A Return to Gujarat Model

NARENDRA MODI BECAME the chief minister of Gujarat in October 2001 and has been prime minister since May 2014. That’s a long span of 20 years, a little over two terms as chief minister and into the second term as prime minister. A prime minister’s mandate is different from a chief minister’s. The canvas of decision-making is broader. Across those 20 years, several books, academic papers and popular articles have been written on Modinomics, seeking to straitjacket and define his economic philosophy in terms of “isms”—centre, left of centre, right of centre. These reveal less about the individual and are more about the boxes authors prefer.

When he was chief minister, there was a debate about the Gujarat model and about what the development trajectory showed. That’s history, and there is no point revisiting it. Shorn of the debate about indicators and measures, which policies bear the stamp of Narendra Modi, the chief minister? My list is the following: one, private investments (Vibrant Gujarat); two, a push to finance, technology and IT (for example, GIFT); three, reform of PSUs in Gujarat (such as Gujarat Electricity Board); four, clamping down on corruption (such as computerisation of land records); five, integrated water distribution, conservation and use through the Sujalam Sufalam scheme (local conservation plus a grid); six, power reforms (Jyotigram Yojana and electricity supply to villages, 24/7 electricity, gas grid, solar power); seven, agriculture (Krishi Mahotsav, BT cotton); eight, women and children (Chiranjeevi Yojana, Beti Bachao, Matru Vandana, Kanya Kelavani Yojana); nine, health (Swastha Gujarat, Chiranjeevi Yojana); ten, skills (Karmayogi Abhiyan for bureaucracy); eleven, school education (the Gunotsav campaign); twelve, deprived sections (Garib Samruddhi Yojana, Vanbandhu Kalyan Yojana); and thirteen, governance (e-governance, connecting villages through broadband).

There are a few more, though I have listed the major ones. Broadly, as the then-chief minister himself stated, these are based on five “Shaktis” or “Panchamrita”: Jal Shakti (water), Urja Shakti (energy), Jan Shakti (human resources), Gyan Shakti (knowledge) and Raksha Shakti (defence). I suspect many who criticised, and continue to criticise, the Gujarat model, weren’t (and still aren’t) aware that some of these thirteen existed. Hence, the Gujarat model is criticised for not having had an emphasis on social sectors. (In actual social-sector variables, if one starts with a low base, notwithstanding improvements, it takes a while to offset the low base.) A prime minister’s mandate is different from a chief minister’s. International relations, foreign policy, defence, cross-border terrorism, Parliament, judiciary, dealing with states, dealing with bureaucracy from a different state—the stage is different. Complexities multiply manifold. I think a prime minister who is elected through Lok Sabha looks at matters differently, as compared to a prime minister who has effectively been nominated (though technically, it may be an election) through Rajya Sabha. I think a prime minister born in independent India looks at matters differently. I think a prime minister who has been a chief minister looks at matters differently.

On that last sentence of having been a chief minister earlier, the Union Government accepted the recommendations of the 14th Finance Commission in February 2015. Compared to the 13th Finance Commission, the 14th increased devolution to the states by a staggering 10 per cent to 42 per cent. Except once (in the 1980s), recommendations of the Finance Commissions have invariably been accepted. However, given the Union Government’s fiscal constraints then, there would have been few objections had the incremental 10 per cent been staggered over time. A prime minister who has not been a chief minister might well have done that. A prime minister who had not been a chief minister might well have continued with a discretion-driven Planning Commission and not replaced it with NITI Aayog, with a different mandate. We tend to forget that templates of several policies, Centrally sponsored schemes, Swachh Bharat, skill development and the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), and agriculture, have been determined by sub-groups of chief ministers, not by the Union Government. There has been a strong strand of fiscal devolution and non-fiscal decentralisation of decision-making. Cooperative federalism and competitive federalism (such as through rankings of states) are not contradictory. Nor does decentralisation mean Union-state alone. There needs to be decentralisation within states ,too, and there is heterogeneity and diversity within states. While a prime minister’s mandate is different from a chief minister’s, I think antecedents of the aspirational districts programme can be found in the Gujarat experience.

With the reform of PSUs in Gujarat, it was unreasonable to expect largescale privatisation. Also, anyone familiar with Gujarat should have expected Central initiatives directed towards cleaning up the system

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Analysts often didn’t look at Gujarat hard enough. With the reform of PSUs in Gujarat, not just the Gujarat Electricity Board but also PSUs in sectors like fertilisers and chemicals, it was unreasonable to expect largescale privatisation along the lines of say, Margaret Thatcher. Why should Narendra Modi become another Ronald Reagan or Margaret Thatcher, as several pro-right commentators wished him to become? Hence, one shouldn’t have expected privatisation to be a binary, all or none. Lest I be misunderstood, as the prime minister has repeatedly stated himself, there is a case for privatisation of Central PSEs (public sector enterprises) that are consistently loss-making (such as Air India, Bharat Petroleum Corporation Ltd or BPCL, Shipping Corporation of India, BEML, Pawan Hans). But, in other cases, there is a scope to monetise and leverage PSE assets (National Monetisation Pipeline), especially since land valuation becomes a difficult issue. Privatisation and competition occur not only through sales of equity of PSEs but also through fresh entry from the private sector (bank, defence, insurance). Why does one disinvest or privatise? There is an efficiency argument and a fiscal argument, though the two can be linked. In both Gandhinagar and New Delhi, the emphasis has been more the former and one should quickly mention fiscal consolidation and rectitude. Contrast what happened in 2009-10 with the reluctance to completely open the fiscal tap in the midst of the Covid pandemic. On a related note, the Modi Government in Delhi doesn’t get due credit for keeping inflation in check, compared to rampant inflation in preceding years. Let’s not forget that a modern monetary policy framework, with flexible inflation-targeting, was introduced in 2016.

During Modi’s first term in Delhi (2014-19), an expression was often used in the media—“from doles to empowerment”. A scheme like MGNREGA is demand-driven. A more pertinent question to ask is: Why do we still need something like MGNREGA, so many decades after Independence? Part of the answer has to do with an inability to transform agriculture. The remaining part is about an inability to provide inputs (physical and social infrastructure) required to enable poverty reduction and employment generation. Notwithstanding reforms, some segments will need to be subsidised. There cannot be across-the-board subsidisation. There has to be targeting of beneficiaries. For years, under the United Progressive Alliance (UPA), there was preaching about decentralised identification of the poor. That can only be done through a Census, not a survey, the National Sample Survey (NSS) being an example of the second. Therefore, we argued about poverty ratios based on NSS, but little was done to target the poor. The Socio-Economic Caste Census (SECC), 2011 is now used for both Union and state government programmes. (With a repeat Census now due, this has been in the news because of the caste part, which became non-implementable in the last Census). That argument, about subsidising only those who warrant subsidies, existed in Gujarat’s Chiranjeevi Yojana too. It exists across numerous schemes. The Jan Arogya Yojana, Garib Kalyan Anna Yojana, Awas Yojana, household toilets under Swachh Bharat Mission (SBM) and Ujjwala Yojana are instances. But note a component that was alien to anti-poverty schemes earlier—a contribution by the beneficiary. Doles do not exist without attached strings. In different ways, this exists for Awas Yojana and Ujjwala Yojana, among others.

SBM is a good peg to mention an important and implicit ingredient in Chief Minister and Prime Minister Modi’s initiatives, articulated explicitly in the prime minister’s recent speech on the occasion of the 75th Independence Day. He spoke not only of “Sab ka Saath, Sab ka Vikas, Sab ka Vishwas”, but also of “Sab ka Prayas”. Indeed, India cannot develop and prosper only because of what government, more so the Union Government, does. There has to be a citizen initiative. It exists in SBM, voluntary giving up of LPG subsidies, Smart Cities Mission and Jal Jeevan Mission. Indeed, I would also list MyGov and Mann Ki Baat under that head.

IN THE CONTEXT OF Gujarat, I mentioned the emphasis on IT, e-governance and clamping down on corruption. The Jan Dhan Yojana is a remarkable instance of the success in opening bank accounts. This is, of course, an extension of the argument of providing inputs (in this instance, financial products) to everyone. The success of Jan Dhan has been vetted externally. One shouldn’t forget to mention dashboards (which use IT) and exist for every Union Government scheme. There is no need to reiterate obvious points about the JAM (Jan Dhan-Aadhaar-Mobile) trinity. Suffice to say, it has reduced leakage and corruption, eliminating intermediaries. On a broader anti-corruption plank, few would have expected demonetisation, or at least, the precise day on which it was announced. However, anyone familiar with Gujarat should have expected initiatives directed towards cleaning up the system—the Real Estate (Regulation and Development) Act, 2016 or RERA, clamping down on shell companies, the amended Benami Transactions (Prohibition) Amendment Act, eliminating interviews for lower-level government appointments, transparency in coal allocations, broadening of tax bases (both direct and GST) to curb evasion, Government e-Market Place (GeM) and even National Agriculture Market (e-NAM) and urea policy. The last two may not be specifically directed at corruption, but they do reduce intermediaries. While on taxation, one should mention the Vivad Se Vishwas scheme, faceless assessment and the use of IT to reduce the human interface.

India cannot develop and prosper only because of what government does. There has to be a citizen initiative. It exists in Swachh Bharat, voluntary giving up of LPG subsidies, Smart Cities Mission and Jal Jeevan Mission

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As a polity, we have a tension. While governance needs to be decentralised (not just from the Union Government to states but also within states), it is one country. Therefore, part of the template must be standardised and uniform, notwithstanding the Seventh Schedule to the Constitution. Hence, the Goods and Services Tax (GST) is not only a more efficient system of indirect taxation—though it is still a work-in-progress, it has dramatically reduced inter-state barriers that occur because of taxation. Notice the tension within the GST framework itself. The GST Council is a phenomenal instance of Union-state cooperation in decision-making. Simultaneously, states are reluctant to cede control and standardise rates, including all products in GST. Productivity occurs because of more efficient land, labour and capital markets (with capital understood in an economist’s sense). For efficient capital markets, one should recognise the importance of the new legislation on insolvency and bankruptcy. Given that labour is in the Concurrent List of the Seventh Schedule, Union Government labour laws have been consolidated under four statutes, but the rest has to be entirely left to states. Given that land is entirely in the State List, everything has to be left to states. I think, in Narendra Modi’s mind, there exists an image of a unified India, with unification transcending narrow economic definitions. Thus, for the future, one country-one election. For the present, not only better physical infrastructure (roads, railways, civil aviation, airports, railway stations, Bharatmala, Sagarmala) generally, but also directed towards parts of India historically deprived (think of the Northeast). That unified and integrated India also means a safe and secure India. Hence, defence, internal and external security. Ask yourself, how many major terrorist incidents have there been in India since 2014, cross-border or otherwise? This is a question we rarely think about. What occurs is visible, what has been prevented remains invisible.

A column with limited word length doesn’t allow one to document everything Narendra Modi has done, or has sought to do, in two-plus terms in Gujarat and one-plus term in Delhi so far. I think a pattern and continuity exist in the transition from chief minister to prime minister and I have simply cited some instances. He had an image for India in 2022, when we complete 75 years of independence. The Covid pandemic has knocked everything back by at least two years, including the $5 trillion aspirational GDP target. Perhaps the target is now 2024. (At least, the Jal Jeevan Mission has that timeline.) In any event, 30 years down the line, when posterity examines the Narendra Modi imprint on governance and public policy in India, I think the assessment will be that these 20 years have been transformational.

About The Author

Bibek Debroy

Bibek Debroy has translated the Mahabharata and the Valmiki Ramayana into English. He is the Chairman of the Economic Advisory Council to the Prime Minister

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