Governance, not Godhra? Modi must be kidding

From a very sharp growth of 20 percent in 1994-95, in real terms, growth in Gujarat’s net state domestic product declined to just marginally over one percent in 2000-01. And while much of this fall in growth was due to a decline in agricultural growth, even industrial growth has fallen sharply during this period (see graphic).

With industrial growth suffering, not surprisingly, fresh investments in the state have also taken a beating. On the surface, though, the numbers continue to look reassuring with the total number of projects that have been announced in the state doubling over the past seven years — the value of investments announced rose from Rs 84,700 crore in 1993-94 to Rs 168,500 crore in 2001-02.

Yet, the figures for projects under implementation (which is the critical figure) has stagnated at around Rs 78,000 crore over the past few years — indeed, the rate of implementation has fallen from a high 66 percent in 1993-94 to under 50 in 2001-02.

Even more frightening, however, is the deterioration in Gujarat’s fiscal balances. According to figures collated by the Centre for Monitoring Indian Economy (CMIE), Gujarat’s fiscal deficit rose from 2.03 percent of its GDP in 1994-95 to a whopping 7.52 percent in 2000-01. Other top states like Maharashtra, Karnataka or Tamil Nadu have also shown sharp deterioration in their fiscal deficits, but no one’s fall is as sharp as that of Gujarat.

With the state overspending so much, naturally it has had to resort to borrowing a lot more from the market. In the last decade, CMIE’s database shows, Gujarat’s annual borrowings have shot up 15 times. In per capita terms, the average Gujarati borrowed Rs 26.35 of fresh debt in 1991-92, and this rose to Rs 344.35 by 2001-02.

Maharashtra’s per capita fresh debt was comparable to Gujarat’s, and was Rs 23.1 in 1991-92 — by the end of the period of comparison, however, the state’s per capita fresh borrowings were just Rs 169.8, or roughly half that of Gujarat. Put another way, Gujarat’s per capita borrowings were 60 percent the national average in 1991-92, and by the end of the decade they were 125 percent the national average. Few other states have matched this dubious feat.

All this when, by the way, Gujarat has got one of the most preferential treatments from the Central government in terms of loans and advances — today, Gujarat is the country’s top recipient of central loans and advances in per capita terms. At the beginning of the decade, the average Gujarati got Rs 92 as loans and advances against the national average of Rs 98. In 2001-02, the average Gujarati got Rs 810 of loans and advances against the national per capita average of just Rs 276.

With such a largesse from the Centre and huge market borrowings, the state’s performance in terms of collecting taxes hasn’t been that great. From being the country’s sixth largest collector of taxes on a per capita basis, Gujarat has today slipped to seventh position.

While tax collections in Gujarat rose 3.2 times in the ’90s in per capita terms, those for Maharashtra and Andhra rose 3.4 times, while those for Tamil Nadu rose 3.6 times.