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January 4th, 2013

Gujarat: The key to India’s economic future?

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Estimated reading time: 5 minutes

Editor

January 4th, 2013

Gujarat: The key to India’s economic future?

0 comments

Estimated reading time: 5 minutes

LSE alumnus Siddharth Ramalingam argues that recent state elections in Gujarat could help decide India’s economic future. A version of this article first appeared in the Fair Observer

Narendra Modi is not new to controversy. And neither is he fazed by aspersions on his secular credentials. He is seen as a strong, sometimes autocratic, leader who is not too worried about taking the fight to the opposition, be they from within the BJP or from outside. In the run-up to the elections in Gujarat, the Congress had, in the last few days of campaigning, brought into political discourse something Modi would have preferred not to engage (or so one would have thought)—accusations of his complicity in the communal riots of 2002. But as the election results made clear, Modi’s political career has not suffered as a result of his alleged link with the riots; on December 26, he was sworn in for the fourth time in 12 years as the chief minister of Gujarat.

The secret behind Modi’s success at the ballot is, in part, a reflection of his ability to deliver on promises of industrial and infrastructure development in the state. To put things in perspective, here are some numbers. Gujarat is one of India’s fastest growing states, with GDP growing at a five-year average of about 10 per cent. The state contributes 8 per cent of the national GDP, and accounts for about 17 per cent of the country’s industrial output. The state also has a phenomenal decadal agricultural growth rate of about 11 per cent.

Gujarat’s cities are also growing at an astounding pace; so much so that the 2010 Forbes list of the world’s fastest growing cities placed Ahmedabad at number three after Chengdu and Chongqing. Infrastructure is good, businesses are booming, foreign investors are flocking to the state in droves, and the people seem happy. It is no wonder that swathes of Indians (domestic and non-resident) and businesses want Modi to run for the Prime Minister’s office. Following his win in Gujarat, Modi is likely to be the BJP’s prime-ministerial candidate in the 2014 general elections, which means that his current state-level policies could hold the key to India’s economic future.

Gujarat is one a handful of states that defy what has come to be accepted as a thumb rule in India: access to ports, good roads, and uninterrupted power cannot be taken as a given. Gujarat’s infrastructure speaks for itself:

  • Home to the highest number of ports (42) and airports in India
  • The only Indian state to have a state-wide integrated gas network
  • Power-surplus state with uninterrupted power supply

To add to the infrastructure, the state government is proactive in wooing both small and large businesses. Large-scale infrastructure undertakings that are in the offing, or already underway, give Gujarat an edge over other Indian states that are following the Gujarat model with respect to openness to businesses. Some of these projects, potentially controversial, include:

  • The Delhi-Mumbai Industrial Corridor (DMIC) that is being touted to become a global manufacturing and trading hub
  • The Dholera Special Investment Region (DSIR) spread over 900 square kilometres
  • The 500-square kilometre Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR)
  • Gujarat International Finance Tec-City (GIFT), India’s first Special Economic Zone for global financial services

It is no surprise that 26 per cent of investments in terms of implemented projects in India (till 2011) have been made in Gujarat. It appears that industrial and infrastructure development in Gujarat has not left the agricultural sector behind, and that growth over the last two decades has indeed been inclusive. For instance, Gujarat can boast of 100 per cent rural electrification. In light of this, Modi was right to be confident that the citizens of his state would want him back in power.

Siddharth Ramalingam is a contributing editor of The Fair Observer and completed an MSc in Political Theory at LSE in 2007.

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