Calcutta Notebook


There is a palpable sense of elation at the prospect of Narendra Modi becoming the Prime Minister. He has won the hearts of the people of this country by standing up to Nawaz Sharif for his calling Manmohan Singh a 'dehati aurat.' Businessmen are falling over one another to sing praises of Modi. Modi had land identified and offered land to Tatas within three days of their pulling out of Singur in West Bengal. He personally presides over meetings to fast track industrial projects. Economic growth in the cities of Gujarat seems to be on track. Modi's efforts have led to the industrialization of major towns like Surat and Porbandar. Electricity is available 24 hours across the State. Gujarat is selling surplus electricity to other states. There is practically no labour unrest in Modi-land. There is no disturbance on account of caste or communal issues either—despite the past controversy. Corruption also seems to be in control. This writer had an occasion to visit Amdavad few months ago. The taxi driver told that now he can get his license by paying only the official fees of Rs 100 or so. The rich and the poor stand in the same queue to get their licenses. Previously one had to pay a bribe of Rs 2,000 for the same. A businessman from Surat said that there was no unemployment in the cities. Farmers and diamond cutting businessmen in Southern Gujarat were finding it difficult to find workers because they were getting employment in cities nearer their homes. Modi was projected as a man of action. He took quick and clear decisions and saw that they were implemented. In Modi one may see a person who has raised the self- esteem on the country and provided clean administration. But a similar sense of euphoria had gripped the country in 1999 when Atal Behari Vajpayee had become the Prime Minister. Yet Vajpayee’s party was shown the door by the electorate in 2004 because there was little in the BJP model for the common man. The same fate may befall Modi unless he is able to make a fundamental change in the development model the possibility of which seems remote.

The pro-rich growth model espoused by Modi is made clear by comparing the growth rate with other 'forward' states of the country? Figures published by the Ministry of Finance indicate that the average per capita growth rate after accounting for inflation between 2005 and 2011 was as follows :

Maharashtra 12.5%, Tamil Nadu 12.2%, Bihar 12%, Haryana 9.3% and Karnataka and Gujarat 7.7%. These other states are enmeshed in problems such as those of corruption, unavailability of electricity and infrastructure yet they have higher growth rates than Gujarat. Why?

Gujarati scholar Darshini Mahadevia helped solve the riddle. She said that development under Modi was centered largely in the big cities like Amdavad, Gandhidham, Porbandar and Surat. The condition of people living in smaller towns and villages had not improved much. For example, Gujarat was selling surplus electricity to other states when about 11 lac houses did not have connections. There would be no surplus if these houses had been electrified. The productivity of these households would be higher if electricity was provided. Other states were growing faster than Gujarat, it appears, because the income of the common man was increasing. The slower rate of growth in these other states due to corruption and lack of infrastructure was more than made up by the growth of income of the ordinary households. This is seen most clearly in Bihar which has clocked higher rate of growth than Gujarat. Bihar's growth is not coming from factories like that of Nano. It is coming from the provision of road and electricity to the ordinary household.

Growth of Gujarat is low because it is restricted wholly to the major cities. The high rate of growth in the cities is being pulled down by the very low rate of growth in the villages and small towns. Maybe this is negative even.

No wonder the Committee under the Chair of Raguram Rajan to determine criteria of backwardness has placed Gujarat at 12th position in development though the industrialists would unquestionably place it at the 1st position. Reason is that four of the ten criteria used by Rajan are focused on the conditions of the common man: infant mortality rate, female literacy, household amenities like water supply and per capita consumption. The last parameter is very important. By taking consumption instead of income the parameter has shifted the definition of development form rich to poor. Per capita consumption will rise only if the poor man also consumes more because the rich save more and consume less. Gujarat would rank much higher if per capita income were to be used instead of per capita consumption. It has high per capita income and low per capita consumption.

The apparent contradiction between the enthusiasm of the businessmen for Modi and low rates of growth thus gets resolved. The enthusiasm is real. Big industries are growing fast in big cities. But the common man in the hinterland is being left behind and therefore the growth rate is lagging behind.

Vol. 46, No. 26, Jan 5 -11, 2014

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