CLSA applauds Gujarat's growth model

Gujarat has a far better chance, according to analysis by research firm CLSA, of sustaining its high growth trajectory in the next few years as compared with competing states such as Maharashtra and Tamil Nadu.

“Unlike most large economies, India’s economy has evolved differently. It has transited from an agrarian economy to a services powerhouse, without going through a phase where manufacturing dominates. But Gujarat has bucked this national trend,” the report said. In Gujarat, it said, industry accounts for 40 per cent of the Gross State Domestic Product (GSDP), while the national average is just 27 per cent. This means far more sustainable growth for Gujarat. It also says the state’s low reliance on central funds would help it deliver strong growth.

Other industrialising states such as Maharashtra and Tamil Nadu have seen a fall in the share of industry in overall GSDP. “The state’s industry GDP contribution to the national GDP has consistently increased from 8-8.5 in 2000-01 to 11-1.5 per cent in FY11,” the report said.

On the oft-repeated criticism that despite high growth, Gujarat’s Human Development Index (HDI) and Infant Mortality Rate (IMR) show little signs of improvement as compared to Maharashtra or Tamil Nadu, the report said with improved governance, Gujarat’s HDI and IMR would soon converge with the other two states.

In agriculture, the report said farming contributes 13 per cent to the state’s GDP, significantly higher than Maharashtra and Tamil Nadu. “The state’s contribution to the national production of wheat and cotton has significantly improved in the last few years and the contribution of its agri GDP to the national agri GDP has doubled in the last 10 years,” the report said.

Regarding the reliance on central funds, CLSA said the ratio of the state’s own tax revenue to total tax revenue is one of the highest among all states, at 84 per cent.

“Less than 30 per cent of its overall revenue receipts come from central taxes and grants from the central account,” the report said.

These, experts said, make Gujarat’s growth far more robust, even if there is a slowing in central allocation.

It spends a consistent 55-60 per cent of overall expenditure on development, while not compromising on spending in other sectors.

In other states, the share of total expenditure on development activities fluctuates widely.