Growth in Gujarat hasn't been confined to 1% of population

by Arvind Panagariya

The Economic Times, December 18, 2017

It has been asserted by leading figures in the recent election campaign whose results will be known today that the 'Gujarat Model' has enriched only the top 1% of the population, that it has helped only 'five to ten' industrialists, and that it has done nothing for Dalits and tribals. While debates during election campaigns are intensely political, and one must resist attaching excessive significance to what is said in the midst of them, these claims have far too important implications for our policy choice to be left unscrutinised.

But first let me clarify what is meant by the 'Gujarat Model', at least to me. I had first used this term in juxtaposition to the 'Kerala Model' in the 2012 book, India's Tryst With Destiny, jointly authored with my Columbia University colleague Professor Jagdish Bhagwati. As we later explained in an interview in this newspaper ('Gujarat Promises Continued, Accelerated and All-Around Progress: Jagdish Bhagwati & Arvind Panagariya,' June 20, 2013,, "'Kerala Model' in our book is a metaphor for a primarily redistribution and State-driven development while 'Gujarat Model' is the metaphor for a primarily growth and private entrepreneurship-driven development."

We went on to quip that the success of the Kerala Model, in fact, owed much to the Gujarat Model since it succeeded in achieving growth while it failed to redistribute with the result that it remains the state with the highest expenditure inequality among the major states.

Therefore, to associate anything and everything that happens in Gujarat with the 'Gujarat Model' is to rob the term of its meaning. In that case, we may as well speak of the success or failure of Gujarat instead of the 'Gujarat Model'.

Measuring Performance 
Let us now turn to the evidence. How has Gujarat really performed in recent years? Consider first economic growth as measured by the Gross State Domestic Products (GSDP). Notwithstanding the efforts by some critics to disparage the state's record even along this dimension during the 2014 parliamentary election, facts are wholly on the side of the state.

According to the 2004-05 constant price series of the Central Statistical Office (CSO), the GSDP in Gujarat grew at the average annual rate of 9.9% during 2005-06 to 2011-12. Among larger states, only Tamil Nadu grew faster at 10.3%. State series at constant 2011-12 prices are not sufficiently complete to make definitive comparisons across states, but it is safe to say that at 8.9% average annual growth from 2012-13 to 2015-16, the Gujarat Model has continued to deliver handsomely. The national average growth rate during these years has been only 6.9%, thanks to the debacle during 2012-13 and 2013-14 when growth averaged just 5.9%.

But has this growth translated in shared prosperity? If shared prosperity is to be defined as every single individual or household experiencing increased prosperity over a period of half-a-dozen years or longer, I have come across no recorded instance of it in the history of mankind. But if shared prosperity means increased prosperity on average of all major groups in the society, however defined, growth in Gujarat has delivered it.

Expenditure Surveys 
The availability of expenditure surveys allows us to objectively measure the improvement in the economic status only until 2011-12. For the later years, we must wait till 2019 for the results of a new survey.

The proportion of population living below the poverty line in Gujarat fell from 32.5% in 2004-05 to 17% in 2011-12. The same trend with approximately similar proportionate decline was seen separately in rural and urban poverty. Therefore, benefits of growth in Gujarat have not confined to just top 1% of the population, or to five-ten industrialists.

But how about the Dalits and tribals? The proportion of the Scheduled Caste (SC) households living below the poverty line fell sharply from 40.1% in 2004-05 to 18.4% in 2011-12 in Gujarat. The decline was sharper in rural than urban areas. But overall, by 2011-12, the poverty ratio for the SC had had fallen close to the level of 17%, characterising the general population.

The decline in the proportion of households living below the poverty line was less sharp for the Scheduled Tribes (ST) but sharper than Indiawide decline for the group. It fell from 54.7% in 2004-05 to 35.9% in 2011-12 in Gujarat and from 60% to 43% in India over the same period.

The sharpest decline in poverty in Gujarat during 2004-05 to 2011-12 was in the Muslim population. It fell from 36.5% to 11.4% during the seven years. In 2011-12, poverty among Muslims in rural areas at 7.7% was the lowest in Gujarat among all states.

If there is one thing that our history teaches us, it is that the only friend the poor have is rapid growth and, therefore, the Gujarat Model, if you go by my metaphor. If you doubt it, ponder over the following figures. If our real per-capita income was Rs 100 a week in 1950-51, it rose to just Rs 300 in 2000 and then hit Rs 600 in 2013-14. In less than 15 years in this millennium, we have raised per-capita incomes by one-and-a-half times the increase in the full 50 preceding years.

And when do you think poverty fell the fastest?

*The writer is former Vice Chairman, Niti Aayog