Development In Gujarat Essay

The growth story of Gujarat is one of a state punching above its weight. With only 6 per cent of India's land mass and barely 5 per cent of its population, Gujarat has managed to account for 7.6 per cent of the country's GDP and 22 per cent of its exports. Its annual Gross State Domestic Product

The growth story of Gujarat is one of a state punching above its weight. With only 6 per cent of India's land mass and barely 5 per cent of its population, Gujarat has managed to account for 7.6 per cent of the country's GDP and 22 per cent of its exports. Its annual Gross State Domestic Product (GSDP) growth from 2001 to 2013 (growth has slowed down since) averaged nearly 10 per cent, which is faster than India's. This is an extraordinary accomplishment. Between 1980 and 2013, Gujarat grew at an average rate of 5.1 per cent. If Gujarat were a country with a 10 million-plus population, this would be the third-fastest growth rate in the world, after China and South Korea.

What were the factors that helped Gujarat accomplish this extraordinary growth? Was it geography, native entrepreneurship, a historical edge in commerce and trade or simply good governance? The reasons for Gujarat's growth can be debated. Did the fact that Gujarat has the longest coastline-1,600 km-contribute to its rapid growth? Gujarat has served as an integral native trading hub for centuries, one of the most dominant in the Arabian Sea. After all, in India, most coastal states have shown higher growth than the BIMARU (an acronym for Bihar, Madhya Pradesh, Rajasthan and UP, referring to their poor economic standing) states. A coastal state has the twin advantages of greater global access as well as lower transportation costs. Other coastal states, such as Maharashtra, Tamil Nadu and Kerala, have also performed well. But sustaining rapid growth, as Gujarat has done, is not easy. Almost 25 per cent of India's sea cargo passes through Gujarat's ports.

Was it the renowned Gujarati entrepreneurial spirit that helped bring about Gujarat's transformation from being only the seventh richest big state in 1980-81 (in terms of per capita GSDP) to the third richest in 2013-14? Gujaratis have dominated businesses all over India for centuries. The Indian diaspora is dominated by Gujarati businessmen. Or was it good governance under successive regimes in Gujarat that brought about such development?

Gujarat has been among the fastest growing states even in the past. Despite poor rainfall, it has made strides in agriculture. Unlike Punjab and Haryana, states which launched the first Green Revolution with government support, Gujarat's agricultural transformation came via the market route. Cash crops such as cotton, oilseeds and tobacco dominated the farm growth story. A milk revolution and largescale exports of fish accompanied the growth in horticulture and sharp increase in agricultural productivity. The agricultural turnaround-with growth rates as high as 11.1 per cent between 2000 and 2013-was accomplished despite water scarcity. Gujarat knows the art of turning every calamity and tragedy into an opportunity. Despite the plague in Surat and the earthquake in Kachchh, the state's economic growth rate has surged in the last one-and-a-half decades. The good governance story of Gujarat, however, takes a knock when it comes to inclusive growth and social sector development. Gujarat is a 'model state' in economic growth but a 'middle state' in social sector growth. Both agricultural and manufacturing growth is in double digits, but of the 20 major states in India, Gujarat's ranking is always between 9 and 12 on all major social sector rankings. This is irrespective of how the measurements are done. Education, health and other social sectors have grown much more conservatively. The challenge for the leaders in Gujarat is finding ways to bring about inclusive growth, alongside the remarkable growth rate.


With a firm belief that the future of the country lies in its states and Union territories, the State of the State (SoS) survey, started in 2003, emerged as the gold standard for analysing the performance of states. The State of the State report was the next logical step. It analyses the performance of districts in each state over a period of time, and across various categories. Each category is usually a composite index of a few parameters, which are measurable across time, provided data is available. In the case of Gujarat, ideally one should compare all 33 districts. Seven of these districts were created in 2013, and eight were created over the period of 1997 to 2010. Data for the recent seven is not available. For the eight districts created earlier, data is available sporadically. Thus, the district analysis presented in this report is for the 18 'original' districts.


How well has Gujarat performed in terms of GSDP growth, education, health and in other key categories can be best assessed by comparing its performance with that of other states; in particular, states closest to it in terms of socio-economic development. If 1999-2000 is taken as the 'base' year, it is found that across a wide array of indicators, Gujarat is closest to these six states-Haryana, Himachal Pradesh, Kerala, Maharashtra, Punjab and Tamil Nadu. Three of them are coastal states, like Gujarat. These states will be referred to as C7 (comparable seven). Performance is measured in terms of various indicators of improvement (e.g. growth) over the period of 1999 to the latest year for which there is data-generally 2011 (latest year for National Sample Survey, NSS, data on education) and 2013 (latest year for GSDP).

Per capita GSDP growth: This is where Gujarat has excelled. The analysis of GSDP performance is conducted over two time periods- 1980-1999 and 2000-2013, for which there is data. The intention behind the comparison between the two time periods is to analytically separate the influence of history from good governance in later years. If per capita GSDP is the criterion, Gujarat was the seventh richest big state in India in 1980-81, fifth richest in 1999-2000 and third richest in 2013-14.

In per capita growth, Gujarat was the third-fastest growing state among C7. The fastest growing state was Maharashtra (4.3 per cent), followed closely by Tamil Nadu (4.1 per cent) and Gujarat (4 per cent). Despite being a relatively rich state, Gujarat pushed itself into becoming the second-fastest growing state for the period 2000-2013 (average of 6.5 per cent annually). The fastest growing state was Uttarakhand (9.2 per cent), a relatively smaller and newer state.

Inequality: Was growth accompanied by growing inequality in the C7 states? Yes. Six of these states witnessed a rise in inequality (measured by the Gini index, which assigns a value of zero if everyone has equal income and a value of 1 if one person has all the income). Only one state, Tamil Nadu, witnessed a decline (-0.3 per cent annual decline for the 12 years from 1999 to 2011, according to NSS data). Gujarat was the third-best performer, with an annual Gini increase of 0.7 per cent.Education: Gujarat hasn't performed well here. NSS data on educational achievement (highest class attainment) is a much better index of educational attainment than provided by the literacy variable. Literacy tells whether a person is literate; educational attainment offers a measure of educational achievement.

In 1999-2000, Gujarat had about the same educational level (average educational achievement of 5.3 years) as Haryana, Punjab and Tamil Nadu. In 2011-12, the state improved its average education level to 6.3 years; however, this improvement was the second worst, behind Kerala. It should be emphasised that Kerala had the highest education level in 1999-2000 (7.4 years) and maintained its highest education level position in 2011-12 (8.8 years). As with income, there is a catch-up phenomena with education (and health), i.e. higher attainment states tend to improve at a lower rate. Hence, that Kerala improved its educational attainment at a rate of 1.4 years per annum is not a surprise; that Gujarat's rate of growth in education was only 1.5 per cent per annum is a big, negative surprise.

Health: If measured by improvement in (the lowering of) the infant mortality rate (IMR), Gujarat does better in health than education-a decline in IMR by 3.6 per cent per annum, identical to Haryana's achievement. Kerala has the lowest rate of improvement (a decline of only 1.3 per cent per annum, from 14 deaths per 1,000 births in 1999 to 12 deaths in 2011). Himachal Pradesh, too, has a low average rate of decline (IMR fell from 54 to 38 deaths per 1,000 births or by 2.9 per cent per annum).


Gujarat was formed in May 1960 with 17 districts. Over the next six years, two more districts were added, one of which became the state's capital. Another 14 districts were formed from 1997 to 2013. Consistent data for all variables is only available for the initially created 17 districts and for most variables for 18 districts. The analysis is done at the district level, taking these 18 districts as individual units, and at a regional level by classifying them into groups as described below. For ease of analysis, the entire state has been divided into three broad regions: Western Gujarat, Central Gujarat and the Eastern Corridor. The demarcation is done on the basis of income and poverty levels in 1999, weighted by the population of each district. Such an exercise shows Central Gujarat as most prosperous, followed by Western Gujarat and the Eastern Corridor (see graphic: Centre Drives Growth). Any regional data provided is computed as a simple average of all the districts in the region.

Overall income: Since overall income comprises three categories-real wages, per capita household consumption and absolute level of poverty-we look at all of these individually. The most prosperous area, Central Gujarat, has shown maximum improvement in wages-an increase from an average wage of Rs 136.7 (2011-12 prices) to Rs 200.9 in 2011-as well as per capita household consumption. In terms of wages, Central Gujarat was followed by the Eastern Corridor (Rs 124.1 in 1999 to Rs 163.4 in 2011) and then Western Gujarat. Western Gujarat, which used to be best in wages in 1999-2000, shows maximum improvement in reducing absolute poverty (from average absolute poverty of 26.5 per cent in 1999 to 9.5 per cent in 2011). In consumption, Western Gujarat is most improved, followed by Central Gujarat, then the East.

Education: In education, Western Gujarat has shown the best improvement from 1999 to 2011, across all the variables for education: mean years in education completed by an average 15-64 year old for overall, male-female as well as female-male ratios. While Central Gujarat ranks second followed by the Eastern Corridor, the latter beat the former in improvement of female to male education, which could be attributed to the performance of one of the Eastern Corridor districts-Valsad. Valsad is the winner in the category of gender equality for education.

Health: Central Gujarat performs the best in lowering IMR, followed by the Eastern Corridor and Western Gujarat. In 1999, the Eastern Corridor showed the worst IMR, followed by Central Gujarat and Western Gujarat respectively. Central Gujarat improved from 58.4 to 39.4 over the period of 1999-2011 to overtake Western Gujarat. This clearly indicates improvement of healthcare in the region. The Eastern Corridor, too, has closely followed, from 59.5 to 41.8 IMR. One of the Eastern Corridor districts-Bhavnagar-has witnessed a significant drop in IMR.

Overall rank: Central Gujarat is the best in level of development. It also shows the highest improvement among the three regions. The conclusion is based on achievements in income, health and education. Western Gujarat and the Eastern Corridor take the second and third positions respectively.

Gender equality in education: There are three measures for educational achievement in 2011-years of education (male), years of education (female), and female education as a fraction of male education. The female-male education ratio captures gender equality. In India, educational discrimination against girls is rampant. But with programmes such as Beti Bachao Beti Padao, there is a new consciousness about education of the girl child. The closer the girl to boy education ratio is to 1, the district is that much closer to gender equality.

Valsad shows a level higher than 100 (equality in male-female education achievement levels) for 2011; this number is the highest in the country. The data was taken from NSS, which, for some districts, can have small sample sizes. However, even in 2009-10, Valsad had the highest gender equality in education in Gujarat, with a ratio of 95.5 per cent. In 1999-2000, the education gender equality ratio was 72 in Valsad, i.e. girls had only 72 per cent of the education of boys. So no matter how the data is sliced (1999-2000 to 2011-12 or till 2009-10), Valsad shows the highest rate of increase in girl-child education compared to boys.


This section will analyse performance in terms of levels, circa 2011, and the next section will look at performance as measured by changes (or growth) between 1999 and 2011. All rankings are on the basis of the 18 districts for which consistent data are available: Ahmedabad, Amreli, Banaskantha, Bharuch, Bhavnagar, Gandhinagar, Jamnagar, Junagadh, Kachchh, Kheda, Mehsana, Panchmahal, Rajkot, Sabarkantha, Surat, Surendranagar, Vadodara and Valsad.


Income: In 2011, for the three income variables (real wages, real per capita income, and level of absolute poverty), Ahmedabad is the number one district. It has a score of 8 (the best score possible is 3, a rank of 1 in each category), followed by Kachchh (score of 11). At third place is Rajkot with a score of 12.

Education: There are three measures for educational achievement in 2011-years of education (male), years of education (female), and female education as a fraction of male education. The best score is a sum of ranks of 3. For the first category, Gandhinagar ranks the highest. Ahmedabad ranks the highest for the second category of female years in education. Valsad ranks the highest for the third category. If we look at the overall education, incorporating all three, Ahmedabad holds the top position, followed by Rajkot and Bharuch. It is interesting that Ahmedabad and Rajkot are tied at an overall score of 8, and some distance behind is Bharuch. In the race for best district, it would appear that for income and education, Ahmedabad is in the lead.

Health: IMR is the major indicator of health in 2011. Bhavnagar has the lowest IMR of 8.3. This is followed by Surat at 11 and then, after a long gap, Amreli, Kachchh, and Mehsana at 27.5, 28.4 and 30.5 respectively.

Overall rank: The overall ranking is estimated as the sum of ranks for income, education and health. The implicit weighting is that each category has one-third weight. However, as we have noted above, no matter what the weights, Ahmedabad is the unambiguous winner. The best (minimum) possible sum of the ranks is 7-3 (income) + 3 (education) + 1 (health). Ahmedabad scores 23. Next is Rajkot (28), then Kachchh (38).

Law and order: While there is data for various crime variables from 1999 to 2011, the ranking for crime is not included in our assessment for the best district. Nevertheless, an assessment of how each district has performed with respect to crime is relevant. Four indicators are combined to obtain an overall assessment. These variables (per hundred thousand of population) are murder, attempt to murder, kidnapping and rape. The best score obtainable is 4. The district with the least crime rate is Sabarkantha (score of 15), followed by Valsad, Junagadh and Kheda at 18, 19 and 24 respectively. Bhavnagar has the fewest rapes per unit of population, followed by Panchmahal and Junagadh.


Gujarat has shown it can achieve rapid growth for an extended period. From 1980 to 2013, average per capita GSDP increased at a rate of 5.1 per cent per annum. Gujarat could rank as the third fastest growing country in the world with a population over 10 million. India ranks sixth for this time period. Gujarat's record in education and health is not as good. Education improved at 2.2 per cent per annum, about the same as India's (2.1 per cent). This would place Gujarat as ninth in the world. For Gujarat, the strategy should be to improve its education system, healthcare and other social sectors on a war footing as these could become obstacles in its growth. The government must focus on the economic-social transformation of the Eastern Corridor and Western Gujarat. The state must uplift the tribal, Dalit and minority communities from the remote, rural areas, who have been left out by the market-led growth. This will lead to inclusive development and reduce inequality-the best recipe for growth.

(With Uday Mahurkar)

Ahmedabad: In the space of a decade, Tunda Vandha, in Kutch district of Gujarat, has been transformed from a sleepy village of mud houses populated by cattle breeders into a prosperous industrial town.

In its vicinity are two of India’s largest coal-fired power projects—Tata Power Co. Ltd’s subsidiary Coastal Gujarat Power Ltd (CGPL) has set up a 4,000 megawatts (MW) plant and has plans to add 1,600MW more; Adani Power Ltd has built a 4,650MW power station.

The two plants brought Rs.40,000 crore into the local economy and changed the lives of local residents—the Rabari community, which has been widely represented as the face of Gujarat in tourism billboards, the menfolk clad in all white, sporting a turban; and the women in black ghagra-cholis, wearing gold or silver jewellery.

Dotted with kutchi bhungas—circular mud houses with thatched roofs—the place was a quaint tourist destination until early 2000 and attracted film-makers like J.P. Dutta, who shot a part of his movie, Refugee, in the village, said Mandabhai Rabari, deputy sarpanch (headman).

Mandabhai and his family sold about 5 acres of land to Adani Power for about Rs.30 lakh. His wife, Lakhiben Rabari, who once made Kutchi handicrafts, now works as a contract worker at the Adani Power plant.

“Earlier I earned Rs.1,500 per month by selling hand-woven garments. My eyes used to ache. Today I earn Rs.5,000 per month. Everybody in the village earns directly or indirectly from these two factories,” Lakhiben said.

With its remarkable transformation from an arid wasteland into an industrial hub over the past decade, Kutch is held up as a showpiece of the so-called Gujarat model of development that four-time chief minister Narendra Modi, the Bharatiya Janata Party’s (BJP’s) prime ministerial candidate in the 2014 general election, says he wants to replicate in the rest of India.

The 63-year-old Modi has used his governance record in Gujarat, its rapid growth and the dynamism of its industry—a kind of “Shining Gujarat” campaign—to try and outshine his political rivals in the election.

Critics say that in the quest for big-ticket industries, from automobiles to so-called ultra-mega power projects, the state government has neglected basic social infrastructure such as education and sanitation. They say there has also been a price to pay for rapid industrialization—displacement of poor inhabitants, for instance. Sceptics question whether the Gujarat model can even be implemented on a national scale.

“Numerous initiatives that the state of Gujarat has taken in recent years confirm the unqualified faith of the rulers in the workings of the market and in the capacity of the private investor to meet the development needs of the state,” said Atul Sood, a professor at Jawaharlal Nehru University (JNU) in New Delhi and a contributor to the book, Poverty Amidst Prosperity: Essays on the Trajectory of Development in Gujarat.

“As a result, governance in Gujarat has been fashioned to the needs of the private investor with public investment taking a back seat. So unquestioned is the faith in private investor that the investor is not just bringing the investment but also deciding the priorities of development,” Sood said.

Kutch benefited partly from a special tax holiday offered by the BJP-led central government in 2001 after a huge earthquake that left several thousand people dead and devastated the region. But it’s the two big power projects and an Adani Group port that have been at the vanguard of the region’s subsequent transformation.

Rajdeepsinh Jadeja, 24, who worked as a salesman in Mumbai, has started his own fabrication business in Tunda Vandha. “Emigration has stopped and people like me have returned to our village, thanks to these two large projects,” he said.

The Gujarat government did help the two companies acquire land for the power projects, but villagers say it was done with their consent. Tata Power and Adani Power did take over some grazing land, but, in return, provided cattle feed for those who owned the land, they said. The two companies also built toilets and a school for the villagers.

Modi’s detractors such as Congress vice-president Rahul Gandhi and Arvind Kejriwal, chief of the Aam Aadmi Party (AAP), say the Gujarat model is over-hyped and is a synonym for crony capitalism; they say it has only benefited a few big industrialists who received land at throwaway prices.

Big business

The Ahmedabad-based Adani Group, with $8.7 billion in revenue in 2013, runs India’s largest merchant port in Mundra in Kutch, which has the capacity to handle more than 100 million tonnes (mt) of cargo.

The Adanis have also built India’s largest multi-product special economic zone (SEZ) in Mundra. The Modi government announced an SEZ policy in 2004 for the state—before the central government’s 2005 policy—to encourage the development of the export-oriented industrial enclaves. The policy offers easy labour laws and tax exemptions.

The Adani Group has acquired a lot of wasteland from various governments, including the Congress-backed one in 1993, but it was between 2005 and 2007 that it secured the largest portion of about 5,000 hectares out of a total 7,300 hectares, said an official at the group who spoke on condition of anonymity.

In reply to a question, state revenue minister Anandiben Patel informed the House in March 2012 that 54,656,819 sq. m (about 5,400 hectares) of land was given for Adani’s SEZ project at prices ranging from Rs.1 to Rs.32 per sq. m till December 2011.

Most of the investment and land acquisition for the project happened after 2005. The Adanis have invested about Rs.20,000 crore in the Mundra SEZ and port project, generating direct and indirect employment for about 150,000 people, said the same Adani group official cited above.

“Adani has emerged as one of the country’s largest business houses in the last one decade or so. They were nowhere in the picture in the mid-nineties. The company has certainly benefited from the largesse of the state government,” said Dwijendra Tripathi, an eminent business historian.

Gautam Adani, boss of the Adani Group, has in published interviews denied charges of crony capitalism and said he received no special favours.

“Crony capitalism should not be there. I definitely agree with that. But how you define crony capitalism is another issue,” Adani, 52, was quoted as saying in a recent interview with Reuters. “If you are, basically, working closely with the government, that doesn’t mean it’s crony capitalism.”

The state government, Adani said, had been a facilitator.

“You can say very well that land has been given to Adani,” he told Reuters. “So what? Has Adani taken away land and not developed anything?”

To be sure, state and national governments across the world offer incentives to attract industries and investments. And Gujarat doesn’t seem to have singled out Adani for any special treatment.

Economist Bibek Debroy, author of the book, Gujarat: Governance for Growth and Development, also argues that the state government’s policy of helping companies acquire land for industrial projects is all-encompassing and doesn’t exclude small enterprises.

“One view can be that no industries should be given cheap land or any fiscal incentives,” Debroy said. “Once you decide to give land for industries and form a framework, as has been in the case of Gujarat, there is no digression and this is very important. Anyone willing to set up an industry gets equal opportunity.”

Closer to Ahmedabad, the principal city in Gujarat, another village—Sanand—has been transformed into a bustling industrial enclave and is spoken of as the next automobile industry hub after the Sriperumbudur-Oragadam belt in Tamil Nadu, which accounts for 40% of the country’s automobile production.

It all started in 2008 when Tata Motors Ltd turned to Sanand to set up a factory for making its Nano cars after protests by land owners drove it out of Singur in West Bengal. The state government offered some lucrative incentives to the car maker, including a soft loan of Rs.9,500 crore—at 0.1% rate of interest, repayable over 20 years.

While Nano’s production at Sanand is yet to reach even half its installed capacity of 250,000 cars per annum because of a slump in demand (the car’s been a flop), various other small and big industries have come up in the area in Tata’s footsteps.

Ford India Pvt. Ltd followed Tata Motors to Sanand and has invested nearly $1 billion in its new factory. The state-run Gujarat Industrial Development Corp. (GIDC) has acquired at least 2,000 hectares of land in Sanand to promote manufacturing. And so far, 425 companies, including Bosch Rexroth India Ltd, Hitachi Hi-Rel Power Electronics Pvt. Ltd, Colgate-Palmolive Co. and Nestle India Ltd, have finalized plans to set up units on 450 hectares of land involving a total investment of about Rs.6,000 crore, said a government official close to the development.

Analysts have sat up and taken notice. A March report by US investment bank Goldman Sachs said India can add 40 million jobs in the next decade if states enact flexible labour laws such as in Gujarat.

Modi’s governance style

Modi became Gujarat chief minister in October 2001, nine months after the earthquake. Gujarat’s image and reputation took a beating among investors after communal riots broke out in the state in 2002.

At a conference organized by the Confederation of Indian Industry (CII) in New Delhi in 2002, some leading businessmen asked Modi how he planned to regain the confidence of industrialists in Gujarat.

In reply, Modi came up with the idea of holding a biennial investment event called the Vibrant Gujarat Investors’ Summit, launching it in 2003.

These events have seen companies and state government sign memorandums of understanding (MoUs)—pacts pledging investment—worth about Rs.40 trillion till 2011. Less than 10% of the money has actually flowed in.

The summits have tried to project Gujarat as the best investment destination in the country, besides providing a platform for industrialists including Mukesh Ambani, Ratan Tata, Anil Ambani, Gautam Adani and Anand Mahindra to come and invest in the state, while showering praises on Modi and his governance style.

Ambani’s Reliance Industries Ltd has been one of the largest investors in Gujarat, pouring at least Rs.1 trillion over the last 10 years, much of it going into expanding its refinery project in Jamnagar.

Modi has streamlined the process of clearing projects and tried to move to a so-called “single-window” system so that a person wanting to start a business in Gujarat has just one touchpoint with the government for all approvals. And this has benefited all forms of investments, said Nilanjan Mukhopadhyay, Modi’s biographer.

A key initiative Modi took in his early years as chief minister was the implementation of the Jyotigram Yojana—aimed at ensuring round-the-clock power supply to all villages of the state. Launched in 2003, the scheme was rolled out in most of the state’s 18,000 villages by 2006 and led to improvements in both irrigation and the quality of life. Water for irrigation is supplied for eight hours a day in Gujarat, an accomplishment few Indian states can match. Its success inspired the launch of a similar scheme in 2006 at the national level.

The Modi government has tried to remove political interference in state-run companies by ending the practice of naming political appointees as chairmen. Loss-making public sector units like Gujarat State Fertilizers and Chemicals Ltd (GSFC), Gujarat Alkalies and Chemicals Ltd (GACL) and Gujarat Urja Vikas Nigam Ltd (GUVNL) and the erstwhile Gujarat Electricity Board (GEB) were restructured and returned to profits by 2006. From being a power-deficit state, Gujarat today produces surplus power.

Denied entry into the West for about a decade because the 2002 communal riots in Gujarat happened under his watch, Modi has instead travelled to China a few times. Mukhopadhyay, who has written a biography on Modi titled Narendra Modi: The Man, The Times, says that the chief minister is quite inspired by the Chinese model and has spent a lot of time studying it.

Modi combines Hindu cultural nationalism with economic development, just as the Chinese model is an amalgam of Han nationalism and rapid economic growth, says Vivian Fernandes, author of a recently published book titled Modi: Leadership, Governance and Performance.

“The Vibrant Gujarat summit during Navaratri 2003 had an uncanny resemblance to the development of Shanghai’s Pudong New Area as the ‘dragonhead of the Chinese economy’ after the Tiananmen Square massacre of 1989. Pudong’s development was meant to counter the effect of Western sanctions. Also, I see Kutch as a Shenzen-like metaphor for port-led development in Gujarat,” Fernandes added.

Economic freedom

Like the Chinese again, Modi seems to have a fondness for big projects—be it building what is proposed to be the world’s largest statue, that of India’s first home minister Vallabhbhai Patel or setting up a new city in Dholera.

Located about 80km from Ahmedabad, Dholera is being built on the lines of Shanghai. It’s been conceived as a futuristic city, built over an area of about 360 sq. km, where every home will be connected with gas, water, Internet and electricity through a smart grid.

“The overall perception of Gujarat has drastically changed since 2001, and today it is among the first three choices (Maharashtra and Tamil Nadu are the other two states), if not the first, for anyone looking to invest in India,” said Piruz Khambhatta, chairman and managing director of Rasna Pvt. Ltd, an Ahmedabad-based company that sells beverages and food products under the popular brand Rasna.

“There is industrial peace and the government’s approach is pro-business which means files are not unnecessarily held up. The education and healthcare systems have also improved under Modi’s leadership. One also needs to laud the entrepreneurial spirit of farmers who have not obstructed projects as in other states,” said Khambhatta.

The 2013 Economic Freedom of the States of India report, published by Cato Institute with Indicus Analytics and the Friedrich Naumann Foundation in New Delhi, put Gujarat at the top of an index of governance quality, growth, citizens’ rights, and labour and business regulations among the country’s 20 largest states.

The Gujarat model under Modi’s rule has laid emphasis on economic growth that would ultimately reduce poverty and create employment—some would say classic trickle-down at work.

“It is a well-accepted model, focusing on basic amenities like roads, electricity and water. However, Modi has implemented it very efficiently. The government has encouraged private participation in areas like electricity and, as a result, Gujarat is today a power surplus state,” said Ravindra Dholakia, who teaches economics at the Indian Institute of Management-Ahmedabad (IIM-A).

Modi’s style of governance is based on certain principles drawing on market signals, public-private partnerships that also include the social sector, decentralization of power, and an able administration that does not encourage open-ended subsidies, economist Debroy said.

To be sure, experts question whether the Gujarat model of development can be replicated at a national level in a country with wide regional disparities and political dispensations of varying persuasions in charge of state governments.

“Modi’s political philosophy is to give more flexibility and freedom to the participants. He provides more market opportunity to both the consumer and producer. If you consider this, it can be made applicable everywhere in the country,” IIM-A’s Dholakia said. “But if you go into the specificity of the Gujarat model, like encouraging industrial growth or investing more into farming, then it won’t work everywhere. Every state has its own way of maximizing growth. Modi has time and again opposed centralization of power with the UPA government. According to me, his role at the centre will be of an advisory and facilitative (nature) and not dictatorial.”

Foreign investors hope he would be able to adopt on a national scale policies of the kind he has put in place in Gujarat, by pursuing an anti-corruption drive, reducing inequality and improving the infrastructure, said Daniel Murray, head of research at EGF Asset Management. (See Street Wisdom ).

“However, talk is cheap,” he added. “While Modi does have some pedigree as a successful reformer at the state level, to maintain foreign interest, it will be necessary for policy implementation to be swift and decisive after the election, something which may be more difficult to do in national government.”

Critics have their say

The Modi model has no dearth of critics and for good reason, perhaps. For there have been mis-steps along the way.

E-governance initiatives, such as the computerization of land records, have helped check petty corruption, but not removed it. While Modi has built a personal image of an incorruptible politician, two of his ministers, Babubhai Bokhiria and Purushottam Solanki have been named in financial scandals and are fighting legal battles. Bokhiria has been convicted by a local court in Porbandar for illegal mining and Solanki is accused of involvement in a Rs.400 crore fishing scam.

In September 2013, a panel headed by Raghuram Rajan, now the Reserve Bank of India governor, recommended a new index of backwardness to determine which states need special aid. The committee ranked Gujarat 12th out of India’s 28 states.

National Crime Records Bureau data shows that since 2001, when Modi assumed office, 6,466 people employed in agriculture have committed suicide in Gujarat. To be sure, the data also shows 26,587 farmers in Andhra Pradesh killed themselves in the same time, and 44,769 in Maharashtra did too. And both states were ruled, for at least part of the period under consideration, by Congress governments.

Others point out that Maharashtra and Tamil Nadu have been more successful than Gujarat in drawing foreign direct investment. “Gujarat’s growth story is a great piece of fiction which is marketed well through a lot of PR (public relations) agencies and other compradors. The real-life condition of the (project- evicted) farmers and the poor is constantly blocked by this propaganda machine,” says Navdeep Mathur, who teaches public policy at IIM-A.

Modi’s political opponents accuse him of making tall claims.

In 2005, Modi made a dramatic announcement that the state government-owned Gujarat State Petroleum Corp. (GSPC) had discovered 20 trillion cu. ft (TCF) gas in Andhra Pradesh valued at $50 billion and production was to begin by 2007. However, the directorate general of hydrocarbons (DGH), the country’s top nodal agency for oil and gas production, has till date certified less than 2 TCF as recoverable reserves. GSPC is yet to begin production form the block.

In September 2008, the Gujarat government ordered 13 profit-making state-run companies to contribute 30% of their profit before tax into a welfare fund.

The move led to a sharp fall in the shares of some of these companies and drew criticism that the interests of minority shareholders were being bypassed. The state had to finally withdraw the move after some investors went to court.

The Sabarmati Riverfront project in Ahmedabad, likened to the London Docklands, the Singapore waterfront and Mumbai’s Marine Drive, was opened to the public in 2012.

That project, which led to the beautification of the city with the river Narmada flowing through it, also caused the displacement of poor residents.

It was only after they took legal measures that the Gujarat high court ordered the city’s civic body to rehabilitate and resettle about 11,000 affected families.


“Their livelihood has been lost and the place where many of the evicted families have been rehabilitated is far from their work area, with some residing near the city’s garbage dump-yard, devoid of basic civic amenities,” said Beena Jadhav, a city-based activist who works with slum dwellers and displaced people.

The Shanghai-like Dholera project is expected to cost Rs.38,000 crore and create housing facilities for 500,000 people over 30 years, according to estimates by UK-based Helcrow, the company that planned the development. But Dholera is a low-lying area that gets flooded in the monsoon and the cost of landfills will cause the project cost to shoot up, said an official familiar with the project, who spoke on condition of anonymity. The first phase of the city was to be completed by 2016, but it is running behind schedule and land acquisition has been stuck because of local protests.

Another much-publicized project is a business hub being built by the Gujarat International Finance Tec-City Ltd (GIFT) that has been showcased as the state’s answer to global financial centres.

But while the project has begun and two towers have already been built, it has failed to draw many investors.

Even local residents who have benefited from the Modi model have their misgivings.

“Villagers of Navi Nar, Goyar Sama and Luni in Kutch are fighting a legal battle in the Gujarat high court to avail the gauchar (pastoral) land that has been given to the Adani Group by the state government. A final decision in the matter is pending,” said lawyer Anand Yagnik, who is representing some of the villagers.

Adani Group did not respond to an email query seeking comment.

In Tunda Vandha, resident Vanka Raja Rabari said: “One of the major challenges we face is of air pollution, given the proximity of the plants to our houses. The coal dust from the Tata Power factory enters our house and could cause severe health problems.”

The villagers have complained to the state pollution control department and some action has been initiated but our problem has not been completely resolved, he added.

Hardik Shah, member-secretary of the Gujarat Pollution Control Board, said the department had served a show-cause notice to Tata Power and sought an action plan to control emissions from its plant.

“The company would like to reiterate that the ambient air quality in the area has not deteriorated due to power plant operations... In addition to the green belt, the company has set up wind barriers for preventing coal dust from the coal stockpile getting airborne due to coastal winds,” Tata Power said in response to an emailed query.

There’s lustre and hype surrounding Modi’s Gujarat model discourse, but there are fundamental concerns as well. The change is symbolized above all by the Rabari community of Tunda Vandha, as the face of Gujarat abandons its traditions and way of life to make for industrial development.

“We are losing our traditional culture, be it living in Bhungas or herding our cattle. But we are only to blame for it, for our next generation is not interested in preserving these values,” said Vanka Rabari.

First Published: Fri, May 09 2014. 01 14 AM IST

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