Myth of Gujarat’s Economic Performance under Modi

By Dr Rahul Pandey, CNS
December 9, 2012
The author is a former faculty member of IIT Bombay and IIM Lucknow, and an alumnus of IIT Kanpur and IIM Ahmedabad. He writes for Citizen News Service – CNS and is currently an entrepreneur and a visiting faculty at IIM Lucknow. He is a doctorate in management and a post-doctorate in energy and climate policy modeling

A lot has been bloated about Gujarat’s outstanding economic performance during Narendra Modi’s Chief Minister-ship. Many educated people believe in it too. By looking at the growth of the Net Domestic Product in the past five years, I show that this is a myth rather than reality. Several other states like Bihar, Haryana, Andhra Pradesh and Maharashtra have performed better than Gujarat. By looking at the whole picture, Gujarat’s performance on economic growth relative to other states can only be labeled as above-average. It cannot be called outstanding or spectacular by any yardstick.

I have analysed and compared twelve large states of India on the past five years’ trend of Net State Domestic Product (State NDP) which is the commonly used measure of average economic performance of a state. I have used the latest State NDP data from the Economic Survey 2011-12, published by the Ministry of Finance, Government of India on its website. This is an authoritative source of aggregate economic statistics in the country. A straightforward analysis of the data shows that in the past five years Gujarat has been an above-average, not spectacular, performer on economic development. It must be noted, however, that Gujarat has displayed this kind of above-average economic growth since the past few decades, much before Modi came to power. That trend has continued during the past five years too. In other words, the case of Gujarat’s economic growth performance in the past five years has been that of a status quo. Therefore it is difficult to say that Modi has made any significant difference to it.

In order to keep the comparison fair, I have considered only the twelve largest states in terms of population and land area, and ignored the small ones like Delhi, Goa, etc. The states compared here are: Gujarat, Bihar, Haryana, Andhra Pradesh, Maharashtra, Rajasthan, Tamil Nadu, Orissa, Punjab, Karnataka, Uttar Pradesh, and Madhya Pradesh.

Looking at the State NDP figures of the past five years, since 2005-06 to 2010-11, the following facts become self-evident. The summary of the data on which these conclusions are based is provided in the two tables at the end of this article.

- On compounded average NDP growth rate in the past five years, Bihar stands first, way ahead of others. Haryana, AP, Maharashtra are second, third and fourth, respectively. Gujarat, Rajasthan and Tamil Nadu jointly hold the fifth position.

- Other states which had a similar starting NDP base as Bihar in 2005-06 could not grow at the same pace as Bihar. For example, Orissa had the same NDP as Bihar five years ago. Now it is distinctly behind.

- Two states - Punjab and Orissa - which were much ahead of Bihar in 2005-06, are now at the same level as the latter.

- Some states which had similar or higher NDP than Gujarat, grew at a higher rate than Gujarat. For example, AP and Maharashtra both had much higher NDP than Gujarat in 2005-06, and yet they grew at a higher rate than Gujarat in the next five years. Tamil Nadu had a higher NDP than Gujarat in 2005-06, and grew at the same rate as Gujarat.

- As a direct consequence of Bihar's NDP growing at the fastest pace, it has closed or is steadily closing the NDP gap with several other states. For example, Bihar was 25-30% lower than Punjab and MP in 2005-06. In 2010-11, they are at the same level. Bihar was at the same level at Orissa in 2005, now it has outgrown Orissa.

- Therefore, based on just the NDP growth performance, Bihar is the clear winner. Gujarat fares much worse than Bihar, and worse than even AP, Maharashtra and Haryana. Gujarat is even worse than Tamil Nadu, given that Tamil Nadu had a larger NDP in 2005 and has grown at same rate as Gujarat.

- Among these 12 large states, the worst performers are MP, UP and Karnataka -- two of these ruled by the BJP. The next worst performers are Punjab and Orissa -- both NDA ruled and BJP supported.

- And all this is just the NDP analysis. Results will not change much even if we do it on the change in NDP per capita, as we can assume that the population growth rate has been similar in these states. If we add the performance on social indicators (changes in crime rate, communal situation, etc), the gap between Bihar and Gujarat will increase even more.

Table 1
Major States’ NDP and NDP Growth Factor in the Past Five Years (Arranged in the order of Growth Factor, i.e. Growth multiple or growth rate in past five years)

Data Source: Govt. of India, http://indiabudget.nic.in/es2011-12/estat1.pdf

Table 2
How other States’ NDP stands w.r.t. Bihar (Ratio of other state NDP / Bihar NDP), and how it has changed in the last five years

Data Source: Govt. of India, http://indiabudget.nic.in/es2011-12/estat1.pdf

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Posted on: December 09, 2012 04:42 PM IST