A path to prosperity

The Gujarat Model of development seized national imagination in the run-up to the 2014 Lok Sabha elections as Chief Minister Narendra Modi staked his claim to the prime minister’s chair. So relentless and powerful was BJP’s propaganda that many Indians, without understanding what the Gujarat Model actually was, came to perceive it as a catch-all for overall development and what the whole of India should aspire to. In the Lokniti-CSDS post-poll survey conducted in five states in 2014, Gujarat was ranked first when voters were asked ‘In your opinion, which state in India is doing best on development indicators?’

Over the past fifteen years, there has been plenty of discussion and dissection of the Gujarat Model in academic circles but not much of this has filtered through to India’s middle classes largely because the media has failed to scrutinize its claims. To begin with, let’s define what the model is or isn’t. The Gujarat Model is an example of trickle-down economics taken to the extreme. It reduces the primary role of the state to facilitating rapid economic growth by promoting big industry at all costs and at the exclusion of almost everything else, especially expenditure on human development. The result has been stark: Gujarat experienced a sharp jump in growth rate over the decade 2001–02 to 2011–12—the Modi years—but simultaneously saw itself underperforming when compared to most Indian states in social indicators. This has led many critics like the French political economist, Christopher Jaffrelot, to define the model as ‘growth without development’.

Let’s discuss Gujarat’s economic performance first. For several decades since its formation as a state in 1960, Gujarat was known to be a business-friendly state with big corporate houses having a huge influence on the governments. In the decade preceding the Modi years, from 1990 to 1999, Gujarat’s economy (GSDP) grew faster than all major Indian states at 8 per cent as against the all-India average of 5.9 per cent. In the subsequent decade 2000–2010 under Chief Minister Modi, Gujarat’s economy grew at 9.8 per cent as compared to the all-India average of 7.7 per cent. Gujarat’s growth rate was 2.1 per cent above the national growth rate in both these periods indicating no further acceleration of growth in the 2000s relative to the 1990s. However, achieving a near 10 per cent growth rate for a decade starting 2000 was a rare feat by any Indian state.

This was achieved by an unprecedented rise in incentives to the corporate sector to attract investments—virtually free land, large loans at nearly-zero interest rates, generous tax breaks and no-fuss environmental clearances. For example, to woo the Tata Nano project, Gujarat offered a soft loan of ₹9,570 crore at 0.1 percent interest rate and repayable in twenty years, for an investment of ₹2,900 crore—a third of the loan amount. Media reports called it a ‘sop opera’. Most of these investments focused on capital intensive industries that didn’t create enough jobs. The Nano plant never had more than 2,200 employees—in other words, a ratio of one direct job for over ₹1.3 crore of investment. Until the Centre banned it in 2007, 40 per cent of the revenue from sales tax in Gujarat was forgone in the form of corporate subsidies. The government complemented this big-business bonanza by establishing a single-window mechanism for clearing investment proposals and focusing on infrastructure development to attract corporates, primarily roads, power and airports. Apart from a sharp rise in industrial and manufacturing output, Gujarat also saw its agriculture output double between 2001 and 2011.

However, not everyone gained from this ‘development on steroids’ model, least of all labour. Only 6.8 per cent of the workers in Gujarat are in the formal sector with the rest in informal and traditional sectors with low incomes and poor social security. Throughout the past two decades, Gujarat had among the lowest wages across India. The Centre’s Labour Bureau data shows that the average daily wage for non-agriculture rural labour in Gujarat was ₹273 in 2023 as compared to ₹697 in Kerala and the national average of ₹348. Gujarat stood at nineteen out of twenty states in this list.

The fact that the average daily wages in rural Gujarat were substantially lower than the state-notified minimum wages of ₹462 per day in 2023 shows that the government did little to remedy this situation that favoured big businesses. As a result, Gujarat had a high multi-dimensional poverty rate (that measures deprivations in health, education and living standards, rather than income) of 11.7 per cent in 2021, as compared to other large states with similar per capita incomes such as Maharashtra (7.8 per cent), Telangana (5.9 per cent) and Tamil Nadu (2.2 per cent). West Bengal, which had only 40 per cent of the per capita income as Gujarat, had a similar share of its population below the poverty line.

Besides furthering social inequalities, the prioritization of corporate sops meant that little was left to spend on education and health. Between 2006–2007 and 2022–2023, Gujarat spent an average of just 14.2 per cent of its budget on education, lower than the national average of 15 per cent, leading to steady deterioration of the government school system. As of February 2024, 1,606 government primary schools in Gujarat had only one teacher. The government had failed to recruit full time teachers since 2009, resulting in 19,000 teacher vacancies. Remote districts were the worst hit. While 95 per cent of teacher posts were filled in fifteen developed districts, this figure dropped to 50 per cent in ten remote districts. ‘Schools in tribal districts like Dahod and regions of central Gujarat, or far-out villages of Kutch are empty boxes, with one or no teacher,’ said Digvijaysinh Jadeja, the president of the Gujarat State Primary Teachers Association.

The condition of education infrastructure wasn’t acceptable either. In 2014, after twelve years of the Modi government, over 12,000 of 34,000 government schools operated from a single room. In 2021, the government disclosed that over 10,500 schools were in dilapidated conditions with tin-shade roofs. Poorly-run government schools have led to a steady exit of students leading to government shutting down or merging schools, citing low student enrolment. Just between 2020 and 2022, the Gujarat government closed down around ninety government primary schools and merged nearly 500. Gujarat continues to be at the bottom of the table on most education outcomes. As per the Economic Survey 2023–2024, Gujarat ranked twenty second among twenty-eight Indian states with only 75 per cent children enrolled in secondary schools as compared to the national average of 80 per cent, and 100 per cent in Delhi. It ranked twenty-third with only 48 per cent enrolment in higher secondary schools as compared to 58 per cent national average and 95 per cent in Delhi—the highest nationally. The Annual Status of Education Report 2023 revealed that only a third of the children in rural Gujarat in class five could read class two texts; lower than the national average.

(Excerpted with permission from Jasmine Shah’s The Delhi Model; published by Penguin)