What Works and What Doesn ET Article

7/28/2019 What Works and What Doesn ET Article

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What works and what doesn't in Narendra

Modi's Gujarat

Binoy Prabhakar & Mitul Thakkar, ET Bureau Jul 1, 2012, 07.16PM IST

By Binoy Prabhakar & Mitul Thakkar

A decade after he took over as Gujarat chief minister,Narendra Modi remains the most polarising political figure ofour times. No Indian politician has earned as much admiration and derision as him. Modi is lauded for hisdevelopment credo, for turning Gujarat into an investment magnet, for making it easy to do business in the state.

Critics say all that is bunkum, linking his pro-business attributes to assiduous use of marketing to erase anotherlegacy of his early days in office the 2002 Gujarat riots. Modi has repeatedly denied his alleged complicity in thecarnage that killed thousands after a coach of the Sabarmati Express train was burnt in the city of Godhra.

The riots continue to tie an anchor to all his plans of transforming into an everyman's politician. Yet, many regardhim as a prime ministerial candidate because of the UPA government's struggles. But before the general elections,Gujarat will decide in December if it wants him to continue.

Here, ET Magazine pieces together six different narratives that present a sober reflection of Modi's rule. Gujaratunder Modi is too complex and fascinating a story to offer one judgement. The real Modi isn't visible to either theman himself or his critics.

Growth: Real & Apparent

The Gujarat economy has been growing at a steady tick, but the growth is not spectacular. There are also plenty of

problems lurking.

On June 25, 2005, Narendra Modi convened a hurriedly called press conference where he was expected to make animportant announcement. Senior journalists in Gujarat remember the occasion because the invite came on aSaturday. They had to drop everything they would do on a relatively slow day and rush to the conference. Modi hadabundantly exhibited his penchant for sensational declarations during the three years in power.

By then, he had also displayed a keen sense of occasion. A few weeks ago, the US had denied him a visa. A daylater, he was to address a crucial meeting of the Planning Commission where Prime Minister Manmohan Singh andother chief ministers would attend.

Modi did not disappoint that day. He announced that state flagship Gujarat State Petroleum Corporation hadstumbled upon India's biggest gas find yet. The 20 trillion cubic feet (tcf) of gas at the Krishna-Godavari basin off

the Andhra Pradesh coast was actually more than all the gas discovered in India. To put the discovery in context,consider what oil and gas experts would make of it.

One tcf of natural gas is enough to heat 15 million homes for a year, generate 100 billion kilowatt-hours ofelectricity, or fuel 12 million natural-gas-fired vehicles for a year. Modi gave it a different spin. With the pomp thatwas already his signature, Modi said farmers would see oil pouring out of taps. He also said in subsequent publicspeeches that farmers would now be selling packets of petrol and diesel instead of milk, recalled an analyst who was

present.


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Cut to the present day, those statements are recounted with chuckles or guffaws. No sooner did Modi make his grandannouncement than doubts began to surface. VK Sibal, the then director general of hydrocarbons, the oil and gassector regulator, said the discovery of 20 tcf appears to be a tall claim based on the result of one (oil) well.

Closer home, GSPC's technical partner GeoGlobal Resources said it was premature to quantify the gas reserves. Yet,Modi stood by his claims until most of 2007. Turns out the sceptics were right. In truth, GSPC found no more than 2tcf. But Modi and his administrators now treat the claims as an unfortunate episode that must be quickly forgotten,as they have with every development that runs counter to the Gujarat growth story.

Growth Story

There is little to suggest that Modi has learnt lessons from the GSPC affair. To this day, he is as eager as ever tocollect superlatives for his rule. An oft-repeated claim is the spectacular economic growth in Gujarat under hiswatch. Agriculture in Gujarat has grown more than 9% in the past five years, the highest in India.

Every village in Gujarat is self-sufficient in drinking water thanks to taking the waters of the Narmada river to everynook and corner of the state. Gujarat is the No. 1 in providing jobs. The most retold accomplishment, if it can be

called that, is investments worth Rs 39.6 lakh crore promised in the five Vibrant Gujarat summits, Modi's showpiecemeeting of global investors.

Modi has reeled out these headline figures time and again. He also leaves no one in doubt about his starring role inthese feats. His website is packed with reports such as: "Narendra Modi holds online grievance programme" and"CM gives necessary directives to the district functionaries for satisfactory solution of people's problems."

Each of these seemingly impressive exploits appear lacklustre under scrutiny. Experts and independent observerssay it is wrong to identify Gujarat's development with Modi's rule alone. Dwijendra Tripathi, an economic historianwho taught at the Indian Institute of Management, Ahmedabad for three decades, says Gujarat has historicallyenjoyed a locational advantage due to its 1,600 km coastline. "Its soil is also good for cash crops."

Complementing these factors is the famed entrepreneurial zeal of the Gujarati. "Entrepreneurship, trade and businessare in the blood of every Gujarati," says the head of a brokerage in Ahmedabad. "But this aspect is omitted whentalking about Gujarat these days."

Indeed, the Gujarati's affinity for trading and business is legendary. While other states were taking baby steps inindustrialisation, Gujarat was about to take the next big leap. "Surat was among the first big ports in India andAhmedabad was the first city to commission a textile mill after Mumbai in the pre-independent era," says Tripathi.

The people of Gujarat are also known for their support for development.

Sebastian Morris of IIM Ahmedabad says industrial growth in Gujarat has taken place in capital-intensive andlabour-intensive industries where the usual considerations of safety and environment have been kept to amanageable level." Economist Yoginder K Alagh, chairman ofInstitute of Rural Management Anand, says Gujarat

has always been an open society with a penchant for global ideas and experience. He says the state has grown fast inthe last three decades and will continue to do so.

Morris agrees. "When it comes to Gujarat, the first thing to recognise is even in the past, the state has had highergrowth than the rest of the country, particularly in manufacturing. (see The Numbers Tell the Story). Whathappened after economic reforms is that other states were able to catch up."


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Not Miraculous

Morris says Gujarat's growth is undoubtedly quite good, but not miraculous. Other states may have even exceededGujarat in certain sectors, according to him. The latest data of the ministry of statistics under the central governmentsupports this argument. Bihar, Delhi and Puducherry are the fastest growing states in the country and Gujarat foundno place in the top five for the second successive year, according to the data.

Other headline figures too appear tame on closer look. According to Morris and Alagh, to peg the agriculturalgrowth at 9% is incorrect. In separate studies, they have concluded that average growth in the sector since 2005-06has been around 3-5%. The difference in the two estimates alone would give reason to pause. There are twostatistical sins here, according to Alagh, which he says are unforgivable.

"One is to take bad initial and good terminal years. And growth has been calculated accounting for current pricesbecause that includes inflation." Both economists prick holes in the claims of the government's contribution to theagricultural progress. Irrigation coverage is still low, says Alagh.

According to Morris, the main reasons for the agricultural revival are two-fold. Gujarat has benefited from a majorshift in rainfall in the past 10 years. He says the Sardar Sarovar Dam project across the Narmada has helped farmersin the state. "But there would be a bigger impact if the canals were finished they are nowhere near completion.

The output [in agriculture] we see is because of water being stolen... pumped through plastic pumps."

On the job front too, the statistics of the unemployed contradict the government's claims. Officials of the Directorateof Employment and Training, the nodal agency for distributing jobs, were reluctant to share the latest details of jobseekers in the state, but earlier data from the institution reveals that the total number of people who have applied for

jobs at the employment exchanges for three years to end December 2010 was nearly 9 lakh compared with morethan 8 lakh in 2009.

A senior government official requesting anonymity says in Ahmedabad alone, there are nearly 1 lakh registered jobseekers. Unemployment is common in every state, but in the case of Gujarat, it appears staggering when stackedagainst the number of jobs promised during Vibrant Gujarat Summits.


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At the 2011 summit alone, the government declared potential investments would generate 52 lakh jobs. Thedisparity in numbers holds true for Vibrant Gujarat Summits as well. Only investments worth Rs 3.1 lakh crore have

been implemented against the promised Rs 36 lakh crore.

Maheswar Sahu, principal secretary, industries and mines, says implementing a big project involves a lot ofprocesses like environmental clearance and land acquisition. "Any big project will take 5-7 years to take off." If that

were the yardstick, the lion's share of the MoUs from the first and second Vibrant Gujarat summits should have beenimplemented. Only, 57.13%, 35.74% and 23.19% of the promised investments have been executed, according togovernment data (see More Hype, Less Substance).

Beneath the veneer of prosperity, a raft of problems lurks in Gujarat. The state fares poorly in many socialindicators. Nearly 4% children below the age of five suffer from malnutrition and 70% of children suffer fromanaemia. Not surprisingly, Gujarat ranks 11th among all states in the Human Development Index, according to theIndia Human Development Report 2011 published by Planning Commission.

The reasons are straightforward, says Morris. "Income inequality in Gujarat is extraordinarily high. Income is notdistributed equally... a small section of people the capitalist class and the migrant labour are the biggest

beneficiaries of economic progress. In agriculture too, this income inequality is prevalent."

The very process of development in Gujarat is unequal, according to Morris. "There has been no labour movementto seize a larger share of the benefit. It is only now that skilled labour-intensive industries are springing up theauto sector is a key example."

Again, these are all problems common to most states. But in Gujarat, they are particularly glaring because of Modi'sclaims of prosperity. (Modi declined to comment for this story despite repeated requests for an interview).


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Modi Magic: How it Works

He has cut red tape, he has almost ended corruption and made it easy to do business.

On a sweltering afternoon in mid June, the Sachivalya, the headquarters of the state government in Gandhinagar,was buzzing with activity. Bureaucrats were signing furiously on files and shouting orders to underlings. Soon after,

a steady stream of officers walked briskly some ran towards their cars. Some jostled for space in packedelevators, where visitors followed them to the way out. It was only 4 pm.

To an outsider who had heard stories of the super efficiency of Gujarat's administration, the exodus of officialsduring working hours would come as a surprise. But for people familiar with the Narendra Modi rule, this washumdrum.

The bureaucrats, including senior officers in the rank of principal secretaries, were off to rural areas to monitor theKanya Kelavani and Shala Pravesh Mahotsav, the government's massive drive to enroll children in schools. In thenext three days, they would visit 34,000 schools in 18,000 villages. They have been at it for the past 10 years. Theresults are striking. Under Modi, the dropout levels in primary education that was as high 41% (see Dropout Rate...)has fallen to under 8%. That is a significant achievement for a society that places entrepreneurship on a higher

pedestal than education.

During the twin programmes, ministers and MLAs would be in attendance. But the stars of the show are thebureaucrats. The hustle and bustle at the Sachivalya was a pleasant surprise given that authorities typically slip intolethargy when elections are nigh. This is only because the CM does not allow them to be lazy, says a senior

journalist.

To his admirers, Modi comes across as a driven, even obsessive, entrepreneur with a proclivity formicromanagement. The sole enforcers of Modi's progressive agenda are the authorities. Politicians, includingministers and MLAs, watch from the sidelines. That way, Modi is said to have weeded out red tape in the state.


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Rapid Development

After Tata Motors and Ford, French carmaker Peugeot is building a manufacturing facility at Sanand. Modi islooking to turn the region into an auto hub. Top carmakerMaruti Suzuki is about to establish a plant at Becharaji inMehsana district. Other companies have similar stories to recount.

Asutosh Shah, managing director of bathroom manufacturer Duravit, says his experience while building a plant inGujarat was superb. Gujarat was unfamiliar territory to the multinational company, according to Shah. "But wereceived excellent cooperation from all departments concerned without exception. For example, we needed naturalgas connection. GSPC issued a letter of intent in less than a week."

This clinical efficiency has become the hallmark of every project Modi lends his name to. Take, for example, the

Vibrant Gujarat Summit. Officials have already made a trip to China to woo investors for next year. The speed is

also characteristic of Gujarat's jumbo projects such as Gujarat International Finance Tec-City (GIFT City), the

Sabarmati Riverfront Development Project and the Metro Link Express for Gandhinagar and Ahmedabad, or MEGA

(see Modi's Dream Projects), which are progressing at a rapid pace. Modi is also said to work for up to 18 hours a

day. He hasn't taken a holiday for nearly 10 years. Why then the huge inconsistency in the economic indicators?

A senior BJP leader who has known Modi for more than 20 years says if there is a mismatch in results, it is perhaps

because he has been unsuccessful in getting people to work at the pace he wants. "Modi succeeds in single

projects. The Ahmedabad Bus Rapid Transit System is a shining example. You can't beat him in such single, time-

bound projects where largely only his energy is required. But in a macro project, where the efforts of many people

are needed, he comes up short."


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he Big-Bang Publicity

Modi runs a superb PR machine. Admirers take this as proof of a driven man. Critics see pure propaganda.

Assuming Narendra Modi returns to power, here's a preview of the sixth Vibrant Gujarat Summit next January. Along line of businessmen, analysts and diplomats from around the globe will again assemble. Again, they willshower Modi with praise for making it easy to do business.

Again, a few will address him as a progressive and tireless leader, or a visionary. Again, there will be plenty ofhandshakes and hugs. Again, a few would encourage counterparts to invest in Gujarat. And again, jaw-droppinginvestment figures will be announced.

Punit Mawli, vice-president, media relations, Mutual PR, the Gujarat government's public relations company, saysVibrant Gujarat 2013 promises to be even more spectacular than its predecessors. "Preparations for the summit arein full flow, with 11 teams of officials coupled with more that 100 industrial houses scouting 34 identified countries

for further investments in Gujarat."

Vibrant Gujarat is Modi's piece de resistance. Ostensibly designed to attract investments, it has another purpose to showcase Modi's credentials as a Vikas Purush, or a man for development. It is an image he has been tirelesslytrying to build to eclipse the Godhra riots. Vibrant Gujarat offers a glimpse into the efficacy of Modi's publicitymachinery. Detractors, including Congress leaders, have accused the government of inflating investment figures tograb headlines. Indeed, promises are getting bigger with every investment meeting (see More Hype...). But actualinvestments are a fraction of the promises.


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Surreal Development

Authorities say investments take time to fructify and projects executed are for real. "Whenever commissioning isdone in any project, not even 60-70% is spent. It is a continuous process," says Sahu, the industries and minessecretary.

Yet, the common thread running through Modi's marketing campaigns is the uncanny ability to present a picture ofsplendour in every endeavour. That explains investment figures running into lakhs of crores, growth figuresdwarfing experts' estimates and of course, 'India's biggest gas find'.

The official Socio-Economic Review 2011-12 states that the total length of roads in the state has increased to 74,117km at the end of 2008-09 from 74,112 km in 2007-08: an achievement of 5 km in one year


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Mawli says usually in PR, an agency finds difficult to manage a reticent client as expectations of the client are notusually matched by its propensity to converse/engage with media. "That has not in been the case with the Gujaratgovernment. It has loads to talk about, be it the developments on the industrial front or the socio-political ones."

Modi employs two public relations firms Washington firm APCO Worldwide to cater to the world media andMutual PR for the Indian media. He is also one of the first Indian politicians to have understood the power of the

internet as a marketing medium. Today, he runs his campaigns through Twitter, Facebook and YouTube. He is amethodical blogger and fans can download Narendra apps on the iPhone and Android platforms.

To his admirers, Modi is only trumpeting achievements. But to critics, his marketing reeks of propaganda. Modi'sinvite to the Tatas through a text message to establish the Sanand factory is highlighted frequently. What receivesless attention is the government's generous offer of a tax waiver up to 20 years and exemption from stamp duty andelectricity duty, among other charges.

Every day, Modi takes his show to Gujarat and outside. Constant reminders of who runs the show in Gujarat includehoardings that are dominated by his big cutouts. Visitors to government offices are greeted with video recordings ofModi even in elevators.

Critics allege that he has also successfully suppressed negative news by making it hard to access government

records. Shaktisinh Gohil, leader of opposition, says Gujarat has just three Right to Information commissioners."Even a small state like Punjab has 10 RTI commissioners. At least 10,000 RTI applications are pending with thegovernment." Modi baiters like Gohil say an independent assessment of Modi's record is often buried inmanufactured atmosphere of optimism.

Historian Tripathi says Modi has benefited from the foundation created before he became CM." He was referring tothe state's focus on small and medium enterprises way back in the 1970s. Gujarat was also among the first states tofloat the idea of public private partnerships.

The BJP insider says Modi's predecessor's record was as good as Modi's if not better. "Keshubhai Patel's three-yearterm was much better than the 10-year tenure of Modi, but appears dull because of Modi's better marketing...Previous governments neglected showcasing achievements."

"In my view, he has been unable to change the system. He is a good marketer.. he is projecting a better image thanthe truth."

The Invisible Hand in Gujarat

It works in mysterious ways. So it pays to be in the good books of Modi. Here's what happened to those who weren't

The office of Canada's GeoGlobal Resources is located in the unlikeliest of places for an oil explorer: the Info Cityin Ahmedabad, a business hub that houses IT companies in Gujarat. Given that the state government's IT dreamsnever really took off, GeoGlobal may have had little trouble in securing the office. The 11,000 sq ft office canaccommodate 50 employees, but on a Monday morning in early June, it was deserted, except for 11 members of thecurrent workforce.

GeoGlobal arrived in Gujarat the early 2000s with big dreams. The New York Stock Exchange-listed companybecame the technical partner of state-owned GSPC. After Narendra Modi announced the 20 tcf gas find, theGeoGlobal scrip shot up to $8.5 on June 28, 2005 from $3.39 the previous day. But the company had to comply withstringent American laws and informed regulators that it was premature to estimate the quantum of gas. For Modi,this was a setback. Here was GSPC's own partner casting doubts on his claims.

GeoGlobal's troubles started soon after. GSPC asked the company to share exploration and development costsalthough this was a clear breach of contract, according to documents on the terms of the partnership accessed by ET


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Magazine. Subsequently, GSPC accused the company of providing a wrong geological model and blamed it for costoverruns. (A state government certificate of commendation is kept atop a table in the office).

Today, GeoGlobal is at the receiving end of the dispute with GSPC. Company officials refused to comment, askingus to leave once we introduced ourselves as journalists. But a financial analyst who has advised the company saysGeoGlobal has invested $57 million to date in Gujarat and has zero returns to show. The scrip has nosedived to less

than $ 0.4.

GeoGlobal's litany of woes can be dismissed as a spat between partners, but it is something of an anomaly in a stateknown for its full-on support for businesses. The Canadian company's experience has a bigger message gettingon the wrong side of the government can be disastrous.

The visible hand in Gujarat makes it easy to do business. But there is also an invisible hand that can wreak havoc.Take for example, the public spat between Verghese Kurien, the man behind the Amul brand, and Modi. At a publicfunction in 2004, Kurien criticised the government's decision to split the Gujarat Agriculture University into four. Itwas the beginning of the end of Kurien's career.

For years, Kurien had kept Amul's apex marketing body Gujarat Cooperative Milk Marketing Federation (GCMMF) free of political interference. But under pressure from fellow directors, he was forced to resign amid

controversies. The BJP grabbed the opportunity to wrest control of one of the world's largest dairy cooperatives.

"Amul gives you control over 30 lakh dairy farmer families, which means almost a crore voters," says a confidanteof Kurien. Under Modi's watch, the BJP tweaked the Cooperative Act to install its party workers in districtcooperatives. The very character of cooperatives in Gujarat has been destroyed, says the person.

A senior executive of an oil and gas powerhouse says his experience in Gujarat has been that the governmentwithdraws once a factory is set up. "Say, a company faces tax troubles, it is left to fend for itself. I am not surewhich is more important for the CM: the welfare of industry or the state."

Vibrant Gujarat apart, many companies with businesses in Gujarat participate in government-organised events suchas the international kite festivals, Navaratri and Krishi Melas. An oil company at a festival for farmers? "If you askme, there is no sense, but we have to."

Just after he said this, this official cut short the conversation. "He [Modi] has a way of finding who talks to themedia. So I have this to tell you: he is great."

Juhapura and its Citizens

How do Muslims fare in Modi's Gujarat? Those in business say there's no real problem. But many others feel left

out.

Nestled on the outskirts of Ahmedabad, towards the west, is Juhapura. A 4-km stretch of road teeming with vehiclescuts the area into two. Huts, bungalows and apartments jostle for space on either side, trying hard to accommodate a

population of nearly 4 lakh.

Today, Juhapura is one of the largest Muslim ghettos in India, but it had humble beginnings. It was built torehabilitate people affected by the floods in 1973. The population was largely Muslim, but the affluent stayed away

because of its haphazard wall-to-wall buildings. All that changed in February 2002.

In the aftermath of the riots, Muslims from across the city resettled in Juhapura. It was crowded, the amenities werepoor, but the area offered security. Naedeem Jafri arrived in Juhapura in 2002 for the same reason. He relocatedfrom Paldi, an area dominated by the Jain community. Jafri is a Cheliya, a group of Muslims prospering from thehospitality boom in Gujarat and Maharashtra.


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In 2004, he quit an advertising agency to launch a retail outlet in Juhapura. It was a risky move. "There was adumpyard next to my shop. Juhapura didn't yet appeal to educated and prosperous Muslim families." But Jafri alsohad the advantage of being an early mover. There were no modern retail stores yet in Juhapura and though businesswas slow, he knew customers would come eventually. The move paid off.

Today, Jafri runs a chain of 11 outlets under the banner of 'Hearty Mart'. The dumpyard has turned into a private bus

parking and his shop attracts decent footfall. "I did not get any external support to build my business. At the sametime, nobody discouraged me," Jafri says.

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