Economic Growth in Gujarat in Relation to the Nation and Other States in Recent Times - A Statistical Analysis

Abstract

Growth rates of regions (states) have generally followed the national level growth rates over time with small lags or leads. We find much coherence between the aggregate performance of regions over time and that of the nation, so that the periodization at the national level is also useful at the regional level. Growth of regions since the reform of 1991-93 can be considered in two phases 1992- 94 to 2002-03 and 2003-04 onwards. The very growth achieved in the latter period is mirrored at the regional level with particularly the services sector growth rate moving upwards in the second period. Gujarat like many other states is no exception. But its large competitive advantage in manufacturing means that the growth achieved in the manufacturing sector may have been less than what was possible given the monetary and exchange rate conservatism of the Reserve Bank of India. Both Maharashtra and Gujarat in the period since 2003-04 show strong positive residual (regional) factors explaining their high growth performance in this period. The contrast is with Tamil Nadu and West Bengal in the very same period. What is remarkable though of Gujarat is that it has been able to maintain and enhance its comparative advantage despite a high level of per capita income. Gujarat shows better performance on both agriculture and electricity but especially the latter which therefore inter alia has influenced local industrialization. But the roles of the factors considered must not be exaggerated. Coherence of national level growth with regional being high, the focus in discussions of the performance of states and state governments should shift to income distribution, performance of public services, locally provided infrastructure, social services over which state governments have far better and possibly even overriding control.