Minhaz Merchant
A rational analysis of the “Gujarat and Bihar models” of development must not mix apples with oranges. Critics put India’s 35 states and union territories – big and tiny – in the same empirical basket.
But comparing, for example, Goa’s indices with Uttar Pradesh’s is misleading on account of size, population and demographics.
A more logical way to address the Gujarat vs. Bihar development model debate is to compare the indices of India’s 10 largest states (by population) and rank them accordingly.
All data is from the Planning Commission of India except population data which is from the 2011 census, education data which is collated from published sources, and city GDP data which is drawn from the International Monetary Fund (IMF).
In this study, I have chosen the following indices:
- Per capita income;
- Human Development Index (HDI);
- Poverty levels;
- Education.
Taken together, ranking India’s 10 largest states by population across these four parameters will give us a good idea of where each state stands in income, malnutrition and social infrastructure.
Start with the 10 largest states in descending order of population:
State Population (2011 census, in million)
- Uttar Pradesh 199
- Maharashtra 112
- Bihar 104
- West Bengal 91
- Andhra Pradesh 85
- Madhya Pradesh 73
- Tamil Nadu 72
- Rajasthan 69
- Karnataka 61
- Gujarat 60
Now rank these 10 states by per capita income – a critical indicator of prosperity.
State Per capita income (FY 2012)
- Maharashtra Rs. 1,01,314
- Gujarat Rs. 89,668
- Tamil Nadu Rs. 84,496
- Karnataka Rs. 69,055
- Andhra Pradesh Rs. 68,970
- West Bengal Rs. 55,222
- Rajasthan Rs. 53,735
- Madhya Pradesh Rs. 37,994
- Uttar Pradesh Rs. 30,051
- Bihar Rs. 22,691
All-India Rs. 61,564
Maharashtra ranks no. 1, Gujarat no. 2 and Tamil Nadu no. 3. But Maharashtra has an unfair advantage because Mumbai, India’s wealthiest city, increases its average per capita income significantly. Let’s compute the precise impact.
The GDPs of India’s richest cities are:
City GDPs (PPP)
- Mumbai: $209 billion
- Delhi: $167 billion
- Kolkata: $150 billion
- Bangalore: $84 billion
- Hyderabad: $74 billion
- Chennai: $66 billion
- Ahmedabad: $52 billion
- Pune: $47 billion
(PPP: Purchasing Power Parity)
If we exclude Mumbai’s $209 billion GDP from Maharashtra’s GDP (adjusting PPP GDP for nominal GDP to align with Planning Commission figures) but keep Pune (whose $47-billion GDP is not dissimilar to the GDP of the capitals of other key states), Maharashtra’s per capita income falls from Rs. 1,01,000 to around Rs. 78,000.
So without Mumbai (but including Pune), Maharashtra would slip to no. 3 in our per capita income chart. Gujarat would move up to no. 1, Tamil Nadu to no. 2. Bihar, with per capita income of Rs. 22,691, would stay at no. 10.
As Rahul Sachitanand wrote in The Economic Times on August 1, 2013: “In the five years before Modi took charge, the state’s average growth in GDP was 2.8%. Under him, between 2002-03 and 2011-12, it was 10.3%. Only three small states – Sikkim, Uttarakhand and Delhi – have grown faster. Gujarat is ahead of the national average (7.9%), as well as the two states it is pitted against in today’s discourse, Bihar (8.4%) and Madhya Pradesh (7.1%). It has leapfrogged Maharashtra to lead in factory output, grown well in agriculture, and been a leader in electricity reform and the spread of irrigation.”
Sachitanand goes on to point out, rightly, that Gujarat "has struggled to engineer similar breakouts in its social indicators – women, health, education, poverty, wages."
Turn now, therefore, to our second criterion – Human Development Index (HDI).
State HDI (2011)
- Maharashtra .572
- Tamil Nadu .570
- Gujarat .527
- Karnataka .519
- West Bengal .492
- Andhra Pradesh .473
- Rajasthan .434
- Uttar Pradesh .380
- Madhya Pradesh .375
- Bihar .367
All-India HDI .467
HDI is a composite of life expectancy, education and income indices. It was created in 1990 by Amartya Sen and Pakistani economist Mahbub ul Haq. Life expectancy is correlated to social indicators such as healthcare, malnutrition, infant morality, etc.
Maharashtra emerges as no. 1, Tamil Nadu no. 2 and Gujarat no. 3. HDI is also correlated (though not linearly) to prosperity. Not surprisingly, therefore, these three states top the per capita income charts as well. Clearly, however, despite being ranked third among India’s 10 largest states on HDI, Gujarat needs to improve further. Bihar though is ranked last again and needs to do a lot more.
* * *
Gujarat also needs to increase its expenditure on education. It currently spends only 13.9% of total expenditure on education and is ranked a low eighth among India’s 10 largest states. In comparison, Bihar spends a higher proportion (18%) of its overall expenditure on education. Of course, Gujarat’s outlays are larger in absolute terms because of its larger overall budget but it hasn’t paid enough attention to education – and that could hurt growth in the long term unless corrected quickly.
Education expense as a ratio of total expenditure
- Maharashtra 21.0%
- Rajasthan 19.1%
- West Bengal 18.3%
- Bihar 18.0%
- Uttar Pradesh 15.9%
- Karnataka 15.6%
- Tamil Nadu 14.7%
- Gujarat 13.9%
- Madhya Pradesh 13.1%
- Andhra Pradesh 11.5%
Gujarat has also been criticised for neglecting healthcare and malnutrition. While HDI, where Gujarat is ranked no. 3, captures some social indicators like infant morality, healthcare and malnutrition, poverty levels are another important pointer to the overall quality of social infrastructure.
Here Gujarat, while better than the all-India average, fares poorly in comparison with a state like Rajasthan. Bihar though continues to suffer twice the level of poverty of Gujarat.
Poverty ratio (2011-12)
- Bihar 33.5%
- Madhya Pradesh 31.7%
- Uttar Pradesh 29.4%
- Gujarat 16.6%%
- Rajasthan 14.7%
All-India: 21.9%
* * *
The overall verdict:
- Gujarat has the highest per capita income among India’s 10 largest states (when Mumbai is excluded from Maharashtra).
- It has the third best HDI score among these large states. This is contrary to the popular belief that Gujarat favours manufacturing, industry and infrastructure at the cost of the social sector.
- Bihar does abysmally on all criteria – per capita income, HDI, poverty levels – except education where it spends more as a ratio of its small overall expenditure than Gujarat.
Going forward, Gujarat needs to focus on education and healthcare and further improve its HDI score. And it must focus on more equable income distribution to bring poverty levels down even faster from 16.6%, even though this is significantly better than the all-India level of 21.9% and half Bihar’s poverty level of 33.5%.
Gujarat’s annual agricultural growth over the past decade has averaged more than 10% – triple India’s average – and it still has the country’s highest manufacturing/industry ratio-to-GDP.
Bihar’s task is tougher. It needs to improve on all fronts. Its per capita income is one-fourth Gujarat’s and its poverty levels twice Gujarat’s. Though its annual GDP growth rate is roughly similar to Gujarat's, its low base will make it hard for it to bridge the gap for decades. It is ranked last on HDI. Its only silver lining is education – but here too, as the Chapra midday meal tragedy demonstrated, much more needs to be done to improve school infrastructure despite eight years of Nitish Kumar’s chief ministership.
In conclusion, the Gujarat vs Bihar development model debate is a sterile one. Both states should be aiming at meeting absolute standards on economic and social criteria, not engaging in political one-upmanship.
Follow @minhazmerchant on twitter
Source: http://blogs.economictimes.indiatimes.com/headon/entry/gujarat-vs-bihar-which-model-works-best
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