The Gujarat Model: Fraud Against The Poor?
The much-trumpeted Gujarat Model is fast turning out to be a fraud against the poor, gullible citizens, first in Gujarat, and lately Pan India. The Model was drafted for business, by business, and for the exclusive benefit of the business.
While the much-debated but now forgotten, pre-independence Bombay Plan spoke about state intervention in economic policy to ensure inclusive economic development, the Gujarat Plan is an exclusive plan for the rich to get rich which kept the poor out. The Plan enabled the rich to rake in wealth and rise to global positions while the poor were forced to make excessive sacrifices, largely to satisfy the ego of the leader.
This has resulted in a massive increase in inequality. A few capitalists, (One percent of the population) at the top, became dollar billionaires, joining the global rich men's’ club. Below them, 10-15 percent attained the status of a prosperous middle class. The remaining, the vast majority, did not witness any change in their economic status. An unbridgeable economic gap between the top and the bottom persists.
In 2014 Modi and his crony businessmen supporters unleashed a massive campaign against the economic policies of the Congress UPA-II Government. According to Rohini Hensman, researcher, activist, and author,“ The cornerstone of the Bharatiya Janata Party’s campaign for the 2014 Lok Sabha elections was that the United Progressive Alliance (UPA) had ruined the Indian economy. That the BJP led by Narendra Modi will make it boom.
“These claims were reinforced by corporate adulation for Modi.” One called him Narendra Bhai whereas the other likened him to Mahatma Gandhi and Sardar Patel calling him a King among Kings. Surveys showed that almost 75 percent of top corporate CEOs wanted him to be the PM.
How valid are these claims?
The economic reforms initiated by the Congress government in the 1990s raised the Gross Domestic Product growth rate from an average of around 3.5 percent per annum, since independence, to more than 9 percent between 2005-06 and 2007-08, according to figures released by the Planning Commission in 2011. It dropped to 6.7 percent in 2008-2009 as a result of the global ?nancial crisis
Global competition forced manufacturers of products, like electrical and electronic goods, to improve the quality and reduce the price of their products. Computers, internet access and mobile phones became much more widely available. Moreover, while corruption during the UPA regime is undeniable, the Congress also enacted the Right to Information (RTI) Act, which played a considerable role in exposing corruption.
APCO Worldwide, whom the Gujarat government had hired at of $ 25,000 a month to promote Modi’s Vibrant Gujarat, agreed with this assessment of the UPA’s economic performance: “India today is a trillion-dollar market with an enviable rate of GDP growth. India's economy is fueled by the combination of a large services sector, a strong and diversi?ed manufacturing base and a signi?cant agricultural sector that continues to provide a framework for the growth of the domestic economy.
“The country's resilience in weathering the recent global downturn and ?nancial crisis has made governments, policy-makers, economists, corporate houses and fund managers believe that India can play a signi?cant role in the recovery of the global economy in the months and years ahead”.
This is a very di?erent picture from the constant BJP campaign alleging that the UPA has made a mess of India’s economy. Given that APCO is the public relations ?rm hired by the Gujarat government it can hardly be accused of pro-Congress bias. Growth under the UPA was robust, but the party failed to win the perception battle.
Like Icing on the Cake
While Modi wins praise, even from critics, for cutting red tape and making government more responsive and predictable, many ingredients for Gujarat’s run of growth were in place well before he took office in 2001. “It is like an icing on cake sort of thing. You have a nice cake and Modi has done a lot of good icing,” said Rakesh Chaudhary, director of Pratibha Group, a textile manufacturer in Palsana on the outskirts of Surat.
That the Gujarat model favoured a few in India Inc is evident from several articles and surveys appearing then and thereafter. In 2013 the Financial Express, wrote, “The Modi administration’s largesse to corporates can be judged by the staggering subsidies offered to Tata for its Nano plant and other projects.
Against an investment of Rs 2900 crores, Tata received a loan of Rs 9,570 crores at 0.1 percent interest, to be paid back on a monthly basis after 20 years. In addition land at much below market rates, with stamp duty, registration charges and electricity paid for by the state. The project, it would now seem, has bombed.
All rules were ignored to provide Adani with a power supply contract costing Gujarat an excess Rs 23,625 crores over 25 years Other companies, including Reliance Industries and Essar Steel, were extended similar favours according to a report filed by the Press Trust of India (PTI). Tax breaks meant that the people of Gujarat will not be getting any of this money back in the near future
These liberal concessions and subsidies to corporates increased the debt burden of the state which stood at between Rs 4,000 and Rs 6,000 crore in 2003 to Rs 1,98,000 crore in 2017 While there is no denying its success in infrastructure, investment and e-governance, the Gujarat model has limitations.These are highlighted by failings in public health and education, with the state still behind its peers in infant mortality rate and women's literacy.
Gujarat Model gave a new dimension to business-friendliness. It benefitted first the large corporate houses. The special relationship that developed between the government (and more precisely the chief minister) and big companies had implications not only for the economy, but also for the society (big firms need fewer workers than small and medium enterprises) and the polity.
Employment Growth Negative
According to reports appearing in the Press “The state’s growth was achieved at the cost of handing over complete control over the economy to corporates, and wholesale privatisation: ‘Key sectors – traditionally held to be the preserve of the state – such as ports, roads, rail and power have been handed over to corporate capital.
"The government had abdicated all decision making powers, as well as functional and ?nancial control over such projects. Infrastructure and access to water and electricity favour industry over agriculture and individual consumers. Employment growth in manufacturing and services turned negative in the last ?ve years, and even prior to that was concentrated in the informal sector
The Poor have paid a heavy price for Gujarat’s economic growth. The state has one of the highest poverty levels of all states. According to reports “Huge swathes of land allocated to corporates displaced lakhs of farmers, fishermen, pastoralists, agricultural workers, Dalits and Adivasis. During Modi’s tenure, 16,000 workers, farmers and farm labourers had committed suicide due to economic distress by 2011
According to Abusaleh Shariff, Chief Scholar at the US-India Policy Institute, Washington): “Gujarat Shining Story?”, “Gujarat has the highest prevalence of hunger and lowest human development indices among states with comparable per capita income, its implementation of NREGA is the worst among large states, and Muslims, “in particular, fare poorly on parameters of poverty, hunger, education and vulnerability on security issues”..
Rules for Job Creation Relaxed
By focusing on “megaprojects", the model preferred big companies which boosted the growth rate but have not created many good jobs, big companies are very capital intensive. To make it attractive for them rules pertaining to job creation were relaxed.
Manufacturing is more labour-intensive, but most units adopted automation in a big way. The maximum number employed at the Nano plant at Sanand never exceeded more than 2,200 employees For an investment worth ? 2,900 crore, this works at a ratio of one job for more than ? 1.3 crore. Of the 2,200 employees, at the unit, only 430 were “permanent workers" earning ? 12,500 in 2016, whereas the informal workers earned about ? 3,300 a month.
The massive subsidies and concessions handed out to big business impacted adversely on the lives of the poor. People have paid a heavy price for Gujarat’s economic growth. The state has one of the highest poverty levels of all states. “Huge swathes of land allocated to corporates have displaced lakhs of farmers, fishermen, pastoralists, agricultural workers, Dalits and Adivasis. During Modi’s tenure, 16,000 workers, farmers and farm labourers had committed suicide due to economic distress by 2011
According to Professor Maitreesh Ghatak , London School of Economics and Political Science, “Gujarat’s is a proverbial case of darkness under the lamps. Over the years, the high growth figures have covered up a dark underbelly of poverty, inequality and poor performance on human development indicators.
“Those who only looked at the growth numbers concluded that if the “Gujarat model” as it was termed was applied to the whole country, India would be unshackled from an outdated Nehruvian model of development, its growth potential unleashed to make it a world leader. This optimistic version proved more persuasive in 2014 than the more sober accounts of the state of things in Gujarat that were based on publicly available official statistics.
The Gujarat story is being re-enacted Pan India. The government is bending policies to help the richer get richer while the poor and deprived are being pushed into poverty and despair. The government has helped the favoured industrialist Mukesh Ambani climb into the list of the world’s wealthiest persons.
Crown Jewels on Sale
To further help the rich the BJP government has already prepared a list of crown jewels (read profit-making PSUs) to be put on the auction block. Reports suggest that the financial status of these firms is being adjusted suitably to make it convenient for the members of the super One Percent to get ownership at very, very attractive rates.
From one of the fastest-growing economies in the world, India has now dropped to the 35th spot among the 42 major economies tracked by The Economist, London. According to Vivek Kaul, an economics and finance writer, “While the pandemic has slowed down every other country in the world, the scale of economic contraction in India was bigger than almost any comparable country.
The National Statistical Office has said “India’s growth had slowed even before the pandemic struck. The contraction followed tepid 3.1 percent growth in the previous quarter, which was the worst performance in at least eight years. Many national and international, economists believe Prime Minister‘s demonetisation of currency in 2016 and a "hasty" rollout of a goods and services tax (GST) inflicted blows to manufacturing.
Migrant Workers Suffer Bigger Blow
According to Arun Kumar, a professor at New Delhi’s Institute of Social Sciences, “the informal part of India’s economy, which includes the millions of migrant workers who have lost their jobs, had suffered an even bigger blow than most people realized. My estimate is after the government takes the unorganized sector into account,” he said, the overall economic slide will be “minus 40 percent.”
Most economists agree with Arun Kumar that the distress caused by the contraction could be much worse within the informal sector, the backbone of India's economy. The informal sector, they point out, was hit far harder than the organized sector during a nationwide corona virus lockdown during much of the April-June quarter. The Centre for Monitoring Indian Economy, an independent think tank has said “About 19 million salaried people have lost their jobs since the 68-day lockdown began in late March”
The past six years have provided sufficient proof that the Gujarat Model is a highly hyped concept and that it is not sustainable Pan India. Already the damage the policy has done to the entire economy of the country is visible across the country. Blaming the problems on God is an attempt to shed its own responsibilities and lack of knowledge There is no doubt that the government is at sea and has no solutions.
Doling out freebies may help in the elections, which is doubtful; it will not help to create sustainable economic solutions. While the Gujarat Model did help Gujarat to gain substantial investment, albeit of doubtful, controversial nature, it has ruined the economic life of a vast number of Gujarat citizens. The same seems to be happening Pan India
While the government seems to have solutions for the problems faced by industrial houses it seems to be dumbstruck when it comes to providing relief to the poor and poverty striken. It is willing to allocate crores for the rehabilitation of industrial houses but is niggardly when it comes to providing succor to the poor.
The father of the Nation, Mahatma Gandhi had said that the rich cannot live an oasis of luxury surrounded by a desert of deprivation and want. He had suggested the Trusteeship concept wherein he had said that the rich set aside a part of their wealth for the welfare of those in want.
This however is not to completely write off the efforts of governments past and present. India needs solutions that can only come from a blend of industrialization and social concerns. India is still a country with a vast population of poor and struggling. There are still larges areas of social concerns that need to be tackled. These include in the main providing jobs to the growing legions of unemployed, education, and health facilities to the poor and the needy and equal opportunities for small entrepreneurs to set up their industrial projects.
Like one swallow does not indicate the advent of summer so one, one or one percent, entering the list of the world’s richest ten does not signify that the country has attained the pinnacle of economic development. India needs inclusive economic development which has a place for all to share in the created national wealth. It is the duty of the government to create this desirable goal. The Gujarat Model has been modeled to help the rich to grow rich and worse to push the poorer deeper into poverty. We need a model that will take both up the economic ladder.
As it functions today the Gujarat Model can be called a fraud against the poor. Further evidence of the failure of the Gujarat Model is the wall built during the Namaste Trump visit to hide the living conditions of the common man in Gujarat.
Also Read:
https://noidasmartcity.blogspot.com/2020/09/gujarat-model-has-failed-india.html
https://noidasmartcity.blogspot.com/2020/09/acts-of-god-and-follies-of-man.html