Over the last few months, I have been terribly perplexed by both the fluff that has masqueraded as a discussion on the Gujarat model and the bewildering array of data that has been parsed endlessly and occasionally mangled. In order to rectify this, I asked my bright young colleagues in HDFC Bank's research team - Tanvi Garg, Shivom Chakravarti and Rishi Shah - to put together a list of what they thought were the specific achievements of this governance model. Here's what they thought and presented in the report "Modinomics: Reason to believe?" (HDFC Bank Research, May 22).
To start with, all three of them wanted to highlight reforms in Gujarat's power sector. In terms of specifics, they liked the idea of separating the power feeder line to the rural households from the line that supplied (more subsidised power) for agriculture. This prevented the diversion of cheap power for household use, ensured better collection rates for power providers, and also improved the quality of power. Rishi Shah emphasised the success of the policing of power theft with dedicated police stations for preventing pilferage. As a consequence, Gujarat's power tariff collection rates were close to 100 per cent.
Tanvi Garg wrote extensively on Gujarat's land-use practices - which were, incidentally, highlighted as a "best practice" by an Accenture report commissioned by the Department of Industrial Policy and Promotion ("Best Practices to Improve the Business Environment in India"). She discussed the Gujarat Industrial Development Corporation's online service, namely GIDC MITRA. This service gives a clear idea of the land available in the state for different uses, and has timelines for approval embedded in it. There is a strict compensation policy for those who sell their land with mandatory employment to one member of the family. Thus, land possession happened within 45 days of application, and land allocation increased fourfold since the implementation of GIDC MITRA.
I am not denying the fact that there were issues related to adequate compensation or the environment. However, the fact that in a period when Indian manufacturing was bogged down in a morass of new red tape, Gujarat's achievement to retain and grow a "manufacturing culture" certainly should not be overlooked.
All three of my colleagues liked the way the Gujarat government restructured and ran its public sector units. A common thread that runs through the approach was the replacement of politicians in senior management positions by competent bureaucrats. This was true for both large entities, such as Gujarat State Fertiliser and Chemicals Limited (GSFC), and smaller ones such as cooperative banks. This "professionalism" paid off in terms of sensible business decisions. In GSFC's case, this took the form of a debt restructuring programme and a switch from naphtha to natural gas as feedstock. In the period 2001-03, it accumulated a loss of Rs 692 crore; in 2012, it posted a profit of Rs 1,113 crore.
My team also explored the e-governance system SWAGAT, which enables citizens to seek redressal of their problems once a month. It operates at three levels - the district, taluka and village. What is interesting is the review process of this redressal system. Unlike many other bureaucracies, it is not based on cases being taken up, but on the number of problems solved - much like a well-functioning company. The programme incidentally won the United Nations award for public service.
Coming to agriculture, we were all quite impressed with the fact that not only did Gujarat clock the highest average growth rate among all states, of 7.7 per cent (India average was 2.6 per cent), the volatility of this growth rate measured by the coefficient of variation was low. The traction in agriculture came partly on the back of Bt cotton. This is hugely controversial and we didn't quite know how to assess it. However, the fact remains that while the use of these seeds has hurt farmers in Maharashtra, Gujarat's farmers seem to have benefited from it. This might be due to other enabling factors such as the availability of groundwater, better access to loans and the replacement of "illegal" seeds by certified "safe" seeds in Gujarat - missing in Maharashtra.
However, the big success in Gujarat's agriculture strategy was the extension of farming to the drier regions of Saurashtra and Kutch. This resulted from liberalising markets and from improving roads and infrastructure - but, most importantly, through ensuring water availability, putting together a workable programme of mass water harvesting and ensuring steady power supply.
It is interesting to note that Gujarat's consumer price inflation has been lower than the national average, partly due to the fact that food has been cheaper. Part of this bears testimony to the success of the initiatives on the supply side taken by the Gujarat government. It was one of the first states to reform the Agricultural Produce Market Committee Act, encouraged large players to set up spot exchanges, promoted contract farming and drastically reduced mandi charges.
A couple of my colleagues are data junkies and insisted that we look at the state-level data more closely. Of the many Excel sheets they showed me, a few grabbed my attention. First, in terms of change or increment, Gujarat showed the largest improvement in literacy rates between 2000 and 2011 among large states with similar levels of per capita income. It's a similar story for the human development index, with only Haryana and West Bengal doing as well. It also seemed to have the lowest inequality among major states - at least going by the Gini coefficient of consumption for 2009-10 published by the Planning Commission.
I agree that these are scrappy bits of data and evidence that hardly constitute the national economic or even a governance policy. There could, for one thing, be problems with replicating this in other states. However, these are certainly examples of what I consider "doable development" that, in our constant effort to see the big picture, we should not lose sight of.
The writer is with HDFC Bank. These views are personal
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
