For the first time since 2002, the BJP’s supporters, including the Patels, have criticised the party’s rule in Gujarat because of its economic performance. Resentment among the urban youth has been increasing due to the large number of educated unemployed. Recent data indicate that the number of educated unemployed stood at around 6.12 lakhs in 2016. Additionally, the farmers argue that their daily income, which was Rs 264 in 2016, is Rs 77 less than the national average.
The situation has worsened after demonetisation and the implementation of the Goods and Services Tax (GST). However, such resentment must be linked to the corporate-friendly policies, dating back to the early days of BJP rule in the state. The industrial policy of 2003 is a case in point. A large number of industries were exempted from obtaining no-objection certificates from the state’s pollution control board and the release of agricultural land for industrial use was made easier. In 2004, the state assembly passed the Gujarat Special Economic Zones Act that made land acquisition easier and labour laws less stringent. Five years later, the Gujarat Special Investment Region Act was passed to promote mega projects. Gujarat’s Industrial Policy of 2009 was designed to promote the state as one of the most attractive investment destinations.
The state received a large number of investments. It meant that Gujarat was only behind Maharashtra and Haryana in terms of state domestic product. But these investments did not create many jobs. The petrochemical industry and the chemical industry are two examples. These sectors generate 34% and 15% of Gujarat’s industrial output but are not labour-intensive. The manufacturing sector is labour-intensive but automatization is gaining momentum. For instance, for an investment of Rs 2,900 crore, the Nano plant never had more than 2,200 employees.
The crisis in the labour market in Gujarat can be linked to the crisis of the SME sector in Gujarat. The SMEs are four times more labour-intensive, on an average, as compared to the big companies. The share of the MSMEs (micro, small and medium enterprises) credit as a percentage of the gross bank credit declined from 12.98% in 1997-98 to 6.34% in 2006-07. It did rise to touch 10% in 2009-10 but that wasn’t sufficient. The financial turmoil, partly caused by a crisis in the district cooperative banks, jeopardised the future of many MSMEs. According to the Union Ministry of MSMEs, the number of sick units had jumped from 4,321 in 2010-11 to 20,615 in
2012-13 and 49,382 in 2014-15. Between 2004 and 2014, around 60,000 MSMEs closed operations in Gujarat.
According to the National Sample Survey (NSS), in 2009-10, the informal sector represented 84.1% of the work-force in Gujarat. This is in sync with the stagnation of wages in the state. One reason for industrialists investing in Gujarat is the low level of wages in the state. According to the 2011 NSS report, Gujarat has the third lowest average daily wages for casual labourers in urban areas.
The lack of resources partly explains the low level of social expenditure in Gujarat. Between 2001-2002 and 2012-2013, Gujarat spent 13.22% of its budget on education as compared to the national average which was slightly above 15%. It did little better in public health. With 4.2% of its budget devoted to health-related expenditure, Gujarat ranked seventh out of 17 large states in 2010-11. But Gujarat lags behind states like Tamil Nadu with respect to vaccination, infant mortality rate, child undernourishment and literacy.
The Gujarat model has therefore been characterised by attempts at attracting big investors who generate growth but few jobs. It is also characterised by disappointing social indicators reflecting comparatively low social expenditures.
— The author is a Kolkata-based IPS officer.
[The views expressed by the author in this article is his own.]