By Christophe Jaffrelot

BJP setback in local polls may point to a growth model that does not create jobs.

narendra_modi_rise_bjpThe BJP’s recent setback in the Gujarat local elections is partly due to the fact that Chief Minister Anandiben Patel has not been as effective as now-Prime Minister Narendra Modi, who used to canvass for local elections more systematically than most. But this is not the only reason. What is at stake is the Gujarat model. This model never appealed to the common people who have been its casualties for years. Gujarat’s social indicators contrast starkly with its growth rate. Gujarat has slipped in the human development index from 10th in 1999-2000 to 11th in 2011.

This is largely due to the condition of three groups: Adivasis (15 per cent of the state population), Dalits (7 per cent) and Muslims (9 per cent). In the last decade, the Comptroller and Auditor General of India has repeatedly reproached the Gujarat government for failing to ensure that the development funds allocated to Adivasis and Dalits were in proportion to their population. An indication of the socio-economic backwardness of Adivasis and Dalits in Gujarat is their indebtedness. While the proportion of indebted rural households has increased from 35.7 per cent in 1999-2000 to 56 per cent in 2004-05, it has risen from 44.80 per cent to 62.95 per cent among Dalits, and 32.9 per cent to 60.1 per cent among Adivasis.

Given the communal violence they have repeatedly suffered from, Muslims in Gujarat face specific problems. According to the Sachar Committee report, they are under-represented in most state government departments: They occupied 1.7 per cent of higher positions and 4.5 per cent of lower positions in the education department as well as, respectively, 5.6 per cent and 5.6 per cent of the home department, 2.2 per cent and 1.5 per cent of the health department. Low levels of education compounded this problem. Only 26 per cent of Muslims in Gujarat reached matriculation, the same proportion as for SCs/ STs, against 41 per cent for others. Twenty-four per cent of urban Muslims in the state lived below the poverty line, against 17 per cent of SCs/ STs, 18 per cent of OBCs and 3 per cent of other urban-dwellers.

These figures suggest that the Gujarat model relies on a twofold process of polarisation, religious as well as social. But another dichotomy deserves some attention, as evident from the rural-urban differential of the average monthly per capita expenditure calculated from National Sample Survey data. This differential grew from 49.8 per cent in 1993-94 to 68 per cent in 2007-08, and remained the same in 2011-12. Which means that urban-dwellers consumed two-thirds more than villagers.

These inequalities did not prevent the BJP from winning elections, because its urban supporters were sufficiently numerous to ensure its victory. If Gujarat had been only rural, the Congress would have won the 2012 state elections, according to a CSDS survey, but the state’s urbanisation rate is among the highest in India. So why is the BJP losing ground today? Because of the growing alienation of rural and semi-rural (important in a state known for its “rurbanisation” process) voters after two years of bad crops and the prospect of an agricultural crisis, and also because of the growing frustrations of those aspiring to “neo middle-class” status. Young Patels from the lower middle class are a case in point. The government has antagonised this major caste group — 14 per cent of society — by repressing their demonstrations this summer. But why were young Patels in the street? Largely because of another feature of the Gujarat model: It has not created that many good jobs. It has relied on an effort to attract Indian and foreign big companies, whose investments have resulted in growth. But it has had two unintended negative consequences.

First, these activities developed at the expense of the micro, small and medium enterprises (MSMEs), which were often located in rural and semi-urban areas and largely run by Patels. A study by the Institute of Small Enterprise and Development showed that in 2012, the non-performing assets of the MSMEs had grown by 43.9 per cent. This was attributed to the poor financial support that the MSMEs received, thanks to the high interest rates and indifference shown by local banks. The share of the MSMEs’ credit as a percentage of gross bank credit halved between 1997-98 and 2006-07. It started to rise again to reach the 10 per cent mark in 2009-10, but it was too late by then. In 2014, Central government data showed that there were 48,000 sick MSME units — one-fifth of those registered with the government — in Gujarat. Clearly, the MSMEs are not in a position to hire as many people as before.

For that matter, even the big companies are unwilling to hire. Reason: They are very capitalistic, especially in the energy sector. Between 2009-10 and 2012-13, Gujarat was the state with the highest investment in industry. But this mainly reflected the acquisition of machine tools. For instance, while the industries in Tamil Nadu account for lower fixed capital than their counterparts in Gujarat, they have a much higher share in the number of factory jobs created. Clearly, these two models are in competition.

Besides quantity, the quality of jobs is also a problem. One reason why industrialists have invested in Gujarat is the low level of wages. According to the Labour Bureau, the average daily earnings of employees in Gujarat in 2012 were significantly below the national average. Unsurprising then, the Patels asked for reservations. Beyond wages, there is another reason for that demand: Their imbalanced sex ratio. It is so asymmetrical that parents of girls are in a good position to bargain. Grooms with government jobs are preferred. But, in general, government jobs are a much lower proportion of the total jobs in Gujarat than in several other states. Second, the Patels who do not get good jobs resent their socio-economic conditions, especially since they are used to being the dominant caste in a village. Patels, who formed the core of what Modi called the aspirational “neo middle class”, now feel a deep sense of frustration. Beyond the BJP’s defeat in rural and semi-urban Gujarat, what is at stake is the urban and middle-class bias of the Gujarat model and the risks that its replication at an all-India level may entail. “Make in India” is not sufficient, because growth matters only if it creates jobs. Creating jobs is something that big companies do not do as much as smaller ones — the ones that used to be protected by the Nehruvian state.

The writer is senior research fellow at CERI-Sciences Po/CNRS, Paris, professor of Indian Politics and Sociology at King’s India Institute, London, and non-resident scholar at the Carnegie Endowment for International Peace.