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HindustanTimes Sat,26 Jul 2014

India's Modi: Economic inspiration or illusion?

AFP  Ahmedabad, March 30, 2014
First Published: 12:25 IST(30/3/2014) | Last Updated: 13:10 IST(30/3/2014)

To supporters in his thriving fiefdom Gujarat, BJP's prime ministerial candidate Narendra Modi is the inspiration behind an economic success story that India has a chance to emulate if as expected he becomes prime minister.

But ahead of elections beginning on April 7, sceptics accuse Modi of claiming credit for an "illusion" in Gujarat that has mainly benefited big business and will be hard to replicate on a national scale.
 
Governed by Modi since 2001, Gujarat recorded average annual growth rates of 10.13% between 2005 and 2012, according to latest figures, the second-highest pace among large or medium-sized states.

And according to businesswoman Bhagyesh Soneji, it would be churlish not to acknowledge the leading role of the state's chief minister who polls say is set to lead his right-wing Hindu nationalist Bharatiya Janata Party to a general election victory.

After arriving in Gujarat in 1992 from the impoverished Orissa with just 20 rupees (30 cents) to her name, Soneji has built up a pharmaceutical group that exports to some 28 countries, has an annual turnover of around $5 million and employs 23 people. Soneji said since becoming chief minister, Modi has made Gujarat one of the few states not to be suffocated by India's infamous red tape and has ensured that businesses which encounter obstacles get a friendly hearing.

The 45-year-old founder and chief executive of Ameda Pharma said Modi's administration was characterised by a "proactive dynamism".

"We can meet principal secretaries and ministers easily to discuss issues related to industry," she told AFP in her office in Ahmedabad, Gujarat's commercial capital.

"The bureaucracy here is businesslike, they understand the time demands of the business fraternity and corruption is also much less in comparison to other states," said Soneji, who also serves as president of Gujarat's chamber of commerce.
   
Entrepreneurial spirit
"Gujaratis have entrepreneurship in their DNA," she added, referring to the famed business talents of those who come from the state.

"The entrepreneurship spirit in Gujarat is so demanding bureaucrats cannot be lethargic."

Modi supporters point to Gujarat's infrastructure as another sign of good governance. Downtown Ahmedabad has managed to escape the gridlock common to most Indian cities and the city has bus lanes. Power cuts are rare.

But it's a different tale a short distance away in the rundown neighbourhood of Juhapura where Nadeem Jafri runs a supermarket business.

Modi first came to national prominence in 2002 when communal riots erupted in Gujarat, soon after he took over as the state's chief minister. The riots left more than 1,000 dead, most of them Muslims.

While Modi himself has never been found guilty of playing any role in the bloodshed, one of his ministers was sentenced for inciting violence.

When the violence broke out, thousands of Muslims took refuge in Juhapura.

Two years later, Jafri quit his job in advertising to open his first supermarket in a district largely abandoned by retailers.

Ten years on, Jafri now runs a chain of 12 supermarkets and supplies hotels and restaurants with his branded rice and tea products.

"At a personal level, I had no help from the administration," said Jafri.

"Gujarat has been marketed well for the last five years. It has always been a progressive state with good electricity and water supply.

"But giving credit for this success to just one person is not fair. Credit must go to all people."

Modi rarely passes up the chance to trumpet his state's track record, promising at rallies to replicate its success nationwide.

Every other year, Modi has hosted a "Vibrant Gujarat Summit", inviting business leaders and politicians to celebrate its achievements.

Some economists are unconvinced, saying only big businesses have really thrived.
   
'Larger the company, larger the subsidy'
"This model is an illusion. Growth in Gujarat is highly unequal in the sense that certain regions, certain sectors and certain parts of population are left out," said Indira Hirway, director of Gujarat's Centre for Development Alternatives.

The larger the company, the higher the rate of subsidy, in terms of capital subsidies, credit, VAT subsidy, she said.

Hirway said bigger companies were often granted favours in accessing land, water and natural resources.

"They give very cheap water for big industries. The land is given at a very cheap rate, highly subsidised, because the state wants to be the best in terms of growth," Hirway told AFP.

Not only has the environment suffered as a result, but there has also been a knock-on effect on health while Gujarat's education sector has been neglected, Hirway said.

Literacy rates are at 79%, still above the national average of 74%, but seen as disappointing for a thriving state.

In Kerala for example, run by the Communists or centre-left Congress for the last three decades, the level is 94 percent.

Furthermore, there is scepticism over whether Gujarat's successes can be repeated elsewhere given some of its unique advantages.

Sebastian Morris, an economics professor at the Indian Institute of Management in Ahmedabad, said Gujarat was blessed with large amounts of real estate as well as access to the Arabian Sea.

"Land essentially has emerged as a constraint all over the country and Gujarat is lucky to have a lot of land available which can ideally be used for industry" such as oil firms, Morris told AFP.

Morris also warned that the style of government that the strongman leadership Modi has championed in Gujarat, bulldozing his way past critics and scything through red tape, won't work at a national level.

"It is a corporatist model where the chief minister takes charge fully and... bypasses all intermediate political levels," said Morris.

"That is not too bad a model if you're talking of hard infrastructure like ports, roads, electricity. But when it comes to health care, education, this model no longer works because you need a greater involvement of the society which may be lagging in Gujarat."


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