FW: Why we should respect Gujarat's governance and economic achievements

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Subject: Why we should respect Gujarat's governance and economic achievements

 

Money                                       Wednesday, October 13, 2010

Why we should respect Gujarat's governance and economic achievements

Other states and the Centre should learn and adopt its approach to economic management and governance

Mukul G Asher As the state of Gujarat nears completion of the first decade of the 21st Century, its achievements in economic management and in governance merit respect and closer study. Between, 1999-2000 and 2007-2008, Gujarat's gross state domestic product (GSDP) in nominal terms grew at a compound annual rate of 15.8% (13.8% in per person terms). By 2010, its GSDP is approaching $100 billion, and its per capita income around $1,600, over a fifth higher than the national average.

Gujarat's economy is well-balanced, with primary, secondary, and tertiary sectors contributing 21%, 33%, and 46%, respectively of GSDP in 2007-08. The manufacturing sector, key to India's future, accounted for 41% of employment, the largest share. Gujarat, a mid-sized state, accounts for 5% of India's population but contributes 21% to India's exports and 13% to the industrial production. Its literacy rate is higher than the national average. While the sex ratio needs to improve (there were only 920 females per 1,000 men in 2001), consistent with international norms, females in Gujarat live nearly four years longer than men. Gujarat's achievements have been a result of combining the following set of characteristics consistently and skilfully, with the particular mix and sequencing to suit particular context and conditions. Narendra Modi, Chief Minister, Gujarat

Outcome or result orientation: Such an orientation has helped minimise political or outmoded ideological considerations (such as the public sector being better than the private sector) in economic decision making and in project management. This has been the case in social sectors such as health and education, infrastructure provision, or in actively seeking new growth opportunities to help diversify sources of competitiveness and livelihoods for a growing number of workers. It has facilitated combining knowledge, resources, energies and management skills of public, private and not-for-profit sectors for addressing specific public policy challenges. It is only in the last decade that plans to use the state's 1,600 km long coastline to generate broader regional growth have made progress. Gujarat's private and joint sector ports will positively contribute to India's rapidly growing international trade; to industrialisation; and to support future development of inland transport to reduce congestion and reduce transport and logistics costs.

Willingness to explicitly address business environment: The mix of factors which impact business environment include supply of resources and inputs; progressiveproductivity oriented industrial relations environment, regulatory framework; physical and social infrastructure; and where appropriate, fiscal incentives involving taxes, subsidies and budgetary expenditure. The emphasis on addressing supply side constraints in infrastructure; in real estate amenities, matching human resources and skills with projected demands; and improving urban amenities, including innovations in public transport (such as Ahmedabad's Bus Rapid Transit System (BRTS)), sets Gujarat apart from most other states in the country. India is rapidly urbanising, and Gujarat is expected to experience majority urban population in the not-too-distant future. Its urban management experiments should therefore be of relevance elsewhere in the country. BRTS in Ahmedabad, for example, is raising resources from the market for expanding its reach. With tight fiscal constraints in urban areas, such a capability will be increasingly needed to provide urban amenities, and sustain competitiveness, while improving the quality of everyday life of the people. Gujarat is among the handful of states where the state government has framed clear policies in vital areas such as agriculture, ports, power, roads and education. This has helped create greater certainty and consistency, two important aspects of business environment. Gujarat's share in the Delhi-Mumbai Industrial Corridor (DMIC) is 62% of the total area and 74% of the population. Its share in the 1,500 km-long Delhi-Mumbai dedicated freight corridor (DFC) is 38%. Its readiness to leverage these to enhance its competitiveness in attracting new economic activities is illustrated by the speedy and smooth allocation of Tata's Nano car project and the rapid industrial development of the town of Sanand, near which the Nano plant is located. Its ability to address issues surrounding land acquisition and development fairly effectively is a particularly strong advantage as compared to other states. To give another illustration, the Kutch region, traditionally arid, is being transformed through what a magazine has recently termed as 'Green Revolution Lite'. This is an improved, compacted, and eco-friendly version of the earlier Green Revolution in Punjab and elsewhere. It is led by ordinary farmers, but under state policies to address their business environment. The two characteristics noted above have contributed to improving Gujarat's power supply capabilities in an environmentally sustainable manner while contributing to India's energy security. Thus, Gujarat Urja Vikas Nigam Ltd, its state electricity utility, has signed power purchase agreements with 26 solar power project developers for 365 mw of electricity. Its electricity regulator has fixed tariff for solar power. The state has formulated a solar park scheme, which is expected to contribute to increasing the share of renewable energy in India's energy consumption.

Governance philosophy and vision: The third key characteristic has been the governance philosophy, which has emphasised the vision of India emerging as a major power by transformation into a knowledge-based economy and society, while approaching the country's history from a more balanced and empirical-based perspective. A good illustration is the Statue of Unity Project after Sardar Patel, who politically unified India after Independence. Characteristically, the project also includes a research and academic centre for preserving the unity and integrity of India, on agriculture to improve land productivity and yields, and on tribal life to empower them to earn livelihoods from a wide variety of activities over large geographical areas, rather than continuously depending on government initiated and funded programmes. The Unity project aims to balance national, academic, historical and spiritual values. Gujarat has also demonstrated strong skills in social entrepreneurship, defined in simple terms as meeting everyday needs of ordinary people in an affordable manner by capitalist means. This philosophy, sometimes pursued in partnership with the government organisations, is much more sustainable and useful than large centrally planned ill-designed schemes, which make reversibility difficult even when they are demonstrated to be ineffective. Gujarat's people, its political leadership, particularly chief minister Narendra Modi, its business sector, labour leaders and social-entrepreneurship oriented not-for-profit sector all have contributed to Gujarat's achievements and to laying a solid foundation for its future, though it should not become complacent and regard future progress as automatic. India would clearly be in a better position to emerge as a major power if more states and the Central government learnt and adapted the state's approach to economic management and governance. The writer is a professor of public policy at the National University of Singapore and can be reached at sppasher@nus.edu.sg.