Wednesday, June 4, 2014

Some economic discussions - 3

So Anand and myself had another round of discussion on the Gujarat Growth a few days after the previous discussion. That one is as follows:

Anand Mishra shared a link:
It would be facile to dismiss Surjeet Bhalla as merely a BJP sympathizer. I understand that social indicators from Gujarat may not present a consistent story, and detractors ( like me) of Modi argue "all that growth is fine, but .........." , however, on the growth inclusiveness subject, Surjeet claims :
" Does this extra growth benefit all sections of society rather than just the privileged few? To answer this question, household-level NSS data on wages and unemployment for the large sample years 1983 to 2011/12 are used. Wage and unemployment data are presented for the disadvantaged group (comprising of Muslims, SC & ST) and the rest (not disadvantaged group). In the Modi period, wages of the “rich” (non-disadvantaged) group increased at an annual rate of 2.2% per annum compared to a higher 3.5% per annum rate for the poor. In the comparator states, the difference was only 0.4 percentage points higher for the poor."
Can anyone point to studies that refute this claim? Perhaps, within the disadvantaged group, Muslims' wages did not grow as much as that of others. If not, then I have to accept it.

Siddhartha Rastogi: Comment 1
Well, again, my response would be based on memory but this is possible to substantiate from references. Also, please keep my previous reply on steps to growth in perspective. This comment is about general growth, next one for social side of it.

1. Before I begin, a caution - Surjeet Bhalla in economics is almost equal to Subramanian Swamy in politics - both are loose canons and can go to any extent to prove a point, where none exists. However, Bhalla is sensible in his assertions herein. 

2. Gujarat growth and development is a sensitive matter - conclusions are drawn before the facts are gathered and therefore, indicators are chosen accordingly. Obviously, all the sides come out to be equally convincing. 

3. So what I do is to not look at the conclusions but at the indicator, the data points, and the rates chosen. Let's see in the following (perhaps incoherent) points. 

4. Remember what I said earlier - privileged classes are more equipped to participate in the economic process and eventually, under-privileged groups would be enabled to join in the growth process. In India, it has not happened for two reasons. One, such groups have not been empowered by the state through quality education and primary healthcare. Two, most such groups have accepted their misery as fate and cocooned away from the process of growth. 

5. Gujarat has broken this trend with emphasis on few basic ideas. I'll describe the ones, where Gujarat shall get the credit in the coming points. Where there is not much credit to Modi govt is industrial growth. Industry runs on direct proportion to its own capability and inversely to the length of red tape. Except cutting the red tape, there is no big deal. In fact, service sector has not taken off in Gujarat and IT companies have preferred Indore over Vadodara. 

6. In agriculture, govt focused on less competition intensive cash crops. Their wheat and coarse grains are stagnated to a trend growth but spices, horticulture, floriculture are high on performance. The end result is richer villages. 

7. Electricity is not that scarce in India except nobody wants to pay for it. T & D looses and non-payment were cured through jyoti-gram scheme - basically a parallel line for limited hours agricultural supply. After that major loss center is eliminated, commercial and industrial is always profitable and domestic was easy to control. 

8. Road network was never too bad in Gujarat. However, last select state highways were broadened (and for the first time, considering the futuristic capacity requirement). Also, rural roads of some quality were laid down. This has helped in two ways - increased penetration of vehicles (and sales) and lesser spoilage of agri produce (one of my profs at IIMA worked on tomato spoilage and road network problem). 

9. These all steps have been accompanied with a lot of innovative and small steps. For example, ONGC buys a lots of guar gum - nobody had identified this trend but Gujarat agri dept by involving the existing network of agricultural universities, which was never done before. Gujarat is exporting a lot of kesar mango, which is really poor as compared to dasseri but UP govt doesn't give a damn. Similarly, data collection is so good in Gujarat that govt depts gave us soft copies of all the data at district levels (and in some crops, farm levels). They didn't do anything new - just engaged the network of universities, institutes, and co-operatives (including amul) for data collection and putting that out for analysis.

Siddhartha Rastogi: Comment 2
Now, coming to the point that you have raised (and a lot of fringe discussion from my side)

1. It is true that middle class always benefits the most from such growth. The poorest sections - SC , ST, and Muslims - also have benefited from this growth. However, the analysis by Bhalla has two problems. 

One, the achievement (based on my memory), OBC are now as good as unreserved general classes, SC have benefited a lot, and ST have benefited a lot less, whereas Muslims stand between SC and ST. 

Two, the growth rate of income is often misleading in these cases due to small base problem. The income of an SC increases from 100 to 120 and shows 20% growth. The income of Tata grows by a million and shows an increase of 1%. 

So Bhalla is not wrong but not totally honest either. 

2. Gujarat has drawn a lot of flak for poor HDI indicators also. Some points to ponder regarding those follow - nutrition, child and maternal health indicators (IMR, FMR, TFR), and educational achievement. 

3. It is easy to augment income and financial indicators. Whereas, the development indicators take generations to improve. For example, if my growth is stunted due to poor nutrition, I may become rich but would still remain stunted for life. So is the case with maternal health also. A typical generational shift takes place in 30 years. So asking questions on that aspect is wrong and they should be asked to the CM of 20-25 years ago.

4. Partially, the eating habits of Gujaratis are also to be blamed. If you remember, the richer they are, the finer and more processed cereals and grains they would consume. This results in low nutrition food as the norm and anemic girls are common. How to change this is not possible for me to answer but may be some sociologists - anthropologists would make more sense. 

5. Educational achievement has had problems at two levels. At primary level, poor quality is the norm. At higher levels, drop out is common. Gujarat has started efforts on these two counts for the past 2-3 years only after investing a lot of energy in universal enrollment and quality improvement of teachers. I think we should hold our guns and criticize them on this about 3-4 years from now.

Siddhartha Rastogi: Comment 3
Final thing - I do not mean to say that every thing is awesome in Gujarat but as compared to most other Indian states, they have maintained more sanity and sanctity from a long term perspective. Also, muslims are slowly and progressively shedding their paranoia of him. Perhaps, it would be too good for Gujarat if Modi loses the battle to center.

Siddhartha Rastogi: Comment 4
Ok, Now finally final - I don't agree to many parts of this article but this part does make sense:

"Be that as it may, the key takeaway from the Gujarat growth debate is that both Modi’s achievements (on growth) and failures (on all-round development) are perhaps exaggerated because of legacy effects."

The great Gujarat growth debate - Livemint
The debate on Gujarat’s ‘growth model’ now seems to be drawing an ever-widening circle of academics

Anand Mishra:

The Gujarat muddle
Why does Gujarat have indifferent social indicators, in spite of having enjoyed runaway economic growth and relatively high standards of governance?

Siddhartha Rastogi:
I have chosen to discard Jean Dreze, Amartya Sen, Jagdish Bhagwati, Arvind Panagariya, Surjeet Bhalla, all JNU cadres, for their apparent bias in all their analysis. Their ideology precedes their scholarship, specially these days. I still find Bibek Debroy a much more honest academic and objective scholar than all these politically loaded scholars. BTW, you introduced me to Bibek Debroy in our ICC days 

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