In Sood’s view, the current Gujarat “model”, which other states now want to replicate, is “characterized in terms of deregulation of the domestic economy and greater integration with the global markets.” While some observers may consider this statement as something Gujarat’s ruling elite should be proud of, nearly all scholars who have contributed to the book, without exception, seem to think otherwise, as some sort of a warning bell which shouldn’t go unheeded.Initially, I was not much impressed by the theoretical hypothesis followed by the authors of the book. Almost all papers seem to start off from the premise that the policy framework of globalization and integration into the world market, embraced by India’s rulers in mid-1980s, is something terrible and shouldn’t be accepted. Frankly, I don’t subscribe to the view. Whether one likes it not, globalization is inevitable, and any amount of protectionism will only cut off the policy makers from what’s happening around the world. However, as I proceeded to read on one paper after another, the analysis on the impact of Gujarat “model” on people’s lives showed up. While there are papers which seek to suggest something that is by now well known – how social sectors, especially health and education, have remained neglected under this so-called “model” – I found that a few of the scholars showed exceptionally interesting insight into the impact of growth on employment and employability, labour and labour market, wages and the wage rate.
About a month ago, while addressing the Vibrant Gujarat investors’ summit in Gandhinagar, chief minister Narendra Modi declared that the state has been able to “attract” nearly 76 per cent (sic!) of all jobs created in the country, thus becoming No 1 in job creation. This is not for the first time that Modi made such tall claim. He has been doing it, if I correctly remember, ever since the mid-2000s. In fact, Modi’s officials say, Gujarat’s recent successes in job creation have been on account of the rojgar melas, which he organized last year. Modi or his officials never reveal from where they got these data. But the book tells a totally opposite story, fully substantiated with facts and figures. Here, I will refer to only two of the dozen papers in the book to show how growth and employment are moving in opposite direction in Gujarat.
The paper by Ruchika Rani and Kalaiyarasan A, “Galloping Growth Stagnant Employment: Mapping Regional and Social Differences”, was particularly impressive. Basing on National Sample Survey figures, the authors say that the growth rate of employment in Gujarat during 1993-94 to 2004-05 was 2.43 per cent. However, they add, “this came down nearly zero in the latter half of the decade (2004-05 to 2009-10).” Further, they say, employment in “key sectors, agriculture and manufacturing, witnessed negative growth rates at – 1.59 per cent and – 2.23 per cent per annum, respectively.” The authors give reasons for this negative rate. In agriculture, labour productivity significantly increased between 2004-05 and 2009-10 at the rate of 5.87 per cent, as compared to 2.66 per cent between 1993-94 and 2004-05. They attribute this to “the commercial and contract farming which involves production with larger capital intensity.” Similarly, the growth in labour productivity in the manufacturing sector was 9.75 per cent per annum between 2004-05 and 2009-10 as against 4.25 per cent in the previous phase.
“This is a clear reflection of rising capital intensity and falling employment per unit of capital in the state”, the scholars point out, concluding, “Gujarat has been consistently maintaining an impressive growth in income in the last decade. This growth, however, is not reflected in employment outcomes. There is mismatch or disproportionality between the sources of income and employment across sectors. Eighty-eight per cent of the state income comes from non-agriculture sectors, providing employment to only about 47 per cent of workforce. The shift to non-farm employment has not occurred in rural Gujarat, whereas there has been a substantial shift towards non-farm employment in rural India.” They add, “Gujarat has enjoyed a continuous and significant growth in labour productivity; however, the gains in productivity have not been passed on to the workers, either in terms of a rise in wages or gainful regular employment.”
Sangeeta Ghosh, in her paper, “Selective Development in Gujarat: A Study of the Manufacturing Sector”, further substantiates this argument. She suggests how the share of wages in growth value added (GVA) has been falling in Gujarat at a much faster pace compared to the country as a whole. In Gujarat, it was 39 per cent in 1980; it came down to 22 per cent in 1990s, and in 2000s it further went down to 20 per cent. The falling trend is also witnessed in Haryana, Maharashtra and Tamil Nadu, in fact in the country as a whole, but it is not as high. Ghosh says, “In Gujarat, the growth rate of wages has been 1.5 per cent in 2000s. However, this wage rate includes the wages given to supervisory and managerial staff. If we look at the growth rate of wages to workers in organized manufacturing, we see that 1990s witnessed a stagnant growth of 0.07 per cent, and in 2000s the growth rate of wages to workers actually turned negative. The higher growth rate of wages accrued to the supervisory and managerial staff, while the worker wage rate grew throughout the period of study (1990s and 2000s) at a little over one per cent.”
Based on this, Sood remarks, what’s happening in Gujarat is a precursor to what may happen in India – low employment generation, high capital intensity growth, and casualization of labour. Though witnessed in India’s industrialization trajectory, this becomes particularly evident in the ‘reform-oriented’ Gujarat. He says, "The recent ‘success’ of growth and hype about governance has done nothing to address regional, structural and employment imbalances. This selective development in the industrial sector has major repercussions on the distributional implications of growth in the state." He warns, "The current direction and orientation of manufacturing growth is likely to push more and more of the state’s population into dependence for low paid jobs in the service and manufacturing sector, and into greater uncertainty for sustainable livelihoods." One can see this already happening.
As Sood points out, contract workers in the organized manufacturing sector currently constitutes around 37 per cent of the total workers, up from 27 per cent a decade ago.
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This blog was first published in The Times of India
About a month ago, while addressing the Vibrant Gujarat investors’ summit in Gandhinagar, chief minister Narendra Modi declared that the state has been able to “attract” nearly 76 per cent (sic!) of all jobs created in the country, thus becoming No 1 in job creation. This is not for the first time that Modi made such tall claim. He has been doing it, if I correctly remember, ever since the mid-2000s. In fact, Modi’s officials say, Gujarat’s recent successes in job creation have been on account of the rojgar melas, which he organized last year. Modi or his officials never reveal from where they got these data. But the book tells a totally opposite story, fully substantiated with facts and figures. Here, I will refer to only two of the dozen papers in the book to show how growth and employment are moving in opposite direction in Gujarat.
The paper by Ruchika Rani and Kalaiyarasan A, “Galloping Growth Stagnant Employment: Mapping Regional and Social Differences”, was particularly impressive. Basing on National Sample Survey figures, the authors say that the growth rate of employment in Gujarat during 1993-94 to 2004-05 was 2.43 per cent. However, they add, “this came down nearly zero in the latter half of the decade (2004-05 to 2009-10).” Further, they say, employment in “key sectors, agriculture and manufacturing, witnessed negative growth rates at – 1.59 per cent and – 2.23 per cent per annum, respectively.” The authors give reasons for this negative rate. In agriculture, labour productivity significantly increased between 2004-05 and 2009-10 at the rate of 5.87 per cent, as compared to 2.66 per cent between 1993-94 and 2004-05. They attribute this to “the commercial and contract farming which involves production with larger capital intensity.” Similarly, the growth in labour productivity in the manufacturing sector was 9.75 per cent per annum between 2004-05 and 2009-10 as against 4.25 per cent in the previous phase.
“This is a clear reflection of rising capital intensity and falling employment per unit of capital in the state”, the scholars point out, concluding, “Gujarat has been consistently maintaining an impressive growth in income in the last decade. This growth, however, is not reflected in employment outcomes. There is mismatch or disproportionality between the sources of income and employment across sectors. Eighty-eight per cent of the state income comes from non-agriculture sectors, providing employment to only about 47 per cent of workforce. The shift to non-farm employment has not occurred in rural Gujarat, whereas there has been a substantial shift towards non-farm employment in rural India.” They add, “Gujarat has enjoyed a continuous and significant growth in labour productivity; however, the gains in productivity have not been passed on to the workers, either in terms of a rise in wages or gainful regular employment.”
Sangeeta Ghosh, in her paper, “Selective Development in Gujarat: A Study of the Manufacturing Sector”, further substantiates this argument. She suggests how the share of wages in growth value added (GVA) has been falling in Gujarat at a much faster pace compared to the country as a whole. In Gujarat, it was 39 per cent in 1980; it came down to 22 per cent in 1990s, and in 2000s it further went down to 20 per cent. The falling trend is also witnessed in Haryana, Maharashtra and Tamil Nadu, in fact in the country as a whole, but it is not as high. Ghosh says, “In Gujarat, the growth rate of wages has been 1.5 per cent in 2000s. However, this wage rate includes the wages given to supervisory and managerial staff. If we look at the growth rate of wages to workers in organized manufacturing, we see that 1990s witnessed a stagnant growth of 0.07 per cent, and in 2000s the growth rate of wages to workers actually turned negative. The higher growth rate of wages accrued to the supervisory and managerial staff, while the worker wage rate grew throughout the period of study (1990s and 2000s) at a little over one per cent.”
Based on this, Sood remarks, what’s happening in Gujarat is a precursor to what may happen in India – low employment generation, high capital intensity growth, and casualization of labour. Though witnessed in India’s industrialization trajectory, this becomes particularly evident in the ‘reform-oriented’ Gujarat. He says, "The recent ‘success’ of growth and hype about governance has done nothing to address regional, structural and employment imbalances. This selective development in the industrial sector has major repercussions on the distributional implications of growth in the state." He warns, "The current direction and orientation of manufacturing growth is likely to push more and more of the state’s population into dependence for low paid jobs in the service and manufacturing sector, and into greater uncertainty for sustainable livelihoods." One can see this already happening.
As Sood points out, contract workers in the organized manufacturing sector currently constitutes around 37 per cent of the total workers, up from 27 per cent a decade ago.
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This blog was first published in The Times of India
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