra 14.43 per cent, Odisha 19.84 per cent, Punjab 13.88 per cent, Tamil Nadu 11.90 per cent, Uttar Pradesh 13.36 per cent, Uttarakhand 15.06 per cent, and West Bengal 16.89 per cent.
While it is not possible to know the real growth rate (at constant prices) in the absence of a reliable deflator, with 9.52 per cent of growth rate at current prices (lowest compared to all major states), there is reason to ask a pointed question: What has happened to the Gujarat model or its much-talked-about resilience to economic shocks and slowdown? What has happened to the strong “stabilizing influences” of Gujarat economy? And, if 2012-13 advanced estimates at current prices could be released in February 2013, why similar advanced estimates couldn’t be released in February 2014 while releasing the interim budget documents? It is because in 2013-14, again, Gujarat economy has performed badly?

Comments