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'Gujarat will be one of the first places to implement FDI in retail'

By Sheela Bhatt
Last updated on: November 19, 2012 21:43 IST
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'So far as FDI is concerned, there are some things one says -- particularly if one is in election mode -- that may or may not be truly reflective of what is eventually going to happen,' says economist Bibek Debroy.

"In Gujarat, the sex ratio is pretty bad in areas where there has been economic development. So foeticide is clearly happening in prosperous regions," economist Bibek Debroy reveals to's Sheela Bhatt.

In Part I, Dr Debroy spoke of how Gujarat learnt from its mistakes: 'Gujarat's development is mainly roads, electricity, water'

There was a controversy between you and Sonali Ranade and Shaelja Sharma. They claimed that Narendra Modi is not an economic reformer and I will quote them that 'his philosophy of development is centered around a command and control authoritarian model that rams through projects and programmes by sheer administrative fiat that is simply not scalable to an all-India level given the country's diversity and cultural mores.'

They are also quoted as saying that in the nine-year period Gujarat saw over 10.35 percent growth and that Maharashtra, Karnataka, and Tamil Nadu were very well comparable to Gujarat.

And since CAGR (Compound Annual Growth Rate) data for three states of 2012 is available, Gujarat is hyped more in the public imagination.

It is not for me to comment on things that others have written. Just for the record there has been no controversy between Ranade and me. It is just that I write in a certain newspaper and she writes in another one. Now what is the controversy, if there is one?

It is that there are several layers to it. One, has Gujarat got a very high rate of GSDP (Gross State Domestic Product) growth? The answer is yes.

Ranade has points about how you should average it. Whether you should use an arithmetic average like the Planning Commission uses or a geometric average. Whichever method you use it will only affect the growth rate at the decimal point level. That she also acknowledges.

Second, is Gujarat the only state that has grown at this rate?

Should I compare large and heterogeneous states which have significant pockets of deprivation and backwardness?

Should I be comparing a state like Gujarat with a state like Bihar which has also grown phenomenally over the last 10 years? But the lower the base, the easier it is to get growth.

I don't know what Ranade's views would be, but my view would be that given the question I have just asked, you should be comparing Gujarat only with Tamil Nadu and Maharashtra, not with the other states because of its size and its base.

Amongst these three states I see that Gujarat has not only grown fast, but the volatility in growth has stopped.

Now volatility in an Indian situation is really dependant on what is happening to agriculture. That volatility in Gujarat has come down because of the agriculture story. Has it happened in Maharashtra? No, it hasn't.

The GSDP growth in Maharashtra is essentially city-sector driven. It is Mumbai-Pune driven.

Tamil Nadu is a slightly different story because historically most of Tamil Nadu does better on social indicators.

Now just because I am sort of saying that Gujarat has done something well, that does not necessarily mean I am saying that Tamil Nadu has not done well. But I think that the Gujarat story is a bit more broad-based than the Maharashtra story.

I travelled in Gujarat near the Maharashtra border. On the Gujarat side, you can see the prosperity, not so on the other side.

It is said that Chief Minister Narendra Modi is considered pro-business, but not pro-market. Particularly, you can see how he is opposing FDI in retail.

Then there is the question of Modi favouring five industrialists and their industries (Reliance, Adani, Torrent, Essar and Zydus Cadila) and the issue of crony capitalism.

When you travelled, did you come across such issues of an imbalance in development?

In Gujarat one needs to appreciate that in terms of governance there is a lot of decentralisation. Earlier, in the course of your statement, you quoted from Ranade and said the Gujarat administration is centralised, it is not quite true. There are several examples of that.

Take the chintan baithak (Modi held to discuss governance-related issues), for example. Sitting here in Delhi we might laugh at it. But what they essentially did was that if someone is in irrigation, s/he is free to comment on education -- it sort of breaks down the boundaries within the government.

There are feedback loops. If as a bureaucrat I think I have got a good programme I will actually be able to push that through and I will actually get some money to do that.

Decentralisation in Gujarat is already up to the taluka level. The officers are given money and a programme to execute it. Now all of these are examples of decentralisation.

So this proposition that it is all very centralised may be true at a political level. But certainly in the terms of economic planning, it is not. I think there is a disconnect in perception.

What about allegations of crony capitalism?

I am not answering that question.

But tell me.

I don't know what the expression 'crony capitalism' means.

But you are an economist.

That's the reason I am saying, I don't know what it means. Because different people use it in a different sense, completely indiscriminately.

The best way to interpret crony capitalism is to say that as an industrialist, because I am close to political forces, I get favours. Now what kind of favours?

One kind of favour can be preferential allotment of land. Question of preferential allotment of land arises only if land is scarce.

One of the things that people don't appreciate is that the Gujarat state government -- going back I think to the 1960s -- acquired enormous amounts of land. The Gujarat story on one level is completely different from the West Bengal story. The West Bengal government needs to acquire land.

In Gujarat, you come to the government as Tata or whoever did and tell them you need land, the government says there is no problem, around Sanand I have got plenty of land.

I think it is important to understand this phenomenon because the Gujarat government has got the land and you do not need any preferential treatment.

The second thing is that I may also be obtaining fiscal incentives, but there are, to the best of my knowledge, no fiscal incentives that are sort of sector-specific or individual specific.

I can give fiscal incentives in Gujarat to the IT sector, that is part of my policy, but I cannot give it to Sheela Bhatt. So in some sense you see, that discretion has become less.

Now crony capitalism may also mean that I am ringing someone up and saying 'Please give a loan to so and so.' But so far as the policy is concerned, the policy is much more balanced. I am not saying it is perfect.

Now so far as the FDI is concerned -- and I will stick my neck out also -- there are some things one says, particularly if one is in election mode, that may or may not be truly reflective of what is eventually going to happen.

Forget the FDI part. I don't think FDI per se is the important issue. The important issue is agriculture and investments.

I am prepared to bet that Gujarat will actually be one of the first places to implement FDI in retail.


Because it is a sensible thing to do. But again don't get me wrong. I am not saying that FDI is as important as it is made out to be. The broader issue is the need for an agriculture distribution chain, the need to have cold storage, the processing... in which FDI can be one trigger.

But it is no more than one trigger. The broader base, you can see it happening already.

One non-economic question. When you traveled in Gujarat, how did you find communal amity?

It has never cropped up as an issue in Gujarat. It is a very important issue if you are talking to people in Delhi. In Gujarat, wherever I have travelled, it did not seem to be an issue at all. Now again, I am sticking my neck out and I am giving you my subjective response which is not mentioned in the book.

When I travelled in Gujarat I met broadly two kinds of Muslims. A very small segment is of the families who have been touched in some way personally by whatever happened in 2002.

If you have personally been touched by some tragedy in 2002, then it never becomes history. It continues to be part of your life. But that is a very small segment.

Other Muslims I have met -- I am just talking about my subjective response to my subjective travel, and my subjective perception -- carry the perception that 2002 is not an issue now, because there has been no event since then.

Everything seems quiet, law and order is fine. We are benefitting from development, so what is the big deal? So this entire communal issue, like I said, you get a completely different perception in Gujarat than here in Delhi.

Were you able to understand, while talking to people, why 2002 happened? Have you been able to get some political truth?

I discovered 2002 is something that people are reluctant to talk about. So therefore the police... justice, home departments are not in the book because I could not get enough material.

Have you been able to understand why the riots happened?

I haven't been able to understand because a. that is not my area of expertise. And b. when I asked questions I discovered I was not getting anywhere. So why get into an area that is not my area?

Gujarat society is considered Lakshmi-centric...

I have a problem about one issue. Gujarati society is not homogenous. So I have a great deal of reluctance to put all of Gujarat's society into the same bucket or paint them with the same brush.

Particularly, because some of these things, some of these divisions, were thought of thousands of years ago and just pick them and sort of mechanically apply them in today's situation, to me seems to be somewhat artificial and contrived.

Now forget all of Gujarat. What has happened in Kutch, around Bhuj, is to me slightly different from what has happened in the eastern parts of Gujarat -- Baroda, Ahmedabad. Should I just look for simple explanations like Vaishyas, Jains? I don't think so. So somehow I am not very convinced.

Gujarat is Lakshmi-centric, of course it is Lakshmi-centric! But why does it have to mean that Lakshmi is at the expense of Saraswati?

I agree, particularly in higher education, there are still problems. Again, I am sticking my neck out and saying that you will not find any really good institution of higher education in Gujarat.

Don't mention the IIM (Indian Institute of Management-Ahmedabad) because it is slightly different. The NID (National Institute of Design, Ahmedabad)is also different.

Look at (Baroda's) MS University. Even it is not today what it used to be.

I don't know why that decline has happened, but I would be a bit worried. As you have higher levels of growth, it is difficult to get back the growth from that capital and labour. You need productivity, you need innovation.

So you need to invest not only in lower level skills, but in higher education. But maybe it will happen in Gujarat with private universities being set up.

How have you been able to understand Gujarat's gender imbalance and other such issues? Do you find Gujaratis overtly religious? It shows in the rituals in the public space.

On the religious part, all of us are religious in our own individual ways. I believe that my religion involves public collective worship. But at the same time I don't think I have any right to determine, dictate or cast value judgments on what Sheela Bhatt believes in.

You do what you feel is correct and there are historical reasons, societal reasons, why you believe in what you do and I don't see anything wrong in that.

I do have a problem if public policy is getting influenced by that religion, which it isn't (in Gujarat). But you are absolutely right that wherever you go in Gujarat, you do tend to find more religious expressions.

When you were travelling, how did you feel, being a Delhi Bengali, about this particular element of Gujarat?

I have no problem with that. I have absolutely no problem with that.

Have you been able to understand the higher suicide rate in Gujarat? What do you think about the gender imbalance and the controversy on malnutrition?

Malnutrition is not the issue. It has been made into an issue because of a statement by the chief minister. But if you look at the malnutrition data post-2008, the situation is improving.

I see the movement towards animal husbandry, so the nutrition part will be taken care of. I am not that worried about it.

The gender imbalance is the problem. The suicide rates in Gujarat as a whole are not that bad if compared to other states. We know Gujarat has an adverse sex ratio. But we know that this is being corrected. If we view 2001 and 2012 data we can see the difference.

In Gujarat, the sex ratio is pretty bad in areas where there has been economic development. So foeticide is clearly happening in prosperous regions. It is a problem. Has the government been able to do anything about it? Not much so far.

Yet there has been the beti bachao andolan. The issue is such a complex one. It is not simply an issue of legislation.

There are two or three things I am worried about Gujarat. One of them is the gender imbalance. Also, the issue of moving to higher productivity levels, improving higher education etc, and improving Sabarkantha and other tribal regions because it is not very easy to get water there.

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Sheela Bhatt