The Indian elections: what does "the Gujarat Model" really mean?

Narendra Modi, whom some consider a human rights criminal, is running for PM of India and being touted as an economic saviour based on his record in Gujurat. An analysis of these claims reveals a version of corporation-driven neoliberalism as extreme as that of the US, argues Rohini Hensman

Rohini Hensman
31 March 2014

General elections in India are scheduled to begin on 7 April, and the top candidate for Prime Minister is reportedly Narendra Modi of the right-wing Bharatiya Janata Party (BJP), who is currently chief minister of Gujarat.  Despite persistent allegations of Modi's complicity in the 2002 slaughter of Muslims there, including reports of gruesome sexual violence, the BJP has won over voters by claiming that the Congress Party-led United Progressive Alliance (UPA) government has ruined the Indian economy and Modi will make it boom.  He is definitely the candidate preferred by the Indian business elite, met by corporate adulation in his "Vibrant Gujarat" investor summits; surveys show that almost 75% of top corporate CEOs want him to be the PM. 

But how valid are his claims of bringing prosperity to Gujarat?  Has he really done better than the Congress Party’s electoral coalition?  

Economic reforms initiated by the Congress government in the 1990s raised the GDP (gross domestic product) growth rate from an average of around 3.5% per annum since Independence to more than 9% between 2005-06 and 2007-08, before dropping to 6.7% in 2008-9 due to the global crisis. This growth included neoliberal policies with serious negative consequences. Privatisation was in many cases accompanied by massive corruption, as politicians and bureaucrats received kickbacks from the corporations they favoured. In other cases, lack of adequate regulation allowed corporations to make windfall profits, while public sector banks offered them generous loans without exercising due diligence.

The result of these trends was a huge increase in inequality. At the top, a few capitalists have become dollar billionaires, joining the global rich. Just below them, 10-15% of the population has become a prosperous middle class. But for the vast majority there has been no improvement. Between the top and the bottom there is an unbridgeable gulf.

Still, when the global crisis hit the world economy, India did better than most. Its relatively well-regulated banking sector survived, though not unscathed. The National Rural Employment Guarantee Scheme, initiated before the crisis, acted as a stimulus package, helping to raise agricultural wages and preventing the collapse of rural spending power. Today the overall assessment by APCO Worldwide is that India ‘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 diversified manufacturing base and a significant agricultural sector that continues to provide a framework for the growth of the domestic economy’.

This is a very different picture from the BJP’s allegation that the Congress Party leadership has made a mess of India’s economy. Given that APCO is the PR firm hired by the state government of Gujarat from 2009 to 2013 at a reported cost of $25,000 a month to promote Modi's Vibrant Gujarat summits, it cannot be accused of pro-Congress bias. Moreover, while rampant corruption during the Congress-led UPA government has been undeniable, it also enacted the Right to Information (RTI) Act, which has played a considerable role in exposing corruption.

Has Gujarat under BJP leadership done as well?

The average GDP growth rate in Gujarat over the past ten years has been above the national average, but no higher than the growth rates of comparable states like Maharashtra, Tamil Nadu and Delhi. Employment growth in manufacturing and services turned negative in the last five years, and even prior to that was concentrated in the informal sector, while industry has been favoured over agriculture and individual consumers in terms of access to water and electricity.

In fact, Gujarat’s growth has been achieved at the cost of handing control over its economy and its resources to large corporations.

Modi’s largesse to corporations can be judged by the staggering subsidies offered to Tata, the automobile manufacturer, for its Nano plant and other projects.  Although Tata proposed to invest only Rs 2900 crores (1 crore = 10 million rupees) in Gujarat, they received a state loan of Rs 9570 crores at only 0.1% interest - which they do not even have to begin to pay back for 20 years.  This was in addition to getting land at throwaway prices, free electricity, and tax breaks.  Thus the people of Gujarat will not be profiting from the Tata project in the near future.  Modi similarly bent all the rules to provide another huge Indian corporation, the Adani Group, with a power supply contract that will cost the state of Gujarat an excess Rs 23,625 crores over 25 years.  Other companies, including Reliance Industries and Essar Steel, have received similar favours. So when these business leaders sing Modi’s praises and support his candidacy for PM, there is a strong element of quid pro quo.

The scale of corruption in Gujarat is stupendous, and those who campaign against it have not fared well. With only 5% of India’s population, Gujarat can boast 22% of the murders and 20% of the assaults on Right to Information activists. The post of Lokayukta (corruption watchdog) was not filled for ten years. When the Governor and Chief Justice of the High Court selected Justice R. A. Mehta for the post in 2011, Modi fought tooth and nail against the appointment, reportedly spending Rs 45 crores to challenge it legally. Even after the Supreme Court upheld the appointment, the state government refused to cooperate with Mehta  and subsequently amended the Lokayukta Act to make the watchdog a toothless body under the control of the very government whose corruption it was supposed to monitor!

Gujarat has one of the highest poverty levels of all the Indian states. Huge swathes of land have been given to corporations, displacing millions of farmers, fishermen, pastoralists, agricultural workers, Dalits and Adivasis.  Under Modi’s regime, by 2011, 16,000 workers, farmers and farm labourers had committed suicide due to economic distress. Gujarat has the highest prevalence of hunger and the lowest human development indices among states with comparable per capita income; Gujarat Muslims ‘in particular, fare poorly on parameters of poverty, hunger, education and vulnerability on security issues’. Among the reasons for the high level of malnutrition in Gujarat are extremely low wage rates, malfunctioning nutrition schemes, insufficient potable water, and lack of sanitation: the state ranks 10th in the use of toilets, with more than 65% of households defecating in the open, resulting in high levels of jaundice, diarrhoea, malaria and other diseases. Uncontrolled pollution has destroyed the livelihoods of farmers and fishermen, and subjected local populations to skin diseases, asthma, TB, cancer and death.  So much for modernisation and “Vibrant Gujarat.”

The idea that Gujarat is attracting large amounts of foreign investment is another myth; in 2012-13,  its share was a meagre 2.38%, compared to Maharashtra’s 39.4%. Most damning of all, for a state that purports to provide a template for the whole country’s economy, has been the Modi government’s lack of financial discipline as shown in a rising level of debt; under Modi’s leadership, the Gujarat state debt has increased from Rs 45,301 crore in 2002 to Rs. 1,38,978 crore in 2013.

In accordance with their frog-in-the-well perspective, Modi and the BJP never mention the global crisis or inquire into its causes, but anyone who takes the trouble to do so can see that the ‘medicine’ they prescribe for the economy, which is suffering from slow poisoning by neoliberalism, is a lethal dose of the same poison. While the Congress Party’s version of neoliberalism retains elements of regulation and social welfare, Modi’s policies are the same as those which destroyed the US economy, resulting in the global crisis: wholesale privatisation and deregulation, extreme disparities in wealth, and unsustainable indebtedness. Far from rebooting the Indian economy, a Modi victory will lead to massive job losses and runaway inflation.






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