Friday, September 16, 2011

Modi’s growth story is a sham…..

As Modi starts his 3 day fast in Gujarat today, it’s interesting to look at his growth record in the last 9 years that he has been CM. We should remember that while the BJP has been ruling Gujarat since 98-99 (12 years), Modi’s tenure only started from Oct 2001. Prior to him was the rule of Keshubhai Patel. The reason to look at the economic scorecard of Gujarat under Modi is that Modi’s supporters have gone to great lengths to tom-tom Modi’s economic achievements. Though most people (outside Gujarat) consider Modi to be communal, they like to give credit to Modi for Gujarat’s high growth rates under his rule. Modi is trying to use his economic success story to stake claim to the PM’s seat. Surely, the canard goes, Modi as PM would be very good news for India – since he would take India into a China-like economic orbit.

But let’s look at the stats and then come to any conclusion about Modi at all:

Source of data: For the purpose of this piece, I have used Net State Domestic Product at factor cost at constant prices in Rupees as the measure of economic growth. The data taken is from the RBI’s “Handbook of Statistics of Indian Economy” readily available on the internet. By using “at factor cost”, we eliminate the effect of taxes. By using “at constant prices”, we eliminate the effect of inflation. And by using “in Rupees”, we eliminate the impact of the $: Re exchange rate. Since the Rupee has been depreciating over the years, the growth rate in $ terms comes lower than the growth rate in Rupee terms. Further, to calculate the average growth rate during a period under consideration, I have used a “simple average” of the growth rates of each year during that period. Whatever method I have used, I have used it evenly for all periods of time under all governments.

Gujarat under Modi: There is no doubt that Gujarat is one of India’s leaders in economic growth. Or so we believe. Well, the data shows that under Modi (between 2002-3 to 2009-10), the average growth rate in Gujarat has been 16.25% per annum. During the same period of time, India’s growth rate has been 14% per annum. So yes, Gujarat has grown faster than India. But does the gap between the two numbers come as a bit of a surprise? India’s growth is an average of “top performing” states like Gujarat and the “underperforming” states strewn all across. So is the gap of a mere 2.25% between Gujarat’s and India’s growth rates high enough to justify Modi’s claim of being such a hot state for growth?

Gujarat under Keshubhai: There is perhaps a reason why the BJP likes to talk about Gujarat’s growth rate under Modi. In the Keshubhai Patel era (1998-99 to 2001-02), Gujarat grew at only 7.5% per annum as against India’s growth rate of 10.7%. Aha. So BJP had messed up Gujarat’s growth rate during Keshubhai’s time. Do we hear anything about this period at all? Or is Modi’s period of growth simply “extrapolated” by the BJP to cover its entire period of rule in Gujarat? Quite clearly, after messing up Gujarat early on, the BJP was forced to pull up its socks. Modi’s performance looks “stellar” in comparison to Keshubhai’s. Modi’s definitely done a good job…..but that’s no so apparent when compared to India’s growth as much as it is when compared to his own colleague Keshubhai’s growth.

Gujarat under previous CMs: Now let’s check out whether Gujarat’s growth story precedes Modi or not. There was a period of rapid changes in CMs in Gujarat between 94-95 and 98-99; so I am leaving that period out (Rest assured –  all the rulers then – the BJP, the Congress and the Rashtriya Janata Party have achieved between 14% and 31% growth rates in that period. I am only leaving it out because it was a period of political uncertainty). The previous strongman of Gujarat used to be Chimanbhai Patel who ruled as CM from 1990-91 to 1993-94. The growth rate during his period was 16.75%. Err…..higher than what Modi achieved. While Chimanbhai Patel was quite a mover within the political classes – moving out of the Congress at one time – he has to be called a Congress CM. He ruled as Congress CM for two terms. His wife Urmilaben Patel was a Congress Union minister. And his son Siddharth Patel is the Gujarat Pradesh Congress Committee President. So Chimanbhai Patel was better than Modi. Prior to Chimanbhai Patel was the rule of the Congress for 10 years from 1980-81 to 1989-90. During this period of time, Madhvsinh Solanki and Amarsingh Chaudhary were the Congress CMs in the state. The growth rate during these ten years was 14.8% - just a shade lower than Modi’s achievements. Let’s not forget that this was the period before economic liberalization was unleashed in the country and so growth rates are bound to be lower.

To conclude – while Modi’s achievements are creditworthy, they are hardly a reflection of his performance. The achievements are a reflection of the enterprising spirit of Gujaratis. Even before Modi, Gujarat was showing exemplary growth rates since at least 1980-81 – when Modi was perhaps just a 30-year old lightweight in the RSS/BJP set-up. The economic miracle of Gujarat – its contribution to the GDP; to exports; to several sectors of the economy; its well developed infrastructure – are all a tribute to the people of Gujarat and not to Modi as CM. If economic growth were to be used as the yardstick, we owe a salute to Madhavsinh Solanki, Amarsingh Chaudhary and Chimanbhai Patel (all Congress) in addition to Modi. And of course, we must remember the mess that Keshubhai created.

Now let’s compare Modi’s growth rate with growth rates hit by some Congress ruled states.

Growth rates in Maharashtra: During the same 8 years period that I have considered Modi’s growth data for, the state of Maharashtra – under Congress rule – recorded an average growth rate of 15.5% per annum. It is generally believed that Maharashtra has lost its “mojo” in the last decade or so. But the economic data surely does not indicate that. In fact, though the Congress government gets maligned for governance issues, their record on economic growth has been very strong. Almost as strong as Modi’s. Let’s look at the two states in a different way. The Net SDP of Maharashtra today is 54 times bigger than what it was in 1980-81. The Net SDP of Gujarat? Marginally better – 56 times bigger in the same period of comparison. That should prove clearly that Gujarat has matched – but only matched – Maharashtra in the last 30 years. And Maharashtra has been ruled for 25 out of these 30 years by the Congress.

Growth in Haryana: This state has been ruled by the Congress since April 2005. Net SDP growth rate over the last five years has averaged 18% - significantly higher than Gujarat’s under Modi.

Growth in Andhra Pradesh: This state has been ruled by the Congress since May 2004. The Net SDP growth rate over this period of time has averaged 16%.

So what really are we talking about? I don’t have economic data for Delhi, but I am sure that Sheila Dixit’s Congress government has provided more growth than Modi has.

Again, in spite of all the growth that Modi seems to have achieved for Gujarat, the state barely makes it to the top 5 in the country in terms of size of  GDP behind Maharashtra, UP, Andhra and Tamil Nadu. Its economy is just about half of that of Maharashtra’s. Even in terms of Per Capita Income, Gujarat (Rs 63,961) trails Haryana (Rs 78,781) and Maharashtra (Rs 74,027).

I know many people will quote some other statistics apart from Net SDP to evaluate economic performance. Let me pre-empt that. A study by the Oxford Poverty and Human Development Initiative using a Multi-dimensional Poverty Index (MPI) shows that while there are 41.5% poor people in Gujarat, the same number is 40.1% in Maharashtra and 41.6% in Haryana. Gujarat is 8th in terms of  % of poor in India….nothing very spectacular really.

One last piece of statistics. Let’s look at Congress rule and BJP rule at a national level. The BJP led NDA ruled India between 1998-99 and 2003-04 and the average GDP growth rate was 10.4% per annum. The Congress led UPA has ruled India since then and the average growth rate in its tenure has been 15.8%. That should settle any debates on who has a better economic scorecard – the Congress or the BJP.

The real truth is that Modi has a strong propaganda wing. This propaganda wing has spread the canard that Modi has been an outstanding performer. The media in India is either so ignorant or so venal that it has not bothered to do any research to substantiate or disprove this propaganda. The absence of any strong leader in the BJP at the center has provided Modi the right fertile ground to plant and grow his canard. Today, the propaganda is starting to be believed. This blog hopes that logic will prevail…..


  1. this was a really good read... not just have you done ur research, you've taken the time to analyse the data and put it forward really well..

    it is true i guess.. the propaganda/publicity team are working overtime to project him as the nxt PM candidate much as Rahul Gandhi and even Varun Gandhi was being projected as youth icons a few years ago...

  2. Sorry Prashant. Dont agree with you on this blog-post. I respect you as a professional but looks like this time you sat down with data to prove a notion that you had.

    I live in Mumbai and have friends in Ahmedabad, Baroda. Have seen and heard one difference between Gujarat today vis-a-vis other states - that the state (as in the administration) does seem to care in Ahmedabad. Its responsive and moves quickly unlike Mantralaya in Amchi Mumbai.

    From a data perspective there are several flaws in the way you have analysed the data points. And for a business leader like you to trifle or berate a 2.25% difference between India's growth rate vs Gujarat's is tragic. We go thru hell as business managers to mobilise a few hundred people and extract an incremental 1% margin or growth - To look down on an administration that has mobilised a full state to perform is childish. Your simplistic praise of Gujarat's achievements due to Gujarati's and not Modi is something like saying that if an organization like Apple or Mirchi or Amazon does well - leaders have zero role and its just the Apple-ians or Mirchi-ites or Amazon-ites that have caused events to happen. Not convincing - Sorry!

  3. @Anonymous - The point I am making is not that Gujarat is not miles ahead. The point I am making is that Gujarat has ALWAYS been ahead. People talk of ease of business. More than three decades back, my uncle moved his business from Mumbai to Gujarat (Vapi) because it offered better facilities - electricity, no labour problems etc. The roads in Gujarat were always terrific. I remember how 20 years back, I used to drive down to Udaipur on a beautiful highway. Or to Rajkot - 200 kms in 3 hours flat. Modi has done well - I am not denying that. What I am denying is that all CMs of Gujarat have likewise done well. There is no hanky panky in the data. Gujarat has always grown MORE THAN INDIA. That's why the 2.25% is immaterial....Prashant

  4. "During the same period of time, India’s growth rate (average) has been 14% per annum." Has India's GDP ever grown at 14% in one year forget about average?