Myth of the Modi Miracle

The stratospheric legend of Narendra Modi and his promised land of Economic Freedom does not really shine as his propaganda machine and miscellaneous industrialists push it down the nation’s throat. Modi’s Gujarat lags behind and much of the adulation is unwarranted
Mohan Guruswamy Delhi 

The moment of inflection for Narendra Modi’s regime in Gujarat, when it curved away from being viewed negatively after its cold-blooded and bloody conduct during the post-Godhra riots, was when in 2005 the Rajiv Gandhi Foundation, headed by Sonia Gandhi, ranked Gujarat under Modi as the the best in the country for something called “Economic Freedom”. To Modi, this was a match-winning self-goal gifted by a ruling party whose left hand obviously did not know what the right hand was doing. The Gujarat government was quick to take advantage of this deemed accolade from the ‘enemy’ by taking out full pages in the national newspapers, advertising this “honour”.

This was soon followed by Mamata Banerjee’s exertions at Singur, supported by the unlikely triumvirate of Anil Ambani, Amar Singh and Medha Patkar, which drove Ratan Tata and his Nano straight into the arms of  Modi. The legend of Modi and his promised land of Economic Freedom went stratospheric and still shines brightly from up there.

But, what is Economic Freedom?

The notion of Economic Freedom traces its origins to a series of seminars between 1986-94 sponsored by the Fraser Institute of Canada and hosted by Milton and Rose Friedman. Milton Friedman is a Nobel Prize winner in economics and his brand of economics stands at the most rightward fringe of the spectrum. His policy preferences have been criticised by a galaxy of economists, including John Galbraith and Amartya Sen, as insensitive to people and sensitive only to profit. The economics espoused by Friedman found its most sincere adherent in the dictatorial regime of Augusto Pinochet in Chile. Other prominent proponents of Economic Freedom are two of the most conservative US thinktanks: the Heritage Foundation and the Cato Institute.

It is therefore somewhat ironical that the Rajiv Gandhi Institute of Contemporary Studies (RGICS) of the Rajiv Gandhi Foundation got mixed up with something quite as dubious as Economic Freedom. One must wonder what the UPA’s National Advisory Council has to say about Economic Freedom. Or whether they even know about such things?

While Economic Freedom is packaged as a new idea with the Wall Street Journal happily celebrating its umpteenth anniversary, it is mostly a rehash of all that went with the Cold War ideology of free enterprise and free markets. Whatever it is, it is not an economics term that finds recognition in my copy of the MIT Dictionary of Economics. It is actually nothing but a brand of politics promoting an ideological lifestyle favoured by ultra-Rightists.
 

The Fraser Institute best describes it as follows: “Economic freedom is the extent to which one can pursue economic activity without interference from government. Economic freedom is built upon personal choice, voluntary exchange, the right to keep what you earn, and the security of your property rights.”

Simply stated, this means that good governments are those which let the rich do what they want, take all they want, keep all they want, and the people be damned. In short, the market will take care of everything. This is as dumb an ideology as that where the State is everything and takes care of all, better known as communism.

The annual Economic Freedom of the World Report, published by the Fraser Institute in conjunction with members of the Economic Freedom Network, ranks countries on their level of economic freedom. Incidentally, the RGICS is not a part of this network, which then begs the question as to why it did something so dumb as appearing to endorse the Modi government?

Last year’s rankings had India at 68 along with the Bahamas, Belize, Ghana, Tanzania and Tunisia and way below countries with few real freedoms like UAE (16), Kuwait (18), Oman (18), El Salvador (27), Panama (27) and Jordan (36). Thus, it seems that while Economic Freedom is a composite index of individual liberty, limited government and free markets, the weight accorded to individual freedoms is at best marginal. On a scale of 10, even top-ranking Hong Kong got 8.7, while the US got 8.2. Apparently, the standards demanded by the makers of Economic Freedom are much too high even for these holy centres of capitalism. 

The Heritage Foundation, in conjunction with the Wall Street Journal, seems to have a somewhat different scale but it comes to about the same conclusions. Thus, while their index considers Saudi Arabia to be mostly free, it considers India to be mostly unfree, like China! 

With respect to the composite Human Development Index (HDI), Gujarat’s performance is devastating. The HDI for Gujarat, in 2008, was 0.527, and it ranked 10th among the major states

Let’s get back to the Modi government, which is shouting itself hoarse from the rooftops that it is the best-governed state in India. That’s not even close to the truth because the RGICS study was not evaluating performance.

Economic Freedom is not about good government. It is not even about economic achievements. It is about the least government and looking most business-friendly. It is as if a policeman is to be judged by how crisp and clean his uniform is and not by his professional achievements.

Gujarat’s achievements in economic and social development during the last decade do not support its advertisement of itself as the best-governed state. In terms of economic growth, at constant prices, in the period 2001-2010, Gujarat averaged a growth of 8.68 per cent, which ranks it well below Uttarakhand (11.81 per cent) and Haryana (8.95 per cent). In fact, the change in the rate of growth from the pre-Modi era to the Modi era was merely 8.01 per cent to 8.68 per cent, when, during this period, the change in rate of growth in Bihar and Odisha was 4.32 per cent and 4.71 per cent, respectively. No wonder Nitish Kumar is irritated by the anointment of Modi as the growth king.

Ten and more years after the advent of Modi, where does Gujarat rank, among the wealthy?

In terms of per capita income, in 2011, Gujarat ranked sixth among major states with a per capita of Rs 63,996, after Haryana (Rs 92,327), Maharashtra (Rs 83,471), Punjab (Rs 67,473), Tamil Nadu (Rs 72,993) and Uttarakhand (Rs 68,292). During 2001-04, industrial growth for Gujarat was 3.95 per cent, rising to a more creditable 12.65 per cent between 2005-9. 

With respect to the composite Human Development Index (HDI), Gujarat’s performance is devastating. The HDI for Gujarat, in 2008, was 0.527, and it ranked 10th among the major states

How does this compare with the unheralded highfliers?

During these two periods, industrial growth for Odisha was 6.4 per cent and 17.65 per cent; 8.10 per cent and 13.3 per cent for Chhattisgarh; and 18.84 per cent and 11.63 per cent in Uttarakhand. Clearly, Modi’s Gujarat lags behind and much of the adulation is unwarranted.

 

With all the Economic Freedom-loving countries rooting for him, and with a rich and numerous Gujarati NRI community, one would have thought that, at least in terms of attracting foreign investment, Gujarat would have been at the top of the list. But it is not so.

During 2006-10, Gujarat signed MoUs worth Rs 5.35 lakh crore, supposedly with a potential for 6.47 lakh new jobs. However, Maharashtra and Tamil Nadu with MoUs promising investments of Rs 4.20 lakh crore and Rs 1.63 lakh crore, respectively, and promising about 8.63 lakh and 13.09 lakh jobs each, are well ahead of Gujarat in terms of promised job creation.

Let’s look at some less-discussed but telling benchmarks. Economists like to see credit/deposit ratios ahead of MoUs, which are in the realm of the future and may or may not happen. Usually not. This is where the real shocker is. The fabled wealth and thrift of the Gujarati does not seem to be working in Modi’s Gujarat.

In 2010, Gujarat’s share in the deposits of India’s scheduled commercial banks was 4.70 per cent, as against 5.42, 6.20, 6.34 and 26.60 per cent for Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra, respectively. The share of Gujarat in total credit disbursed by these commercial banks was 4.22 per cent, while it was 29.75, 6.71 and 9.61 per cent for Maharashtra, Karnataka and Tamil Nadu, respectively.

The economics espoused by Milton Friedman found its most sincere adherent in the dictatorial regime of Augusto Pinochet in Chile… 

The amount of per capita deposit and per capita credit for Gujarat was Rs 37,174 and Rs 24,268; while for Tamil Nadu, it was Rs 42,580 and Rs 47,964; for Karnataka, Rs 49,598 and Rs 38,154; and for Maharashtra, Rs 1,10,183 and Rs 89,575. Even Kerala did better than Gujarat with Rs 43,890 and Rs 27,912.

Clearly, it is not his economic achievements that put Modi on top of both Ratan Tata’s and Anil Ambani’s wish list as prime minister of India in 2014, or before.

 

If Gujarat did not do well in garnering wealth, how did it fare in reducing poverty?

In the reduction of poverty, Gujarat has achieved a decline of 65.87 per cent since 1977, which, while commendable, only places it sixth, well below Goa, Kerala, Himachal Pradesh, Haryana and Punjab. Even now, after so much of “good governance” particularly under Keshubhai Patel, Suresh Mehta and Modi as chief ministers, Gujarat still has 14.07 per cent living below the poverty line placing it only fourth from the top!

While Gujarat has the highest per capita spending on roads and irrigation, it ranks only sixth in per capita spending on health and education. The consequences of such priorities can be seen in the Human Development Indices.

In terms of reduction of Infant Mortality Rate (IMR), Gujarat has achieved a reduction of 17.94 per cent, which is 11th in terms of rank, leaving it with an IMR of 64 which places it seventh. Gujarat doesn’t do too well in terms of life expectancy with the average longevity being 62.15 years, which puts it in eighth place, below even Bihar’s 62.85 years.

In terms of per capita income, in 2011, Gujarat ranked sixth among major states with a per capita of Rs 63,996, after Haryana (Rs 92,327), Maharashtra (Rs 83,471), Punjab (Rs 67,473), Tamil Nadu (Rs 72,993) and Uttaranchal (Rs 68,292) 

Again, in terms of sex ratio, Gujarat is running neck to neck with Bihar with 921 females to every 1,000 males. In terms of literacy, Gujarat, once again, is not among the top with 69.97 per cent, which ranks it sixth.

When it comes to overall population growth, Gujarat, with an annual growth of 2.42 per cent, is once again sixth in the ranking. Even in terms of population between the ages of 5-14 enrolled in schools, Gujarat, with 74.35 per cent, stands at sixth place.

With respect to the composite Human Development Index (HDI), Gujarat’s performance is devastating. The HDI for Gujarat, in 2008, was 0.527, and it ranked 10th among the major states. Kerala stood first with 0.790; Himachal Pradesh scored 0.652, Punjab 0.605, Maharashtra 0.572 and Haryana 0.552.  Even more shockingly, in terms of hunger, the State Hunger Index 2008 reveals that Gujarat ranked 13th among 17 big states, and worse than even Orissa, officially India’s poorest state. 

In 2003, Gujarat reported 1,044 cases of kidnapping, about half of the numbers reported from traditional kidnapping states like Bihar, UP and Rajasthan… …almost 90 per cent of those kidnapped were below 30 years and 80 per cent kidnapped were women

The RGICS study of Economic Freedom apparently includes “efficient and effective legal system ensuring complete investigation” as a measure. Presumably they did not consider the Justice Bannerjee Report on the Godhra incident or the Justice SC Jain’s Central Pota Review Committee order excluding the 130 persons from Pota for the same alleged offence.

The thousands killed in the carnage of 2002 and the about-turns seen in the Best Bakery case are additional testimony to the effectiveness and efficiency of the legal system in Gujarat, just as they are to the “highest level of safety of life and property and lowest incidences of violent crimes in the country” claimed by the Gujarat government. Here, one is hard-pressed to contest Gujarat’s contention of having the ‘least government’.

There is another perspective on this. In terms of value of property stolen during 2003, Gujarat reported Rs 32,419 lakh worth as stolen, placing it just below Maharashtra. In terms of property recovery, Gujarat had only 9.5 per cent, whereas top-ranked Haryana managed 68.3 per cent.

Then, there is another interesting statistic about Gujarat that is quite telling. In 2003, Gujarat reported 1,044 cases of kidnapping, which is about midway compared to the numbers reported from the “traditional kidnapping states” like Bihar, UP and Rajasthan, but well above Madhya Pradesh, Maharashtra, Tamil Nadu and Karnataka. But what makes Gujarat truly unique is that almost 90 per cent of those kidnapped were below 30 years and nearly 80 per cent kidnapped were women. This is almost twice the national average. So much for “the highest level of safety of life and property” claimed in Gujarat.

In terms of sex ratio, Gujarat is running neck to neck with Bihar with 921 females to every 1000 males. In terms of literacy, Gujarat is not among the top with 69.97 per cent, which ranks it sixth 

The National Crime Records Bureau also reports that Gujarat was no slouch when it came to violent crime with 13.1 per cent, putting it ahead even of UP, West Bengal and Punjab. In terms of IPC crime rate, Gujarat with 197.0 was above the national average of 160.7.

There are some other measures we can consider. For instance, in terms of net industrial value added, Gujarat, currently Indian industry’s darling, ranks third, below Maharashtra and Tamil Nadu. It has performed poorly in terms of growth of electricity generation since 1993-94 with a growth of only 18.69 per cent, when the national growth was 43.75 per cent. As a matter of fact, among the bigger states it stands only ahead of Bihar.

Surely, there is more to good governance than just Economic Freedom. Gujarat has not done too badly, but to claim that it is the “best governed state” in India based on some dubious index is to be somewhat economical with the truth. However, quite clearly, for Ratan Tata, Anil Ambani, Shashi Ruia and others who have been excessively laudatory about Modi, Economic Freedom is preferable to Good Government.

 

This story is from the print issue of Hardnews: JULY 2012

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