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Saturday, January 5, 2013

Kerala Vs Gujarat Model ---JAGDISH BHAGWATI & ARVIND PANAGARIYA


Kerala Vs Gujarat Model JAGDISH BHAGWATI & ARVIND PANAGARIYA ECONOMISTS

‘We Are Impressed By Modi’s Economic Policies’


Jagdish Bhagwati is university professor of economics at Columbia University. He is the author of several books including “In Defense of Globalisation”. His latest book, “India's Tryst with Destiny: Debunking Myths that Undermine Progress and Addressing New Challenges”, which he has co-authored with Arvind Panagariya, a professor of Indian economics at Columbia University, argues that growth can reduce poverty and that slow economic growth will hurt social development. In a joint response to questions from ET, the authors dwell on the message in their book, revive the Kerala Model Vs Gujarat debate and attack economists such as Nobel laureate Amartya Sen for his “anti-growth assertions”. Excerpts from an interview with Ullekh NP: 
Why do you want to compare the Kerala model of development with the Gujarat model of development? “Kerala Model” in our book is a metaphor for a primarily redistribution and statedriven development while “Gujarat Model” is the metaphor for a primarily growth and private-entrepreneurship driven development. As such the Kerala Model vs. Gujarat Model debate is a longstanding one. We show in our book, “India’s Tryst with Destiny,” that it is ultimately the Gujarat Model that has delivered in Kerala. Contrary to common claims, Kerala has been a rapidly growing state in the post-Independence era, which is the reason it ranks fourth among the larger states, according to per-capita gross state domestic product and first according to per-capita expenditure. It also suffers from the highest level of inequality among the larger states. So growth, and not redistribution, largely explains low levels of poverty. In health, Kerala's per-capita private expenditures are nearly eight times its percapita public expenditures. In education, excluding two or three tiny northeastern states, at 53%, rural Kerala has by far the highest proportion of students between ages 7 and 16 in private schools. The nearest rival, rural Haryana, has 40% of these students in private schools. 
Kerala's social indicators are still high and there isn't much gender bias in both health and education. On the other hand, in Gujarat, the female and male infant mortality rates stood at 51 and 44, respectively, in 2010-11 (The corresponding national figures were 49 and 46, respectively). No one would question the superior levels of social indicators in Kerala compared with any other state in India, let alone Gujarat. But what does that have to do with the Kerala Model? Kerala simply started at very high levels of social indicators than the rest of the country and it has maintained that lead. In 1951, literacy rate was 47% in Kerala compared with just 18% in India and 22% in Gujarat. As for the infant mortality rate (IMR), in 1971, the earliest year for which we have comparable data, it was 58 per thousand live births in Kerala, 129 in India and as high as 144 in Gujarat. Even the male-female differences you cite date back to pre-Independence era. The right question to ask is whether the Kerala Model produced perceptibly superior gains (as opposed to superior levels, which were inherited at Independence) in social indicators. The answer to this question turns out to be mostly negative, as we demonstrate in our book. 
The people of Kerala aren't perceived to be as entrepreneurial as Gujaratis are. Is it just a problem of perception? Does it mean that what suited Gujarat wouldn't suit Kerala and vice-versa? It is wrong to argue that Keralites are not entrepreneurial. In fact, we show in our book that they have had a long history of commercialisation and globalisation via trade and that the resulting prosperity is a key explanation of the high social indicators they inherited at Independence. Today also, with the long-standing inherited preference for education, skilled Kerala migrants can be found everywhere. As
tonishingly, one in three households in both rural and urban Kerala has at least one member living abroad. It is not surprising therefore that remittances have pushed Kerala to the top in terms of per-capita household expenditures despite its fourth rank according to per-capita gross state domestic product. In comparison, Gujarat has less than one in fifty rural households and one in ten urban households with one or more migrants abroad. Gujarat also has had a longstanding history of a more traditional form of entrepreneurship and this entrepreneurship has flourished under the Gujarat Model. One of us (Bhagwati, in his writings on globalisation) explains that the beneficial effects of globalisation can come in different ways through trade, foreign investment or migration, depending on the circumstances of a country. Kerala and Gujarat have gained differently from prosperity resulting from their people's entrepreneurship; and in both cases, redistributive policies played at best a limited role. Indeed, in our federal structure, being more prosperous, they have been sources of revenues for inter-state transfers to the poorer states. 
Look at education: In 2011, 87.2% of Gujarati males were literate as against 70.7% of females; a gap of 17.2%. The corresponding all-India figures are 82.1% and 65.4%; a gap of 16.7%. How do you explain this? The traditional neglect of the girl child in much of India with rare exceptions such as Kerala in nearly all fields has been wellknown. In fact, one of the first economists to note the gender bias in education and nutrition was one of us (Bhagwati), in a 1973 paper in the Oxford Journal, World Development. Today, there is greater awareness of this issue than in the early 1970s. But the efforts to eliminate this bias have also run into new difficulties such as new technologies that allow the determination of the sex of the child in the early part of a pregnancy. 
Professor Bhagwati has said in an interview that growth in Gujarat is on track. So far, it hasn't shown any impact on social indicators. Do you believe in trickle-down effect? First, we have always argued that the use of the conservative phrase “trickle-down” is misleading. We prefer to use the more radical phrase “pull up”. By reducing poverty, the growth strategy increases incomes which, in turn, can be expected to improve most social indicators (though nutrition in particular may get worse if the diet shifts to less nutritious but tastier foods). Most social indicators have in fact seen a lot of progress in Gujarat and in many of these, the changes (which economists call “first difference”) in social indicators make Gujarat look pretty good indeed. Gujarat inherited low levels of social indicators 
and it is the change in these indicators where Gujarat shows impressive progress. The literacy rate has risen from 22% in 1951 to 69% in 2001 and 79% in 2011. The infant mortality rate per thousand has fallen from 144 in 1971 to 60 in 2001 and 41 in 2011. 
Why do you say all seems to be well in Gujarat? In literacy, too, Gujarat ranks 18th out of 35 states and Union Territories. In sex ratio, the state is way behind the national average of 940 females per 1,000 males. In poverty reduction of 8.6% in 5 years (2005-10), it is still behind states like Odisha (19.2%), Maharashtra (13.7%) and Tamil Nadu (13.1%). But you are again failing to distinguish between low levels and changes therein. On the latter criterion, which is the relevant one, Gujarat is making good progress in most areas. The additional good news is that with relatively high per-capita incomes as well as a high growth rate, it will continue to generate high and rapidly rising levels of revenues that, when combined with its good governance (which predates the current chief minister Narendra Modi), promise continued accelerated and all-around progress. 
There are more reasons to worry: 44.6% of children below the age of five suffer from malnutrition in Gujarat whereas nearly 70% of the children suffer from anaemia. States like UP and Bihar have fared better in malnutrition. Such comparisons selectively focusing on one or the other social indicator, especially their levels, are not particularly meaningful; one must consider the changes in several indicators. By that test, Gujarat has done quite well. But we also need to appreciate, and this is what one of us (Panagariya) has ceaselessly argued in recent writings, that the nutrition measurements leave a lot to be desired. 
Kerala topped the Human Development Index in 2011, followed by Delhi, Himachal Pradesh, Goa and Punjab. Why do you still criticise the Kerala model? As we have already indicated, Kerala's high social indicators are well known and they are not contested. The question we ask is: what does that have to do with the Kerala Model? To keep asserting such causality is the mark of a lazy intellect and is, besides, dangerous in its potential for misleading us to make harmful policy choices. 
Why did you zero in on the Gujarat Model of development and not Tamil Nadu Model or Maharashtra Model of development? Why are you obsessed about “debunking the myth” about the Kerala Model of development? As we have said at the beginning, Gujarat Model is a metaphor and you can surely apply it to Tamil Nadu and Maharashtra. As 
we have argued in the book and also above, it also applies to Kerala in large measure. Debunking the Kerala Myth is important if false arguments and rhetoric are not to be allowed to undermine developmental strategies that are more effective and have helped transform India since 1991 and created finally a substantial impact on poverty and on the welfare of the marginalised groups, as we demonstrate in our book. 
What is the message in the book? Do you both have an intellectual rivalry with Professor Amartya Sen and his school of thought? The message: growth is the single most important instrument of poverty reduction; and India needs to both accelerate growth and make it more inclusive through track-I reforms and make its redistribution programmes more effective through track-II reforms. As for our rivalry, it is with the practitioners of bad economics who are continuously at work to drive out good economics. It is interesting that, in evident riposte to the recent anti-growth assertions of Professor Sen, and taking a leaf from our extensive arguments in defence of the growth strategy, the prime minister has asserted forcefully that growth is central to the poverty-reduction agenda. Avuncular pronouncements by prominent economists, which fly in the face of the obvious and also much of the systematic evidence, are no longer enough to carry the day. 
Are you both impressed by the leadership of Gujarat CM Modi? 
On economic policies, yes. 

on Kerala Model Kerala's high social indicators are well known and they are not contested. The question we ask is: what does that have to do with the Kerala Model? To keep asserting such causality is the mark of a lazy intellect 
on Gujarat Model Gujarat inherited low levels of social indicators and it is the change in these indicators where Gujarat shows impressive progress; it is ultimately the Gujarat Model that has delivered in Kerala.
(Source: Economic Times, 2 January, 2013)

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