Millennium Post

Economics of trust, not ownership

Economics of trust, not ownership
Addressing the India Economic Convention at Delhi last week, Narendra Modi countered P Chidambaram’s earlier jibe at Modi’s lack of formal training in Economics by asserting that he did not ‘need books’ to understand that rulers are ‘trustees of the country’s resources and not its owners’. While the troika of Manmohan Singh, Chidambaram and Montek Singh Ahluwalia may have had a formal academic training in Economics, what Narendra Modi has done in Gujarat is something that economists would and should truly aspire for.

Statistical evidence clearly suggests that the Gujarat economy has grown rapidly under the stewardship of Narendra Modi. The Central Statistical Organisation(CSO) data at 2004-2005 prices (2004-2005 is the base year of the latest series of the national income estimates prepared by CSO) reveal that the annual trend or compounded rate of growth of real GDP in the state or simply put, the long run inflation adjusted GDP growth of Gujarat between 2004-2005 and 2011-2012
(2011-2012 being the latest year for which CSO data is available for all states) has been a huge 9.83 per cent making it the fastest growing state among major ‘general category states’ such as Andhra Pradesh, Bihar, Madhya Pradesh, Haryana, Karnataka, Kerala, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, Chattisgarh, Jharkhand and West Bengal during this period.

Significantly, data also shows that Gujarat has improved its economic performance over time. From an annual trend growth of real GDP of 6.34 per cent during 1993-2094 to 2000-2001, Modi’s chief ministership has seen Gujarat grow at the aforementioned 9.83 per cent. Equally revealing is that in this steady rise up the development ladder over time, Gujarat has left behind many prosperous states like Karnataka, Andhra Pradesh, Tamil Nadu etc.

Likewise, Gujarat’s annual per capita income has also increased from Rs 32,021 in 2004-2005 to Rs 57,508 in 2011-2012 which signifies an improvement in the living standards of the state’s inhabitants. The 2004-2005 to 2011-2012 phase saw an annual trend growth rate of per capita income of 8.49 per cent in the state; up from the 3.50 per cent annual trend growth rate during 1993-1994 to 2000-2001. This major upswing in the state’s per capita income growth rate has been possible as the state has managed to rein in the annual exponential growth rate in population to 1.77 per cent during 2001-2011 signifying an improvement in the performance on the social front too.

Moreover, economic growth in Gujarat has also become more stable under the tenure of Narendra Modi. The fluctuations in the growth rate of GDP have also come down substantially overtime. The standard deviation in the GDP growth between 2004-2005 and 2011-2012 – or simply put, the variation of growth rates around the annual average has been 2.64; down from 7.21 in 1993-1994 to 2000-2001. Clearly, economic growth has become less volatile and more consistent in Gujarat in recent years.

This increased growth has also made a dent on the poverty in the state if one were to go by the National Sample Survey Organisation(NSSO) results. The NSSO’s 61st round in 2004-2005 revealed a 31.6 per cent below poverty line (BPL) population in the state which fell to 23 per cent in the NSSO’s 66th round in 2009-2010 and which further fell down to 16.63 per cent in the NSSO’s 68th round conducted in 2011-2012. Correspondingly, the number of people living below the poverty line in the state has declined from about 1.71 crores in 2004-2005 to 1.36 crores in 2009-2010 and further to 1.02 crores in 2011-2012. Narendra Modi has also transformed agriculture in the state with a statewide network of check dams and assured power supply of eight odd hours to farmers for irrigation purposes through separate lines in villages. Data shows that the annual average rate of growth in the farm sector in Gujarat has been 8.46 per cent; more than twice than that of the all-India average(4.12 per cent) over 2004-2005 to 2011-2012.

By freeing controls and improving governance by cutting down red tape in the state, Gujarat has also managed to attract huge amounts of private investment into the economy. Potential domestic investors or companies in  India  are required to file an Industrial Entrepreneur Memorandum (IEM) form in ‘Part A’ with the Department of Industrial Promotion and Policy(DIPP), Government of India.

Subsequently, after commercial production begins, Part B of the IEM form are filed by companies. Thus, Part B of the IEM form would serve as a correct proxy for actual industrialisation taking place in a state. Between 2003 (when the first Vibrant Gujarat conclave took place) and August 2013, IEMs implemented( or Part B of IEM form filed with DIPP) or actual investments totalled Rs 1,10,772 crores in Gujarat. This accounted for a staggering 38.80 per cent of the aggregate investment (Rs 2,85,422 crores) in the country. Meanwhile, Gujarat has also emerged as the most popular destination of investment in the country during this period. Its total investment of Rs 110,772 crores is an astonishing 2.26 times than that of Maharashtra (Rs 49,055 crores) which stood second in the country. The result of these huge inflow of investments into the state has been that the industrial and manufacturing sector have  grown by a huge annual average of 10.64 per cent and 10.89 per cent respectively during 2004-2005 to 2011-2012.

In a nutshell, while Narendra Modi may not have a formal academic degree in Economics, he has applied sound economic principles in the state by promoting economic growth, reducing poverty, attracting huge private investments into the state by putting governance in order and striving for balanced growth of agriculture, industry and manufacturing sectors.

The author is All-India Convenor of the BJP’s Economic Cell
C Rajashekhar

C Rajashekhar

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