Gujarat’s growth performance – A Statistical Review 1. Introduction: Gujarat has performed impressively under the Chief Minister, Shri Narendra Modi. Many sections of the intelligentsia such as educated professionals, economists, economic administrators, industrialists and intellectuals have popularly described Gujarat’s progress in recent years as the ‘Gujarat model of development’ and have argued for a replication of the model in the rest of the country. The aforesaid sections strongly believe that major economic advances have been made in Gujarat under the leadership of Shri Narendra Modi. However, there are some sections critical of Shri Modi’s performance as a development leader and administrator and have put forward the view that Gujarat’s prosperity under Shri Modi is systematically created hype, rather than hard reality. 2. Objective of the paper: The above two contrasting propositions, made by what may be termed as ‘Shri Modi supporters’ and ‘ Shri Modi critics’ have led to the aim of this paper, that is, to check whether Gujarat’s claim of progress under the stewardship of Shri Narendra Modi is supported and substantiated by statistical evidence or not. 3. Issues for discussion: This paper brings forth the following issues for discussion: a) What has been the state’s economic performance under the Chief Ministership of Shri Narendra Modi? b) What has been the developmental record of Gujarat vis a vis other major states of the country? c) What has been the developmental record of Gujarat vis a vis the national economy? In analyzing the above issues, this paper presents i) economic performance of Gujarat over time i.e during 1993-94 to 2000-01 and 2004-05 to 2011-12. ii) draws a comparison between the developmental path of Gujarat and other major states of the country over time. iii) makes a comparison of economic growth of Gujarat with the national economy over time. 4. Indicators for analysis: Most experts agree that the most crucial and best set of indicators for measuring levels of development are the Gross Domestic Product(GDP) , the Per capita income( PCI) and sectoral growth rates. Despite inter-state comparisons of GDP and PCI being hampered by the quality of statistics produced by different states and inter-state price differentials, considerable progress has been made by the Central Statistical Organisation(CSO) in achieving uniformity in the use of concepts and definitions as well as data sources by different states. Hence, this paper concentrates on the above mentioned three indicators for analysis following established academic tradition. 5. Methodological issues: A word about data issues is appropriate at this juncture. GDP and PCI can show a sharp rise if prices are rising rapidly, and it is very important to take into account the price effect before comparing the level of GDP and PCI over time or across different states. Economists, Statisticians and Economic Administrators therefore construct a series of GDP and PCI at constant prices or in real terms so as to adjust for inflation and get a real picture of change in income and economic performance in a state. Statisticians also change the base year periodically to account for structural changes in the economy and the CSO has moved the base year of the latest series of national income estimates to 2004-05. This paper uses two series with base 1993-94 for the years 1993-94 to 2000-01 and the other one with base 2004-05 for the years 2004-05 to 2011-12 for the purpose of analysis and comparison; 2011-12 being the latest year for which CSO data is available for macroeconomic indicators of all states of the country. The two aforementioned time intervals afford a meaningful and wholesome comparison because: One, both the intervals are equally spaced and cover a time period of 8 years and two, they also make it possible to look at the economic performance of the ‘ pre-Narendra Modi government ’ Gujarat and ‘post-Narendra Modi government ’ Gujarat and compare it with other major states and the national economy. It may be underscored that the two series are not the same in structure and hence, in a strict statistical sense cannot be combined into one series for the period 1993-94 through 2011-12. The paper uses statistical indicators like the trend growth rates or compounded annual growth rates, annualized average growth or arithmetic mean, standard deviation and coefficient of variation in key economic variables like GDP and PCI at constant prices and output of agriculture, industry, manufacturing and services sector for purposes of analysis. 6. Growth performance of States as seen through GDP and PCI data: It would be appropriate to state here that the annual growth rate in real GDP is a key indicator of economic performance of the state, a good gauge of whether a state is doing better or worse than other states. Inter-temporal comparisons of growth, after neutralizing the price effect, also conveys the progress in the state or lack thereof. Planning for growth and development aims at achieving a target growth rate and this therefore also becomes a benchmark to evaluate development plans. Since large states would usually show higher levels of GDP, dividing the domestic product by the population gives a more accurate measure which allows for comparison across different states. More prosperous states would exhibit a higher PCI compared to other states who are not doing so well. Using CSO data, the trend rate of growth( the trend rate of growth gives the uniform rate at which the variable has grown annually over the time period , irrespective of a decrease(s) in between the period; it is also called the compounded annual growth rate or cagr and in some sense represents the long run growth of the relevant variable) of real GDP( or inflation adjusted GDP) and real PCI(or inflation adjusted per person income) is worked out for two time periods, namely 1993-94 to 2000-01 and 2004-05 to 2011-12 for Gujarat, other major ‘general category states’(GCS) and the national economy as a whole. This is presented in Table I below. TABLE I : TREND GROWTH RATES (IN PERCENTAGE) 1993-94 to 2000-01 2004-05 to 2011-12 GDP Rank PCI Rank GDP Rank PCI Rank All India 6.35 4.34 8.48 6.72 Gujarat 6.34 4 3.50 7 9.83 1 8.49 1 Andhra Pradesh 5.64 7 4.35 4 8.66 8 7.38 6 Bihar 5.30 9 2.52 12 9.48 2 7.84 4 Madhya Pradesh 4.97 11 2.59 11 8.70 6 7.10 7 Haryana 5.87 6 3.03 8 9.44 4 7.08 8 Karnataka 8.12 1 6.33 1 7.90 12 6.48 10 Kerala 5.10 10 3.82 6 8.16 10 7.53 5 Maharashtra 5.35 8 2.92 9 9.45 3 8.12 3 Odisha 3.78 14 2.16 13 7.99 11 4.85 16 Punjab 4.79 12 2.67 10 7.21 14 5.21 13 Rajasthan 6.96 3 4.22 5 8.70 6 6.51 9 Tamil Nadu 6.32 5 5.01 3 9.17 5 8.39 2 Uttar Pradesh 4.22 13 1.38 14 7.19 15 5.07 14 West Bengal 7.09 2 5.52 2 7.25 13 6.02 11 Source: a) Author’s Calculations based on Central Statistical Organization (CSO) data. b) GDP and PCI series are at constant prices. An analysis of the above table reveals the following: a) Gujarat’s comparison with the all-India GDP and PCI growth rates suggest a dramatic reversal in the picture over time. Prior to 2001, the state’s trend growth rate of real GDP was 6.34 percent, slightly lower than the national trend growth rate of 6.35 percent. In contrast, during 2004-05 to 2011-12, the state’s trend growth rate of real GDP was 9.83 percent, significantly higher than the 8.48 percent growth achieved at the all-India level. Likewise, prior to 2001, Gujarat’s trend growth rate of real PCI was a meagre 3.50 percent; much lower than the national trend rate of 4.34 percent. However, the 2004-05 to 2011-12 phase saw a huge upswing in PCI growth rate from the erstwhile 3.50 percent to 8.49 percent in the state; much higher than the real PCI trend growth of 6.72 percent registered at the national level. Thus, measures of real GDP and PCI clearly suggest an acceleration in Gujarat’s growth during 2004-05 to 2011-12 enabling it to cross the national trend growth rates. b) In comparison with other states, Gujarat again does very well in the latter period as compared to the former. For the two time periods under analysis, 14 major ‘general category states’ are ranked in descending order of their GDPs and PCIs. An amazing impression imparted by the Table above is the major change in the relative position of Gujarat in terms of the rankings over the two periods. While in the first period, Gujarat is ranked 4th in terms of GDP growth rates, it occupies the top slot or 1st position in the latter period among states. Similarly, while the state is ranked 7th or placed in the middle among all major states in terms of PCI growth rate during 1993-94 to 2000-01, it moved up the ladder remarkably to 1st position during 2004-05 to 2011-12 among states. This major upswing in the state’s PCI growth rate over the two periods is creditable as the state has managed to rein in the decadal growth rate in population from 22.66 percent during 1991 to 2001 to 19.17 percent during 2001 to 2011 which basically signifies an improvement in the performance on the social front. 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. 7. Developmental record of Gujarat vis a vis All-India trends: An important question that needs to be addressed is whether Gujarat is growing faster than the national economy or has it been left behind in the development race? In answering the aforesaid question, a quantitative approach can provide a meaningful answer. The Table II below takes a look at the two basic indicators, namely real GDP and real PCI in this regard. TABLE II : ECONOMIC INDICATORS : All INDIA Vs GUJARAT INDICATORS 2004-05 2011-12 GDP (in Rs Crores) 1) Gujarat GDP 203,373 398,884 2) All- India GDP 2,971,465 5,243,582 3) Guj GDP X 100 AI GDP 6.84% 7.60% PCI (in Rs) 4) Gujarat PCI 32021 57508 5) All- India PCI 24143 38037 6) Guj PCI X 100 AI PCI 132.63% 151.18% Source:Based on Central Statistical Organization (CSO) data. A perusal of the table above reveals the following: a) In numerical terms, it can be seen that while Gujarat’s GDP was 6.84 percent of the all-India GDP in 2004-05, it has increased to 7.60 percent in 2011-12 indicating an improvement in the relative performance of the state over time. The rising ratio conveys that the state is progressing over time and implies a narrowing down of the economic gap between the state and all-India. Clearly, the state economy is growing faster than the national economy. b) In numerical terms, it can be seen that while the state PCI was 132.63 percent of the all-India PCI in 2004-05, it rose significantly to 151.18 percent in 2011-12. Thus, in terms of per person income too, Gujarat displays a better relative performance over time. The rising ratio reflects that the state is developing over time and implies relatively higher standards of living for the state’s residents as compared to their all-India counterparts. 8. Characteristics of growth in Gujarat: TABLE III : STATISTICAL INDICATORS FOR GUJARAT INDICATORS GROWTH IN GSDP¬¬ 1993-94 TO 2000-01 2004-05 TO 2011-12 Mean/ Annual average growth rate 6.60 10.12 Standard deviation (sd) 7.21 2.64 Coefficient of Variation (cv) 109.25 26.14 Trend growth rate 6.34 9.83 Source : Author’s Calculations based on CSO data A closer look at the Table III suggests the following: a) Faster economic growth over time: Gujarat shows an increase in both the annual average growth rate and trend growth rate over time. The annual average or arithmetic mean has increased from 6.60 percent during 1993-94 to 2000-01 to a huge 10.12 percent during 2004-05 to 2011-12. Likewise, there is also an upward movement in the long run development trajectory of the state. The trend growth rate has increased substantially from 6.34 percent during 1993-94 to 2000-01 to 9.83 percent during 2004-05 to 2011-12. b) Stable economic growth over time: The fluctuations in the state’s GDP growth rate have also come down substantially over time. While the standard deviation was 7.21 during 1993-94 to 2000-01, it has come down to 2.64 during 2004-05 to 2011-12. Likewise, the coefficient of variation has fallen from 109.25 percent during 1993-94 to 2000-01 to 26.14 percent during 2004-05 to 2011-12. Clearly, growth has become less volatile in the state over time and it has become more consistent and stable in recent times. 9. Sectoral growth rates: The sectoral composition of economic growth is an important economic indicator as it reveals the pattern of growth and its attendant economic consequences FIG I : AVERAGE ANNUAL GROWTH RATES ( 2004-05 to 2011-12) ¬¬¬ Source : Author’s Calculations based on CSO data The Figure above suggests the following: a)The annual average rate of growth in the agriculture sector in Gujarat(8.46 percent) is more than twice than that of the rest of the country(4.12 percent) over the period 2004-05 to 2011-12. The farm sector growth is most crucial in a country like ours where a substantial proportion of the population is dependent on farming. A high growth in agriculture stimulates the economy by raising demand for goods produced by the industrial and services provided by the tertiary sector. b) The industrial sector comprises of ‘mining and quarrying’, ‘manufacturing’, ‘construction’ and ‘ electricity , gas and water supply’. The annual average growth rate of the industrial sector in Gujarat (10.64 percent) is substantially higher than that of the rest of the country( 8.25 percent) during 2004-05 to 2011-12. Clearly, industrial expansion in the state has been much larger than the rest of the country. c) The manufacturing sector is an important economic sector that is characterised by increasing returns and is responsible for creation of jobs in bulk. Growth paths of economies the world over have revealed that manufacturing is a very consistent engine of growth and a state which displays robust manufacturing set-ups is more likely to show better growth prospects over time. The annual average growth rate of the manufacturing sector in Gujarat(10.89 percent) is again much higher than the corresponding national average of 8.96 percent during 2004-05 to 2011-12. d) The services sector has been growing in importance in most states of the country in the last two decades or so. The sector includes activities like ‘railways’, ‘transport by other means and storage’, ‘communication’, ‘trade, hotels and restaurants’, ‘real estate, ownership of dwellings, legal and business services including finance, banking and insurance’ and ‘public administration and other services representing community, social and personal services’. The services sector in Gujarat has also grown faster( 10.85 percent) than the national average of 9.95 percent during 2004-05 to 2011-12. Two additional points, albeit important, also need to be made. i) While the growth in the farm sector has been sluggish and has lagged behind the growth of the industrial and services sector in most states and the country as a whole, the above figure clearly reveals the robust growth tempo in the agriculture sector in Gujarat. The state has been able to successfully chart out a balanced pattern of growth in recent years with the farm sector being an active beneficiary of the growth process; in turn it has also been a leading sector for promoting growth and incomes in the state. ii) The surge in manufacturing and industrial output in recent years, as revealed by the figure above, suggests that the state has managed to build up a robust and diversified secondary sector. This augurs well for the state in future as better growth performance in the manufacturing and industrial sector would spur fresh investments in the state and strengthen the secondary sector further. 10. Concluding remarks: The foregoing statistical review and discussion has highlighted the robust health of the Gujarat state economy in recent years. While this paper is a modest attempt to analyse Gujarat’s economic performance over time and compare it with the performance of the national economy and major states, statistical evidence substantiates the claim that major economic advances have been made by the state under the Chief Ministership of Shri Narendra Modi. The superior economic performance of Gujarat deserves detailed study to identify the key ingredients of success and best practices in the state which should be emulated and replicated in other states and the nation as a whole.
Posted on: Fri, 21 Mar 2014 09:58:19 +0000
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