Let’s welcome the autonomy economy

Gujarat isn’t Guangdong, but shows the rest of India what its model of governance can achieve

If Narendra Modi finds himself at the centre of the most hotly contested General Election in recent times, the ‘Gujarat Model’ finds itself centrestage in equally fiery contests of some fine minds (and sundry politicians, of course). And while each side of the debate uses macro-statistics to prove its point—whether this involves proving that Gujarat has grown faster under Modi than under any previous government, or whether it means showing how Modi’s Gujarat has lagged on social indicators—nobody cares to explain in any detail what the Gujarat Model that they are praising to the skies or criticising to the ground actually is.

And that is where journalist Uday Mahurkar, among Ahmedabad’s pre-eminent scribes, takes centrestage with this appropriately titled book. The author makes no secret of his proximity to Modi, nor does he hide his awe of Gujarat’s Chief Minister. For a neutral observer, that would be enough to doom the book. Curiously, though, Mahurkar’s access to Modi and his top officials is precisely what makes this book a must- read. It is perhaps the only book in what’s now a mini-industry of Modi books that tells us in some detail what the Gujarat Model is. It’s a journalistic narrative, unburdened by statistics, complex analysis or any grand ideology of economics or governance, and it allows you to make up your mind about the model rather than have someone else make it up for you.

In its nuts-and-bolts reality, the Gujarat Model may disappoint diehard believers in ‘laissez faire’ economics and those on the Left in equal measure. The State is not invisible in the economy, nor is it omnipotent. It is a system of governance run on a commonsensical problem- solving approach rather than ideology. That is why several aspects of it can easily be applied to other parts of India. Of course, Modi’s style of governance does have significant shades of conservative economics. Perhaps the most important feature of the model is its fiscal prudence. Mahurkar documents how Gujarat’s Chief Minister turned around a precarious fiscal position that he inherited in 2001 to one of considerable comfort a decade later. What’s noteworthy isn’t just that Modi’s government bridged the gap between expenditure and revenue—this was achieved at least partly by a more efficient mop-up of revenues and the plugging of leakages in wasteful PSUs for example—but also how Gujarat achieved a qualitative shift in government expenditure. In 2001, non-plan items of largely unproductive consumption accounted for 60 per cent of the state’s spending, while planned expenditure on such productive things as infrastructure made up the rest. By 2013-14, the ratio stood more than merely reversed, with 68 per cent being spent on investment and just 32 per cent on consumption. This is the kind of switch in Central government spending that India’s economy desperately needs.

A corollary of the state’s fiscal responsibility and another standout feature of the Gujarat Model is its rejection of freebies and doles. There is no such thing as a free lunch in Gujarat—no free power or cheap food schemes that are central to most other state governments. It is a strategy that has won political support; Modi chose to crack down on electricity- thieving farmers in the run-up to an important state assembly election despite political advice to the contrary. Again, this is something that the wider economy, caught in a vicious cycle of freebies and doles that India cannot afford, needs to emulate.

The most talked about aspect of the Gujarat Model has been its business friendliness. Mahurkar believes that the biannual Vibrant Gujarat Summit (which the author compares with the World Economic Forum in Davos) started by Modi after he became Chief Minister has played a crucial role in winning the confidence of investors, both Indian and foreign. A single-window clearance system for projects has eased Gujarat’s business environment at a time when clearances at the level of the Central Government have been fraught with difficulty. You can argue about Gujarat’s growth rates and social development indicators, but there is no denying that Modi has made the state an attractive destination for manufacturing, forcing investors to look beyond the usual hubs of Tamil Nadu, Haryana and Maharashtra.

But it isn’t just the Invisible Hand of the market at work here. It wouldn’t have been enough without a concerted proactive government thrust on infrastructure, particularly roads and power. If there is one feature of the Gujarat Model which ought to be replicated in every state of India, it is in the power sector. Like many other states, Gujarat was saddled with a loss-making, debt-ridden State Electricity Board (SEB) when Modi took over as Chief Minister. Its main problem, like in other states, was its huge losses to theft in transmission and distribution, amounting to 30 per cent of all power supply. And much of the theft was in agriculture, which consumed 70 per cent of the state’s power largely for the purpose of pumping groundwater. An innovation suggested by an SEB engineer (opposed by most bureaucrats) and adopted by Modi and his power minister Saurabh Patel began the turnaround: the idea involved setting up separate transmission lines for domestic consumption in order to have two distinct supply networks for agriculture and domestic use. It would imply a cost of Rs 2,000 crore, but once done, domestic consumers would get 24×7 power supply while farms would get a rationed supply of eight hours a day. After a successful pilot project, the plan was extended to the entire state via its Jyotigram Scheme in 2003. Soon, even industry was assured non-stop power supply, a key input for any manufacturing unit. There is no ideology behind Gujarat’s power sector turnaround, just an engineering innovation that Modi and his power minister pushed through despite bureaucratic opposition. It is simple—and frankly inexpensive—enough for other states struggling with similar problems to adopt.

For those who believe that industrial success alone cannot lead to inclusive growth (those on the Left, that is), the Gujarat Model has something scintillating to offer: the outstanding performance of the state’s agriculture sector, which grew at an annual rate of 6-10 per cent for a decade between 2002 and 2012, a period when the sector’s all-India rate struggled to reach 4 per cent. And it ought to gladden the hearts of the Left to learn that the government played a crucial role in this boom: first, by introducing modern and efficient means of irrigation (not just canals, but rainwater harvesting and drip irrigation); and second, by sending out experts to advise farmers on what seeds to use, what fertilisers to deploy, etcetera. The Gujarat government’s annual Krishi Mahotsav revived agricultural extension services, which in theory ought to exist not just in Gujarat but in other states of India too. Again, there is nothing Gujarat-specific in either of these policies. They can easily be deployed in other parts of India.

What also ought to please those who believe in a greater government role in the economy is the manner in which Gujarat has streamlined its bureaucracy. Officials now enjoy stable tenures without the fear of transfers. They are encouraged to brainstorm with the political leadership at annual Chintan Shivirs and throw up ideas. They have considerable autonomy in implementing government programmes. And yet, they are accountable not just to the Chief Minister but to the public at large via the country’s most ambitious e-governance programme.

Of course, Gujarat isn’t paradise. It isn’t even Guangdong. Mahurkar devotes several pages to the problems that remain and mistakes that have been committed. But what is perhaps the biggest constraint on Gujarat is that many policies critical to its success are framed in New Delhi and not Gandhinagar.

In all, the most attractive feature of the Gujarat Model, which doesn’t find mention in Mahurkar’s book, is that it shows what can be achieved by a truly federal structure of governance with genuinely empowered states. The Gujarat experience has a message for New Delhi: governance in general is more efficient at the state rather than Central level, and this is reason enough to devolve more functional and financial autonomy to the states. Perhaps a Prime Minister Modi would recognise as much without enforcing the specifics of the Gujarat Model upon every state.

Sure, while some of the model’s features can and should be used by other states, these states should think out-of-the-box and form their own models. Competition among states will be good for India.

India’s governance desperately needs a problem-solving approach administered by competent managers. That is the one salient lesson that stares us in the face from Gujarat and this book.

Dhiraj Nayyar is CEO of Think India Foundation and editor-at-large, Firstpost

About The Author

Dhiraj Nayyar

Dhiraj Nayyar is chief economist, Vedanta Ltd, and the author of Modi and Markets: Arguments for Transformation

•