Gujarat Model: Will it Work for India?

Can you make development more saleable than dole? Can Indian voters, fed on patronage for decades, be more interested in empowerment? Will aspiration be a bigger draw than entitlement? Beyond the specifics of hard socio-economic data, which is available in plenty, the 'Gujarat model' of Chief Minister Narendra Modi highlights these specific shifts in the electoral narrative. The change is neither definitive nor incontestable, with critics suggesting that Modinomics is mere propaganda, in which events such as the Vibrant Gujarat Summit mask poor performance on social indicators. Some parties, including Congress, have decided to focus their election campaign primarily on attacking the public statements made by Modi on the Gujarat model. But there is little doubt that, for once, what is up for debate before the electorate is not just caste and cultural arithmetic, but a development theory heralded by BJP's prime ministerial candidate.

So what, really, is the Gujarat model? Does it work? And can it deliver for the rest of India?

When you enter Gujarat, the first impression is of wide roads and lush agricultural fields in rural areas, and of how parts of Ahmedabad resemble a top-tier metropolitan city. This is the Gujarat that has seen unprecedented economic growth--between 2004 and 2012 the state grew at 10.1 per cent, far ahead of the national average of 7.6 per cent. But a few miles away from immaculate roads and gleaming highways, a different picture emerges. While there is no denying its success in infrastructure, investment and e-governance, the Gujarat model has limitations. These are highlighted by failings in public health and education, with the state still behind its peers in infant mortality rate and women's literacy.

But how many of these successes, and failings, are due to Modi's policies? Over the course of extensive travel in Gujarat and conversations with government officials and economists, india today identified four major principles in Gujarat governance today:  A  heavy focus on agricultural transformation and industry Encouraging private enterprise in health and education Taking urban-level infrastructure to rural areas and A decentralised model of government where schemes are tailored for specific populations. These principles could form the blueprint for Modi's plan for India.

Transforming Agriculture
Roads, Power and Water

The Gujarat growth story is essentially founded on the simple policy decision to give roads, electricity and water to everyone. The flagship scheme here is the Jyotigram Yojana, commissioned in 2006, which ensures eight hours of electric supply for irrigation for all of Gujarat's 18,000 villages and 24x7 domestic power supply that has covered up to 97 per cent of all villages. Good roads have enabled farmers with easy access to markets and resources to diversify into multi-cropping and dairy farming. Innovations in irrigation, particularly in the construction of check dams, have ensured Gujarat has recorded the fastest growth in agriculture-10.97 per cent-amongst all Indian states from 2001 to 2010.

Driving through Gujarat, there are several examples of this transformation. In Valia tehsil, for instance, farmers say pomegranates, which flower three times a year and were earlier cultivated only in the northern part of the state, have been added to the region's rich harvest of papaya, banana, sugarcane and chikoo (sapodilla). According to Dinesh Padaliya, assistant director of horticulture for Surat and Bharuch, farmers have benefited from having a horticulture officer in every taluka while the state government also encourages dairy farming. Cotton, the high-value segment (livestock, fruits and vegetables) and wheat are identified as the main sources of growth as their production and value has multiplied rapidly.

But can this performance in agriculture be repeated in other states? According to Apoorva Oza, CEO of the Aga Khan Rural Support Programme (AKRSP), which has been working in Gujarat for several years, the Jyotigram scheme costs Rs.2,000 crore. "Inflation included, the scheme can be replicated in almost the entire country at a cost of around Rs.65,000 crore," he says. That figure is high but manageable; Rs.65,000 crore was the total amount allotted to just fuel subsidy alone in 2014-15.

The flip side to agricultural growth in Gujarat is that it has been accompanied by a decline in the number of farmers, which is a good trend in itself. India does need to move people out of farming to the rural service or industrial services sector in urban India. According to the 2011 census, the number of farmers in Gujarat has decreased by 355,000 in 10 years while there is a concurrent increase in the number of unemployed agricultural labourers. The Census figures also show an increase in this period of over 2.2 million industrial labourers in Gujarat, suggesting that there has been a large migration towards cities from the rural areas. If a similar pattern occurs across the country, then any agricultural growth will have to be accompanied by job creation in non-agricultural sectors.

Re-urbanising the State
Making villages modern

At a function in Ahmedabad in 2011, Modi acknowledged there was a problem of large-scale migration to urban centres while announcing a pilot project called 'rurbanisation' for 50 villages. This, according to Modi, combined a process of preserving the "soul" of villages by providing all the civic and infrastructure facilities available in big towns and cities.

Patients wait outside a doctor's clinic at Bhiloda Village in Gujarat

Since it was launched only in 2011, results on the ground are hard to see, especially in the tribal areas around Gujarat. It conforms, however, to a general commitment to upgrading infrastructure. Several villages from Anthasubah in north Gujarat to Khoraj near Ahmedabad have witnessed upgradation of basic facilities, whether it's new schools, hospital buildings or concrete roads in villages.

However, the term rurbanisation is no different from other rural development programmes being run across the country so the debate about whether it can be implemented nationally does not arise. Critics point out that the concept was first coined by Dr APJ Abdul Kalam when he was President. He called it PURA (Providing Urban Amenities to Rural Areas).

Industry
Land and incentives

One major aspect of physical infrastructure in Gujarat is the specific interventions by government for industry. The state's industrial growth jumped to 12.65 per cent during 2005-09 from just 3.95 per cent during 2001-04. A lot of credit for this goes to the government's policy of supporting big business through infrastructure and availability of land.

The industrial policy of 2009 provides a "merit-based" package of assistance to core infrastructure projects involving a minimum investment of Rs.5,000 crore. The state also offers a significant advantage through privately run ports, which were liberalised as far back as 1995. Gujarat saw a radical change in its industry structure from the 1980s as major companies such as Reliance and Essar set up their units in Jamnagar and Vadinar. More recently, Tata Motors shifted its Nano car plant from Singur in West Bengal to Anand in 2008.

While allegations by opposition leaders, including AAP founder Arvind Kejriwal, of subsidised sale of land to business houses, have been denied by the companies and the government, the one caveat is that few incentives have been given to small scale industries in cities such as Surat.

Sanjay Jagnani, president of the Federation Of Surat Textile Traders Association, says that there is hardly any specific government help for small-and medium- scale factories. The business, which at present grows at 10 per cent, "can grow twice as fast with government help", he says.

Decentralisation

Taking government to the people

Since 2005, Gujarat has implemented a host of schemes aimed at decentralising government and taking essential services to people in villages. The marketing around these schemes is innovative-the interaction with villagers is celebrated as a kind of festival. The Krishi Mahotsav, for instance, is a festival where scientists, government officials and agriculturists go to villages to educate farmers about drip irrigation, soil testing, rainwater harvesting.

Children at a school in Gujarat's Sabarkantha district

The government also organises two festivals-Kanya Kelavani to encourage the enrolment of girl children and Gunotsav, an annual drive to assess the quality of primary education. Under these schemes, ministers and bureaucrats go to all 18,000 villages and spend three days surveying schools and talking to families about the importance of educating girls, a traditional weakness in tribal areas. These programmes have been instrumental in taking the primary enrolment rate from about 73 per cent to about 85.3 per cent in 2012.

The enabling factor for these schemes is a strong system of local self-governance called the "Apno Taluko, Vibrant Taluko" (Our Taluka, Vibrant Taluka). Another aspect of decentralisation is using the knowledge of local officials to devise area-specific plans for tribal and coastal populations. The Vanbandhu Kalyan Yojana, introduced in 2005, is one such scheme where the work of various government departments is synchronised to implement schemes according to the specific needs of the tribal population. The Sagarkhedu Yojana, for coastal populations, follows a similar model. Government figures mention that between 2007 and 2012, the Vanbandhu scheme provided jobs to around 10,000 people who had failed Class 10 or 12 examinations and saw 50 new schools opened in the 42 tribal tehsils of the state.

Can this model of decentralisation be taken national? Economist Bibek Debroy says, "Gujarat has a healthy tradition of Panchayati Raj that goes back to the 1960s. That makes decentralised planning easier." Implementation in other states would first involve strengthening local self-government.

E-Governance
One-on-one interaction

The implementation of e-governance schemes has cut red tape at the ground level. Each tehsil headquarters has a Jan Vikas Kendra where more than 100 certificates are available in a matter of minutes on nominal payment. Many of these certificates are now available to villagers at the village E-Gram Vishwagram Centre, part of the government's unique network connecting all the 13,700 panchayat villages in the state.

The E-Jamin project of the Revenue Department has digitised the land record data of almost half of Gujarat's landowners, significantly cutting down cases of fraud in land ownership. Perhaps the most innovative scheme is the Swagat Online Grievance Redressal System run by the Chief Minister's office: Modi goes online to solve the problems in villages by talking to the complainants directly for almost four hours every fourth Saturday.

According to Pankaj Gupta, former head of Tata Consultancy Services, who implemented several e-governance projects in Gujarat, the cost for implementing these schemes has been kept low. "Eight big projects in the state and about a dozen small ones implemented since 2003 have been at a cost of about Rs.1,200 crore. If a nodal agency takes it up, it can be easily implemented across India at a cost of just over Rs.20,000 crore," he says.

Healthcare
The private choice

Despite the success of interventions such as e-governance and area-specific schemes, social indicators in health and education continue to be dire. According to figures from the Union Ministry of Health and Family Welfare for 2012, the shortage of doctors at Public Health Centres in Gujarat was 34 per cent while the national figure is 10 per cent. A government hospital in the tribal village of Bhiloda, 150-odd km north of Ahmedabad, presents a snapshot of the state of public healthcare in rural Gujarat. As patients line up outside a single room on the ground floor, a lab technician explains that the 98-bed hospital is catered to by a single medical officer. About 400 patients visit the hospital every day.

The state's answer to overcoming the manpower problem is giving people the choice to go to private health providers. The Mukhya Mantri Amrutam Yojana allows up to five members of a BPL family to be treated in a government-approved private centre for up to Rs.2 lakh while the Chiranjeevi Yojana encourages women to deliver children in private hospitals. The 108 ambulance service, run by the GVK group, has a fleet of 450 ambulances that it dispatches even to rural areas.

Does the push for private healthcare work? The evidence is mixed. Gujarat's infant mortality rate (IMR) was 38 in 2012, lower than the national average of 42 but much higher than states such as Tamil Nadu (21) and Maharashtra (25). Maternal mortality rate (MMR), or the number of women dying from childbirth per 10,000 births, is 122 for Gujarat, well behind Kerala (66) and Maharashtra (87). One reason for this, however, is the 15 per cent tribal population in far-flung areas.

Till recently, doctors in rural areas were free to practice in private hospitals after paying a bond of Rs.1.5 lakh. The government has now increased the bond to Rs.5 lakh and has brought in a further 2,000 MBBS seats in the state. The plan allocation under health has been increased by 24 per cent in the state budget for 2013-14 to address some of these shortfalls.

Education

Not enough teachers

Figures from the District Information System for Education (DISE), an arm of the Sarva Shiksha Abhiyan, confirms a problem beyond the primary education level. In a 2011-12 survey, the DISE found that the student-teacher ratio for higher secondary and intermediate education was 54, compared to the national average of 32. And according to a 2013 DISE report, while Gujarat's enrollment ratio is 85.3 per cent at primary level, it plummets to 48.77 per cent at the secondary level. Overall, the dropout rate in schools is 58 per cent compared to the national average of 49 per cent.

A variation of the manpower problem in healthcare exists in education as well. In Navbhavnath village in northern Gujarat, the government primary school has impressive infrastructure-10 classrooms, a computer room and separate toilets for boys and girls. The teachers in this school are all part of the Vidya Sahayak Scheme under which they are paid a part-time salary of Rs.5,300 a month--a fact admitted to by BJP leader Amit Shah at the India Today Conclave, though he clarified that they were part-timers for four years, after which they were made permanent.

These poor salaries paid to teachers have a ripple effect. A person qualified enough to be a secondary school teacher is more likely to look for other full-time employment, and it naturally follows that the teacher shortage is the worst at the college level. According to a 2013 news report, over 1,700 posts lay vacant in engineering colleges across Gujarat. There is a commitment to improve-the government has increased the number of universities in the state from 15 to 52 since Modi came to power. But so far the benefits have been limited due to shortage of teachers. In 2013-14 government increased its plan allocation on education by 43 per cent.

Verdict
Not perfect, but a lot to offer

Economists point out that Gujarat has the advantage of ideal conditions-large tracts of land owned by the government can be given to industrial houses, terrain is favourable for building roads, while the Gujarati business acumen is a virtual guarantee of success. It cannot be denied, however, that Gujarat under Modi has seen a singular commitment to infrastructure that has transformed agriculture and is slowly changing the face of Gujarat's villages. Similar levels of economic growth may be hard to replicate in other states.

In the period that it experienced a growth rate of 10.1 per cent, Gujarat was overtaken only by two states-Maharashtra (10.8 per cent) and Tamil Nadu (10.3 per cent). According to the 2011 Human Development Index published by the United Nations Development Programme, the latter two have steadily taken their human development index (life expectancy, education and income indices) higher than the national average while Gujarat remains below it.

Government interventions in terms of taking services to the villages and introducing technology can be easily implemented across India. But unless they are allied with a commitment to human capital-good doctors, good teachers and skilled workers-social indices will remain a stumbling block. The government has taken steps by raising the bond for doctors and increasing the number of universities. Social indicators take a long time to improve, and investments made today will only offer dividends in a decade or so.

Two things are clear. Gujarat is not yet the perfect state that supporters of Modi would have us believe, nor is it as broken as Kejriwal and others suggest. If it irons out certain problems, notably in health and education, it can set the standard for the modern Indian state for others to emulate.

Is Gujarat really a success story?

Gujarat really a success story

A new book by Bibek Debroy on Gujarat looks at how this much-talked about state has performed in economic terms. The author argues history, luck and administrative clarity have been the determining factors.

There has been a discernible pickup in Gujarat's growth performance since the 10th Plan (2002-07), the five-year Plans being natural periods for breaking up the timeline. It's tempting to argue that there is nothing exceptional in this. Gujarat grew fast during the 8th Plan (1992-97) too. While that's true, one should accept that as development occurs, it becomes more difficult to sustain higher rates of growth. 

Among larger and relatively richer states like Maharashtra, Haryana, Gujarat, Kerala, Punjab, Tamil Nadu and Karnataka, it is more difficult to find sources of growth. Growth tends to taper off. Relatively poorer states like Bihar, Orissa, Madhya Pradesh, Assam and Jharkhand find it easier to catch up. Had historical trends alone provided the momentum for growth, Karnataka should have also grown extremely fast.

Moving to a higher growth trajectory is important. But reducing the volatility of growth is no less important. Growth rates in Gujarat have become much less volatile. Given Indian conditions, volatility is fundamentally a function of what has been happening to the agricultural sector.

SECTORAL ISSUES 

In any discussion of any country or state's economy, it is customary to discuss sectoral compositions of GDP or GSDP early on - primary/ agriculture, secondary/industry, tertiary/services etc. In popular perception, at least in some quarters, Gujarat's economic growth is about industry. Gujarat is about an investment destination for industries, about Vibrant Gujarat. It is about sectors like bio-tech and pharmaceuticals, chemicals and petrochemicals, engineering, automobiles and ancillaries, food and agri-business, gas, oil and power, gems and jewellery and IT.

Industry isn't just about large-scale industry. That's a misconception. The 2009-10 survey of the Annual Survey of Industries (ASI) covered the entire factory sector. This shows an increase in the number of factories to 15,576 and 9.8% of India's factories are in Gujarat. At 13.22%, the share is higher in net value added. In decreasing order of importance, these factories are in segments like chemical and chemical products, basic metals, machinery and equipment, non-metallic mineral products, textiles, food products and pharmaceuticals. Together, they provided employment of 1.2 million.

Provisional figures show an increase in the number of factories to 25,206 in 2010, with an employment of 1.3 million. 0.13 million MSME enterprises in Gujarat were in 369 clusters, a pattern also exhibited in Tamil Nadu and Uttar Pradesh, cluster being defined as a concentration in manufacture of the same product group.

This suggests that the positive externalities of cluster formation have tended to work and in all probability, many of these MSME enterprises perform an ancillary function. Also interestingly, at least for SSI, there has been a sharp increase in the number of registered units...At the lower end of the industrialization spectrum are cottage and rural industries. There are cluster development schemes for khadi, handlooms, handicrafts and skill upgradation and market development schemes.

Other than schemes like Sagar Khedu Yojana, Vanbandu Kalyan Yojana, Garib Samruddhi Yojana and even Garib Kalyan Melas, something like Mission Mangalam is also an attempt to integrate animal husbandry, agro processing, food processing, aquaculture, processing of forest products, handlooms, handicrafts, garments, bamboo and timber products into markets, through Sakhi Mandals, self-help groups (SHGs) and other communities of the poor. Gujarat Livelihood Promotion Company Limited (GLPC) was set up in 2010 to implement Mission Mangalam. Part of this inclusion is a financial inclusion agenda.

RURAL PUSH

Gujarat is known as a state with a strong manufacturing base and in constant prices, the primary sector's share in GSDP has declined from 19.5% in 2004-05 to 14.6% in 2010-11, a decline that was mentioned before. Agriculture's share (this includes animal husbandry) has declined from 13.2% in 2004-05 to 10.9% in 2010-11. While the share has declined, the growth rate of Gujarat's agriculture, especially since 2000, has been remarkable and has been commented upon.

Gujarat's agriculture has grown at more than 10%. In addition to water, electricity and roads, there have been other factors too. The Krushi Mahotsav programme was started in 2005 and is a month-long mass contact programme with farmers, including mobile "Krushi Raths". Soil health cards are issued for every plot of land. The Gujarat Cooperatives and Water Users Participatory Irrigation Management Act was passed in 2007 and participatory irrigation management introduced.

Through the Sardar Patel Participatory Water Conservation Scheme, check dams are built with monetary contribution from beneficiaries, 20% in some cases and 10% in others. Animal health camps have been organized in several villages...Of more recent vintage has been the Integrated Wadi and Agriculture Diversification Project (IWADP), started in 2009...IWADP requires a participating entry free from BPL ST families who wish to participate. IWADP has two distinct strands.

There is Project Sunshine strand for the dryland regions of north and central Gujarat, where one tries to push crops like hybrid maize, potato, mustard, pigeon pea and Bt cotton in districts like Sabarkantha, Banaskantha, Panchmahal, Dahod and Vadodara...[the] Jeevika projects for water-intensive areas in south Gujarat, where one tries to push vegetables like tomato, bitter gourd, bottle gourd, okra, pointed gourd, parwal and turmeric and fruits like mango, banana, cashew in districts like Narmada, Valsad, Tapi, Navsari, Surat and Dangs.

PHYSICAL INFRASTRUCTURE

In 2001, Gujarat was a power deficit state, by roughly around 2,000 MW. By the end of 2012, Gujarat will have a power surplus, though expected increases in GSDP growth also increase the demand for power. However, the Gujarat success story isn't just about the macro generation situation. It is also about reduction in T&D losses, down from 35.90% in 2002-03 to 22.20% in 2006-07. It is 20.13% in 2010-11. This is partly because T&D losses aren't actually transmission and distribution losses. They are also about theft and unmetered supply.

Other than metering, theft of electricity became a criminal offence and the law was enforced, with distributors insulated from political pressures. There were special checking squads...Provisions were made for sealed meters that were tamper-proof. Through an e-Urja project, electronic billing and payment was introduced. Faulty meters were replaced. Unauthorized connections were regularized through one-time settlements. The Jyotigram Yojana (JGY) ensures 3-phase power supply to all villages.

The key was a bifurcation of supply lines into dedicated agricultural feeders. For agricultural use, one would thus be ensured continuous power for 8 hours a day, at pre-determined times. For other rural loads, there would be 24x7 power. A 24x7, 3-phase supply was provided to JGY feeders. These then provided 8 hours of 3-phase continuous supply to agricultural feeders and 1-phase 24x7 power to other rural uses.

The argument about people wanting subsidised power and refusing to pay higher tariffs is misplaced. People are prepared to pay, provided that the quality of power supply improves. It was no different for JGY. Once power at pre-determined hours was available, there was less of an incentive to divert subsidized power for agriculture to domestic household use. JGY helped reduce T&D losses. It also helped reduce transformer failures. More importantly, it led to all villages being electrified, without load-shedding, and this had positive socio-economic multiplier benefits.

GUJARAT STORY 

Is there a Gujarat story? Clearly, there is. That's reflected in high GSDP growth since 2002 and is also reflected in poverty declines, with no significant increase in inequality, data constraints notwithstanding. Is this reflected in human development outcomes improving, especially in backward geographical regions and backward segments of the population? 

The evidence suggests that there have been improvements, especially after the conscious focus on such regions and segments since the 11th Plan (2007-12). Therefore, if Gujarat is being criticized on inequitable development, the time-line of data points is important. Pre-2007 data are not pertinent and one must also remember that social sector outcomes often improve with a time-lag. At best, one can complain that these improvements are not yet reflected in northern and central Gujarat. 

If one accepts this Gujarat story, one can move on to the next question. What is the Gujarat model and what has happened? It is one of freeing up space for private initiative and enterprise and the creation of an enabling environment by the State. It is one of decentralisation of planning and empowering people. It is about targeted public expenditure through specific schemes, supplementing CSS-s with State-specific schemes. 

It is one of bureaucratic empowerment and improving the efficiency of public expenditure. It is one of feedback loops from the government machinery to people and from people to the government machinery. It is one of delivering public goods (water, roads, electricity, schools, education). 

FOUR FACTORS 

Stated thus, this is a standard development template that any state ought to adopt and implement. The difference is that not too many states have implemented the template. It is always difficult to disentangle the various factors that go into ensuring the successful implementation of the Gujarat model. First, there is a legacy factor and earlier Gujarat governments, prior to 2002, have left positive impact. 

Second, Gujarat has had a healthy tradition of private entrepreneurship and an equally healthy skepticism of government. Third, in sectors like water and roads, Gujarat has also benefited from favourable exogenous circumstances, as it has from negative push factors in other states, automobiles and auto ancillaries being an obvious instance. Fourth, the present political leadership has also had a role in empowering the bureaucracy, clamping down on corruption, decentralizing planning and delivery and focused intervention for backward regions and segments. 

While disentangling is difficult, it would be uncharitable and unfair to deny this fourth element. The pride in "asmita" begins from the top. And if that is disseminated and successfully trickles down, quite a bit has been achieved.