The ‘Gujarat development model’ is proof that trickle-down economics is a fantasy

As Prime Minister Narendra Modi’s state prepares for assembly elections on December 1 and December 5, the glory of Gujarat’s development is being trumpeted. Modi’s Bharatiya Janata Party has ruled the state since 1995, barring a brief two-year period in between.

There is no doubt that Gujarat is among the states with a high growth rate. But income is not – and should not be – the only criterion to measure development. The state’s social indicators show that its progress is not in line with its economic indicators.

The gap between propaganda and the reality of the “Gujarat development model” was brought into the glaring spotlight with the collapse of the newly renovated bridge over the Machchhu River in Morbi on October 30. It highlighted the problem of corruption in a state that claims to be corruption-free.

The state of Gujarat’s public infrastructure was dragged into the spotlight as Modi was due to visit Morbi to meet survivors and the families of the dead on November 1: the night before, the Civil Hospital in Morbi was hurriedly painted and renovated.

Flawed model

Since 1960, when Gujarat became an independent state, its growth rate has remained above the national average due to the entrepreneurial culture of the state’s business community and the efforts of state governments across party lines.

The Socio-Economic Review of Gujarat, 2021-’22, suggests that the average annual growth rate of the Net State Domestic Product has stayed at 9% over the last decade. Gujarat ranked fourth among all states in per capita state domestic product in 2019-’20. In terms of absolute income and growth too, Gujarat has been among the top states.

At the same time, as one of the top employment providers, the state attracts significant migrant labour – but is a poor wage payer. The rural daily wage for non-agriculture labour was Rs 239.30 in 2021 compared to Rs 677 in Kerala and the national average of Rs 315, according to the Reserve Bank of India. Gujarat ranked 17th on the list of average daily wage in rural areas for non-agriculture labour in 20 states and Union Territories.

The National Wage Report-2018 of the International Labour Organisation showed that for 2011-’12, the average daily wage for urban workers in Gujarat was Rs 320 against Haryana’s Rs 783 and national average of Rs 449. Gujarat was at the bottom of the list of 20 states. It’s clear that higher growth has not automatically improved remunerations for Gujarat’s working-class people.

Gujarat also draws praise for its good infrastructure for businesses. It ranks fifth in terms of per capita availability of power at 1,852 kilowatt per hour, according to the Reserve Bank of India’s Handbook of Statistics on Indian states. It also has a relatively well-maintained urban road network. The Indian government’s Business Reforms Action Plan, 2020, ranked Gujarat second.

Poor social indicators

In socio-economic indicators, however, the state’s rankings are not stellar. With a 78% literacy rate, Gujarat ranks 17th among states and Union Territories, according to the 2011 Census.

Among 30 states, Gujarat ranked 22nd with 77.4% children enrolling in secondary schools and 25th with 43.2% enrollment for higher secondary schooling. The quality of education is a serious concern, especially in government schools.

According to the Annual Survey of Education Report, 2018, carried out by a non-profit, less than 55% of Class 5 students from government schools could read Class 2-level texts.

Only 18% of the children in government schools could do mathematical division in Class 5. In 700 government schools there was only one teacher for Class 1-8 to teach all subjects. There is heavy dependency on vidya sahayaks, or assistant teachers, rather than permanent teachers. In the past two years, 86 government schools were shut down while 491 were merged, according to a response submitted in the state legislature in March.

Gujarat’s health indicators are no better. According to the Handbook of Statistics on Indian States, life expectancy for 2015-’19 was 70.2 years, putting Gujarat below other high-income states such as Maharashtra (72.7 years), Punjab (72.8 years) and Tamil Nadu (72.6).

Infant mortality rate was 25 of every 1,000 live births in 2019. This placed Gujarat at the 12th position among states and Union Territories. Between 2016 2019, the maternal mortality rate was 5.1, higher than other wealthy states such as Karnataka, Maharashtra and Tamil Nadu.

The fifth round of the National Family Health Survey for 2019-’21 showed that the rate of stunted children had not reduced compared to the findings of the previous round of data collection. According to the World Health Organization, stunting or impaired growth among children is the consequence of poor nutrition.

At the same time, the number of underweight children had increased marginally in Gujarat. This signals that undernourishment is rising in Gujarat alongside high economic growth.

Low investment in essentials

Gujarat is an example of the failure of the trickle-down hypothesis – the gains of development have not percolated to a large segment of the population. The state has paid an opportunity cost in terms of its social indicators to attain high economic growth.

The market has responded to government support and progressed well by exploiting profitable opportunities but has kept away, as it would, from non-profitable essentials such as health and education for the marginalised sections.

For the past two decades, Gujarat’s education expenditure has been less than 2.5% of the gross state domestic product, or GSDP, despite the Kothari Commission in 1966 and the National Education Policy in 2020 recommending that the figure be 6%.

Gujarat also spends less than 1% of its GSDP on health with the trend continuing after the Covid-19 as well. The state’s capital health expenditure reduced by 31.9% from Rs 1,067.44 crore in 2019-’20 to Rs 726.88 crore in 2020-’21. The level and nature of government expenditure reflects its priorities. Simply increasing expenditure will not fix the problem.

Instead, the state needs quality public expenditure on education and health. This will help persuade citizens to trust government hospitals and schools. This election season, perhaps political parties could commit towards greater equity. True democracy can be established only if growth is inclusive.

Neha Shah is Associate Professor of Economics, L J University, Ahmedabad. Atman Shah is Assistant Professor of Economics, St. Xavier’s College (Autonomous), Ahmedabad.