The state of Gujarat is usually celebrated as the locale of

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1 Growth and Structural Change in the Economy of Gujarat, Gujarat appears to be a paradigmatic example of the most disconcerting developments of the 1990s in India. There was no increase in organised sector employment during the 1990s. The primary sector, particularly agriculture, has been stagnant or even declining. By contrast, the secondary and tertiary sectors have shown statistically significant and high rates of growth over the whole period. But the factory sector in Gujarat has undergone a higher degree of concentration than in the rest of India. More importantly, the capital-intensive nature of the growth in the factory sector has been even more pronounced in Gujarat. Looking at the sectoral growth rates, it seems that the economy of Gujarat grew in an unbalanced and volatile fashion over the period under consideration. There has been a significant transformation in occupational structure. But that transformation is out of step with the change in incomes derived from different sectors. A mismatch in the movement of income and employment shares is stronger in Gujarat than the rest of India. Further, the people living in rural Gujarat have become significantly proletarianised. AMIYA KUMAR BAGCHI, PANCHANAN DAS, SADHAN KUMAR CHATTOPADHYAY I Introduction The state of Gujarat is usually celebrated as the locale of one of the advanced and dynamic regional economies of India. Such celebration is based on its high net state domestic product (NSDP) and its growth rate. Gujarat s per capita income is above the national average. It has experienced more or less the same growth rate of NSDP at around 4.6 per cent both in the 1970s and 1980s and the rate rises to 6.6 per cent in the last decade (Table 3). The entire period from to has shown a growth rate of 5.3 per cent (Table 2). The state s total income 1 was Rs 13,87,649 lakh in and has increased to Rs 63,12,932 lakh in At the turn of the 21st century, Gujarat was indeed the second most industrialised, the third most urbanised state and the fifth richest state (in terms of per capita income) among the major states of India. The basic objective of this paper is to critically explore how the Gujarat model of growth has benefited the majority of the population. One of the most disconcerting developments of the 1990s in India, and indeed the world over, has been that economic growth has been accompanied by a much lower rate of growth in employment, and by zero or negative growth of what the ILO has termed decent work [Bagchi 2004]. Gujarat appears to be a paradigmatic example of such growth. There has been no increase in the organised sector employment in the state during the 1990s. Large flows of investment have entered the so-called Golden Corridor 2 and the new regions of Sourashtra and Kachchh along the coast line currently known as the Silver Corridor. But the other parts, particularly the hilly districts, where tribal population is concentrated, have witnessed little growth of per capita income or employment matching the growth of the workforce. Hence there is a glaring and probably growing regional imbalance. The cotton mills and other branches of the textile industry had formed the economic base of the state; until the 1970s the textile mills and allied industries accounted for about two-thirds of the industrial production and generated half of the total industrial employment in the state. They have now almost collapsed. Ahmedabad was proudly known as Manchester of India. But it has become a city of derelict mills and has acquired the dubious distinction of being the most riot-ridden city in India. In this paper we first give a brief sketch of the existing literature on structural change in the Gujarat economy, and then build on it to discuss the growth of income originating from different sectors over the last three decades. The third section is devoted to an examination of the changes in percentage contribution of state domestic product and employment share in different subsectors of the state economy. Section IV analyses the nature of agricultural development in the state. Section V examines different structural ratios of the industrial sector of the state. Section VI deals with the employment situation particularly in the rural economy in Gujarat. Many scholars have tried to focus on different aspects of the economy of Gujarat, especially in the context of globalisation. Kundu (2000) made an attempt to analyse the trends and patterns of urbanisation in Gujarat, taking account of the changes in the labour market and observed that the process of urbanisation has many elements of fragility. The study revealed that the state has experienced a high rate of growth in employment (both male and female) during the past decade or so. But this is associated with a high incidence of casual employment, among whom a larger percentage is likely to be poor. The incidence of casualisation has gone up further in recent years. Moreover, employment growth is higher in sectors that have a low productivity and low wage rates, and there is a high incidence of poverty among the workers employed in them. Hirway (1995) concluded that there were great regional disparities in levels of development and claimed that the nature of development in Gujarat is biased in Economic and Political Weekly July 9,

2 favour of developed regions and relatively better off sections of the population. Hirway (2000) further observed that the process of economic growth in Gujarat was associated with a highly diversified economic structure during the post-liberalisation period and government measures had contributed to that diversification. But nevertheless this process does not seem to be sustainable, since it has distorted the agriculture-industry linkage in the state. This apart, environment has also experienced severe degradation, and that has become a major constraint on sustainable development. The study has also highlighted that there has been limited achievement in the field of employment and poverty reduction, which has a direct bearing on the development process of the state. Later on, Hirway and Terhal (2002) observed several contradictions in the growth process of the state of Gujarat. The study conducted by Dholakia (2000) on the development strategy in Gujarat concluded that although the liberalisation process had a positive impact on the economy of Gujarat, this impact was not uniform across the sectors. However, he argued that since the government of Gujarat took new initiatives only after 1996, it was too early to examine their impact on the economy. The study, however, found that the state lags behind several others in the country in terms of human capital and related indices. The expenditure policy of the Gujarat government had consistently accorded higher priority to expenditure that promoted the accumulation of physical rather than human capital. Mathur and Kashyap (2000) observed that in the agricultural sector, the contribution of area to the output growth has declined in almost all districts in the state. The study further found that the 1980s were marked by a major shift in the crop pattern towards non-food crops. They also found that the growth in land productivity in the state had experienced a significant deceleration after the 1980s. II Methodology Data sources: In order to study trends in growth rates we need time series data. In this paper we use SDP data compiled by the CSO and published by EPW Research Foundation (2003) to estimate sectoral growth rates and sectoral composition of NSDP. Different rounds of NSSO on the employment and unemployment situation in India and census data are used to analyse the employment situation in Gujarat. We also use time series data from the Annual Survey of Industries (ASI) published by the CSO to examine industrial development in the state. Data from Socio- Economic Review, Gujarat State, , are also used in this study. Growth estimation: Growth estimation involves a number of issues, such as the choice of base and terminal periods, the selection of cut-off points for different sub-periods, choice of trend equation, avoidance of volatile fluctuations in the data, estimation of growth parameters and proper interpretation of results. The most commonly used statistical procedure has been to postulate a hypothetical function which would adequately describe the series of output over time. The conventional procedure is to choose the function on a priori grounds, such as a theory or a hypothesis underlying the set of observations. The linear and the exponential forms are the most commonly used trend functions. Most of the available studies analysing the growth performance of the economy of Gujarat simply considered the traditional method of estimating annual compound growth rates. Such a traditional method is subject to the problem of arbitrary choice of the base and the terminal years. In this sense, the methodology adopted in this paper seems to be free from this limitation. Table 1 presents the regression results of the smoothed data of NSDP, which may help to select the best-fitted trends. From this table it is seen that the linear trend is best fitted for the primary sector and agriculture while semi-log linear or quadratic in semi-log form fits better for the rest in terms of Adj. R 2, t value and F statistic. Sectoral growth: The growth pattern of Gujarat is not uniform across different sectors. The primary sector, and particularly the agricultural sector, has been stagnant or even declining in the state. The estimated trend values indicate that neither agriculture nor the primary sector as a whole follows any statistically significant time trend over the 31-year period in the state. There is, however, a general problem of the growth estimate, which varies widely according to choice of the data source as well as the base and terminal years. Using the data set available from the ministry of agriculture of the government of India, Bhalla and Singh (1997) show that the growth in agricultural productivity of Gujarat has been fairly high during the period from to Using CSO data, we have estimated trend growth to the income originating in different sectors at prices in Gujarat over the period to The estimated results are presented in Tables 2 and 3. Table 1: Results of Fitting Trend Equations to Gujarat NSDP at Factor Cost by Industry of Origin, to (at Constant ( ) Prices) Sectors Trend Equation Adj R-Square t-value F Statistic Primary sector Linear Exponential Quadratic in semi-log * Agriculture Linear Exponential Quadratic in semi -og * Secondary sector Linear Exponential Quadratic in semi -og * Manufacturing Linear Exponential Quadratic in semi-log * Tertiary sector Linear Exponential Quadratic in semi-log * Trade, hotels, Linear transport, etc Exponential Quadratic in semi-log * Banking and Linear insurance, Exponential real estate, etc Quadratic in semi-log * NSDP Linear Exponential Quadratic in semi-log * Notes: (i) Linear trend: y t = a + bt; Exponential trend: In y t = a + bt; Quadratic (in semi-log) trend: In y t = a + bt + ct 2 (ii) * Corresponds to the coefficient of t 2 Source: SDP data published by EPW Research Foundation (2003) Economic and Political Weekly July 9, 2005

3 Values (Rs lakh) Figure 1: NSDP of Gujarat at Prices.... Primary sector Secondary sector Tertiary sector Per Cent Figure 2: Annual Growth Rates of Gujarat Services Manufacturing Agriculture The total income originating in the primary sector was Rs 7,11,994 lakh in and with severe fluctuations it reached at Rs 12,14,038 lakh in , showing a trend growth rate at around 1 per cent (Table 2). But, according to figures in Table 3, the trend growth rates in agriculture were negative both in the 1980s and 1990s. The liberalisation of the 1990s had hardly any significant perceptible impact on the growth performance of the primary sector in the state. The striking feature of Gujarat agriculture is its highly fluctuating nature. By contrast, the secondary and tertiary sectors in the state of Gujarat have shown statistically significant and high rates of growth over the whole period including the sub-periods. The registered manufacturing sector displayed a trend acceleration from 6.7 per cent in the 1970s to 8.9 per cent in the 1980s but the growth rate declined to 7.9 per cent in the 1990s. The annual growth rate in the output of the unregistered manufacturing sector, which includes the cottage and small-scale units, has shown a jump from 3.9 per cent in the 1970s to 7.1 per cent in the 1980s and further to 8.8 per cent in the 1990s. But this acceleration also conceals much turbulence. The manufacturing output had declined in by 22.1 per cent (Figure 3). Unni, Lulitha and Rani (2001) claimed that both the organised and unorganised sectors in Gujarat seemed to be doing better than the all-india average in terms of growth of value added. According to them, Gujarat had an exceptionally high growth of value added in the reform period. For estimating growth they used four data points, 1978, 1985, 1990 and 1995, instead of the entire time series. This method suffers from the limitation that the growth rate is dependent on the two end points chosen and not on the intermediate periods. To show the difficulty of using their method, it may be mentioned that the annual growth rate of the registered manufacturing sector in Gujarat was 0.7 per cent in the year and 30.3 per cent in the year Therefore, the growth of value added of 18.3 per cent during , in their paper, is no indication of the actual picture. The trend growth rate of the services sector has increased from 5 per cent in the 1970s to 7 per cent in the 1980s and further to 8 per cent in the 1990s. Within the tertiary sector, trade, hotel and restaurants; transport, storage and communications; banking and insurance; real estate, ownership of buildings and business services have been playing a leading role in generating income growth during these periods (Table 3). Looking at the sectoral growth rates, therefore, it seems that the economy of Gujarat grew in an unbalanced and volatile fashion over the period under consideration. The economic growth of the state is sustained by the secondary and tertiary sectors and apparently this growth has had no positive impact on the primary sector. This indicates a peculiar disarticulation between the primary and secondary sectors. It would appear that most of the incentives provided by the state accrued to the secondary sector rather than the primary sector, although the latter employees the majority of the working population. Agriculture shows large year-to-year fluctuations in value of output between Rs 1,139 crore and Rs 3,597 crore without any significant long-run growth in real terms. In the period between and the annual Table 2: Growth Rates in Gujarat s NSDP, to Sectors TE Values TE Values Growth Acceleration @ Rates Coefficient Primary sector of which: *# Agriculture *# Secondary sector of which: Registered manufacturing * Unregistered manufacturing Total manufacturing * Mining and quarrying * * Construction Electricity, gas and water supply Tertiary sector of which: Transport, storage and communication * Trade, hotels and restaurants Banking and insurance Real estate, ownership of dwellings and business services Public administration * Other services NSDP * Per Capita NSDP (Rs) Notes: Triennium ending (TE) value: y/ t = (y t-2 + y t-1 + y t )/3. Values are in Rs lakh at constant ( ) prices. (ii) # Estimate is corresponding to quadratic trend showing absolute deceleration. (iii) * Estimates are insignificant. (iv) The rest of the estimates are significant at the 1 per cent level. Source: As for Table 1. Economic and Political Weekly July 9,

4 Per Cent Figure 3: Percentage Contribution of NSDP... Primary sector Secondary sector Tertiary sector than that of the unregistered sector. The percentage contribution of the secondary sector as a whole to the NSDP has risen much more slowly from 24.7 per cent in to 38.1 per cent in The disaggregated figures of state income also indicate that the share of the tertiary sector in NSDP was 46.9 per cent in as against 26.4 per cent in , 31.5 per cent in and 37.4 per cent in Within this sector, the share of banking and insurance has increased from 1.8 per cent in to 8.5 per cent in , displaying probably the fastest growth among all the major sub-sectors. Our findings are broadly consistent with that of the Planning Commission. As per the estimates of Planning Commission, the changes of the percentage contributions of the primary, secondary and tertiary sectors in the NSDP from to were 21.7, 12.5 and 4.6 respectively, while the percentage change in employment share of these sectors over the same period were -6.1, 8.5 and growth rate of the agricultural sector varied between 50 per cent and per cent (Figure 2) showing the coefficient of variation of that growth rate was per cent. In spite of a substantial rise in income in the manufacturing sector, instability in real income still remains. The services sector is relatively more stable as compared to agriculture and manufacturing (Figure 2). III Change in Sectoral Composition Table 4 presents the data on the shares of the broad industry groups in the state domestic product during the past few decades. It is observed from the table that the share of the primary sector has declined from around 49 per cent in to 15 per cent in The share of agriculture, the major constituent of the primary sector, has steadily declined from 45.2 per cent in to 38 per cent in , 26.7 per cent in , and to 13.4 per cent in In common with the experience of the other states of India, the percentage of people employed in agriculture in Gujarat has declined much more slowly than the income generated by it. Although its share in NSDP has fallen sharply over the past three decades, it still continues to be the major source of employment. The ratio of per worker domestic product in non-agriculture to that in agriculture has therefore increased. We have discussed this issue in detail in Section V. The share of the net output of the manufacturing sector has increased from 13.2 per cent in to 16.3 per cent in , 23.9 per cent in , and finally to 28.7 per cent in However, the performance of the unregistered manufacturing sector does not show any remarkable improvement during the period. The relative shares of the registered and the unregistered manufacturing sector in the total have remained virtually unchanged: their shares in NSDP have increased by a little more than 100 per cent over the whole period. Their relative share in production stood at 10.9 per cent in The output of the unregistered manufacturing sector grew faster during the period of liberalisation than during the earlier decade but the growth of the registered manufacturing sector was relatively slower during those years. This is a rather paradoxical result since the earlier licence-permit regime is supposed to have hampered the growth of organised manufacturing much more Table 3: Sub-Period Growth Rates in Gujarat s NSDP Sectors to to to Primary sector of which: 3.0** -1.4* -0.3* Agriculture 3.2** -1.6* -0.3** Secondary sector of which: Registered manufacturing Unregistered Total manufacturing Construction Electricity, gas and water supply Mining and quarrying ** -0.9 Tertiary sector of which: Transport, storage and communication Trade, hotels and restaurants Banking and insurance Real estate, ownership of dwellings and business services Public administration Other services NSDP 4.6* 4.7* 6.6 Per capita NSDP 2.1** 2.7** 4.9 Notes: (i) * Significant at 5 per cent level; ** insignificant and rests are significant at 1 per cent level. (ii) Growth rates are in per cent per annum form, estimated from a linear trend for the primary sector and agriculture, and from a loglinear trend for the rest. Source: As for Table 1. Table 4: Sectoral Shares of Gujarat s NSDP at Constant ( ) Prices Sectors/ Primary sector of which: Agriculture Secondary sector of which: (i) Manufacturing a) Registered b) Unregistered (ii) Electricity, gas and water supply (iii) Mining and quarrying (iv) Construction Tertiary sector of which: (i) Transport, storage and communication (ii) Trade, hotels and restaurants (iii) Banking and insurance (iv) Other services Source: As for Table Economic and Political Weekly July 9, 2005

5 Per cent Figure 4 Percentage Share of Factories, Employees, Capital, Output and Value Added, to No. of of Factories Factories No. of Employees Employees Productive Capital Capital Value Valueof Output Output Net Value Added Added IV Agriculture As we have observed already Gujarat has experienced violent fluctuations with a negative trend in the share of agriculture. Agriculture accounted for 52 per cent of the workforce and 13 per cent of Gujarat NSDP in Such a discrepancy between income and workforce would have seriously damaging implications for the incomes and security of people engaged in this sector. The fluctuations in crop productivity are induced mainly by variations in rainfall. The Gujarat landscape shows considerable heterogeneity in agro-climatic conditions. The land is predominantly characterised by semi-arid conditions with a large proportion of area facing frequent drought. The southern districts of the state covering 3 per cent of the net sown area generally receive high rainfall. The central districts with 31 per cent of net sown area receive medium rainfall and the northern districts covering 66 per cent of net sown area receive scanty and irregular rainfall. The erratic and uneven nature of rainfall has to be offset with irrigation for sustainable growth in agriculture. Although the irrigated area has increased to about 31 per cent of the total net cropped area, the level of irrigation is still insufficient in the state, with about 70 per cent of the cultivated area being dependant on the vagaries of the monsoons. Canal irrigation is common in southern Gujarat, while the northern districts have potentiality in well irrigation. The pattern of irrigation has been highly uneven and unfriendly to groundwater, which affects the fertility of the soil adversely. All the problems of agriculture cannot be blamed on nature. Public investment in irrigation shows a declining trend from the sixth plan period. The share of irrigation and flood control in the public expenditure by the state declined from 9 per cent in to 8 per cent in The share of government expenditure on agriculture showed an uneven sharper fall, from 8.2 per cent in to 3.1 per cent in Currently, the government canals serve 20 per cent of the net irrigated area. The fall in the share of government expenditure on agriculture enhances vulnerability to climatic fluctuations all the more. The uncertainty in agricultural growth is more prevalent in the districts of Sourashtra-Kachchh region where the availability of proper irrigation facility is not only sub-optimal but also uncertain since it mostly depends on wells that go dry during unfavourable monsoons. We have estimated the growth rates for area, production and yield of foodgrains and coarse cereals, both in kharif and rabi season on the basis of the data published by the Directorate of Economics and Statistics, ministry of agriculture, government of India. These are shown in Tables 5 and 6. They demonstrate that the growth rates of foodgrains are not just nil, but strongly negative as far as rabi crops are concerned, and even more so, in the case of coarse cereals produced as rabi crops. V Industrial Development As mentioned earlier, the economy of Gujarat has witnessed an ever-increasing share of industry in NSDP during the 31-year period from to Further, as per the data compiled by the Annual Survey of Industries (factory sector), the state has witnessed a marginal fall in the share of the number of factories to the all-india total during the period to However, the shares of other important indicators (viz, employment, net value added, productive capital and value of output) to their all-india values have witnessed rising trends during the period (Figure 4). The share of the number of factory employees to the all-india total has increased only marginally; but the corresponding shares of productive capital, value of output, and net value added increased at a much faster rate, especially in the 1990s. That means that in the 1990s, the factory sector in Gujarat has undergone a higher degree of concentration than in the rest of India and more importantly, the capital-intensive nature of growth in the factory sector has been even more pronounced in Gujarat than in the rest of India. During the period to , annual compound growth rate of net value added of the manufacturing sector has been 7.8 per cent, while that of employment 4 has been only 0.9 per cent. However, capital used in the manufacturing sector has Table 5: Area, Production and Yield under Foodgrains ( 000 hectares, 000 tonnes; kg/hectare) Rabi Kharif Area Production Yield Area Production Yield TE TE TE Fitted Gr Rate $ to to CV : to to Note: $ Growth rates are calculated by fitting linear trend. Source: Ministry of Agriculture, GoI. Table 6: Area, Production and Yield under Coarse Cereals ( 000 hectares, 000 tonnes; kg/hectare) Rabi Kharif Area Production Yield Area Production Yield TE TE TE Fitted Gr Rate $ to to CV: to to Note: $ Growth rates are calculated by fitting linear trend. Source: Ministry of Agriculture, GoI. Economic and Political Weekly July 9,

6 Figure 5: Real Wage and Labour Productivity in the Factory Sector in Gujarat, VA/NE EMO/NE Figure 6: Trend of Factor Share in Net Value Added in Gujarat (Factory Sectors), Per Cent EMO/VA Profit/NVA EMO/VA grown at a higher rate of 11.8 per cent. Further, total emoluments of wage and salary earners in the manufacturing sector grew at 4.8 per cent, lower than net value added and value of output. The cost of capital per unit of labour in the organised manufacturing sector witnessed a very high annual growth rate of 10.7 per cent, while productivity of labour, defined by the value added per unit of labour, in the same sector grew at an annual compound rate of 6.7 per cent. On the other hand, the productivity of capital as measured by output per unit of capital has grown at an annual compound growth rate of 5.3 per cent during the period to The value of output per employee has also increased in the manufacturing sector by 6.2 per cent. Thus the industrial growth in Gujarat has been highly capitalintensive and labour-displacing. The average wage of an employee in the manufacturing sector has increased by 3.8 per cent during the year to Thus productivity of labour grew at a rate which was almost double that of the growth rate of wages. Inevitably, the share of wage in value added has fallen drastically (Figure 5). In a nutshell, the structural ratios explain rising capital intensity, falling employment per unit of capital with rising productivity and emoluments; increasing capital output ratio and consequent fall in capital productivity in the state. It is possible that rising wages with rising productivity almost implies displacement of unskilled by relatively skilled labour. Factor shares in net value added: In the organised manufacturing sector in Gujarat, the share of wages to net value added witnessed a secular decline till the period of That share increased a little in but it remained much below the level of the 1980s (Figure 6). The rising profit share and simultaneous decline Profit/NVA in wage share was due to sluggish real wage, while there had been sixfold increase in value added per employee in the ASI factory sector (Figure 6). VI Changes in Occupational Structure There has been a significant transformation in occupational structure. But as noticed above, that transformation is out of step with the change in incomes derived from different sectors. The share of primary sector in total employment has gone down slowly from 63.8 per cent in 1981 to 59.8 per cent in 1991 and further to 52.5 per cent in 1999 (Table 7). Agriculture being the major component of the primary sector has contributed 52 per cent of total employment in 2001 as compared to 56.3 per cent in 1991 and 61.0 per cent in The employment share of industry also declined in the 1990s although it had registered a marginal increase in the earlier decade. Employment in manufacturing, a major part of the industry, as a proportion of state workforce has gone down from 17.2 per cent in 1981 to 15.9 per cent in 1991 as well (as per the census). The story of the services sector is different as far as the sectoral composition of employment is concerned. The employment share of this sector shows a rising trend over the period, with moderate fluctuation in the early 1990s. Agriculture remains the predominant sector in respect of labour absorption. A mismatch in the movement of income share and employment share is observed at the all-india level as well as in many major component states. But this mismatch is stronger in the so-called advanced economy of Gujarat. The employment elasticity of income for different sectors, set out in Table 7a, may throw some further light on the evolving situation. From these estimates, it is obvious that the employment elasticities of all the sectors have declined steeply in the 1990s, compared with the 1980s. The employment elasticity of income generated by the secondary sector has turned strongly negative, and the employment elasticity of the tertiary sector is also too low to be able to compensate for that change. Hence the agricultural sector has become the absorber of last resort. Given the low productivity and the income per capita of the population deriving their principal earnings from agriculture, the incidence of seasonal unemployment and overall underemployment in that sector is likely to be pretty high also. The income per capita of Table 7: Distribution of Employment and Income by Industrial Sectors in Gujarat, Employment Primary sector Secondary sector Tertiary sector Income Primary sector Secondary sector Tertiary sector Sources: NSSO, (as shown in Tenth Five- Plan, Vol 3, Chapter 3), Census of India and Socio-Economic Review, Government of Gujarat. Table 7a: Employment Elasticity of Income Sectors 1980s 1990s Primary sector Secondary sector Tertiary sector Note: Computed on the basis of data given in Table Economic and Political Weekly July 9, 2005

7 the people deriving their income from the services sector is at par with the income derived from the secondary sector. As we see from Table 8, while per capita income of the people engaged in agriculture has gone down from Rs 4,411 in 1981 to Rs 2,719 in 1991, in industry and services this has gone up from Rs 10,760 and Rs 10,057 to Rs 13,139 and Rs 13,212 respectively during the same period. But in the tertiary sector also the degree of income inequality is likely to be very high: the world of the big stockbroker or provider of financial services would have no similarity at all from that of the hawkers or owners of shops in slum areas or peddlers in trains or bus stations. The people living in rural Gujarat have become significantly proletarianised. The share of male agricultural labourers in the main workers group has gone up in rural areas. There has also been a fall in the share of cultivators to the total rural workforce over the period 1981 and 2001 (Table 9). The share of female cultivators and female agricultural labourers declined substantially throughout the period. But there is a steep rise in the share of female other workers 5 in rural Gujarat in the post-liberalisation period. This may be an indication of a shift of female workers participation towards livestock and forestry in rural areas. The other workers group, dominating in urban areas, has shown a substantial rise in its share of both male and female workers over the period. In household manufacturing the share of urban female workers is dominating and has gone up from 5.3 per cent to 9.8 per cent in the 1990s. There are many problems in interpreting employment and unemployment data thrown up by the National Sample Surveys and the Census Operations. During the last decade, the workforce participation rate, defined as the percentage of workers to total population, for main workers among males has shown a drastic fall in rural Gujarat, although at a lower rate as compared to the all-india level, along with too little rise in urban areas (Table 10). Thus, the unemployment situation is severely deteriorating in the state. Side by side the participation rate for male marginal workers in rural areas increased by 5 per cent over the same period, implying that the growth process in Gujarat has marginalised the employment situation in the rural economy. Importantly, the proportion of female marginal workers is very much higher than their male counterparts, in rural Gujarat. This is a clear indication that a high proportion of rural women in the state work on a part-time or non-regular basis. We present some data from the NSS employment surveys to illustrate further the extreme fluctuations and disparities that characterise the growth process in Gujarat. Table 11 gives data on rural employment in Gujarat by the concept of NSS usual status, separately for agriculture and the non-agricultural sector. These indicate a high degree of fluctuation in both male and female employment in the agricultural sector. For example, agricultural employment of males per thousand persons declined from 495 in to 417 in ; similarly, the agricultural employment of females declined from 381 per thousand persons in to only 279 in A comparison of the usual status employment figures with the daily status and weekly status figures reveals that there is a high degree of unemployment and seasonal unemployment in rural areas (Table 12). There is a major differential between the growth rates and employment prospects between the dynamic region around Surat and the newly industrialising coastal regions of Saurashtra and Kutch, and the old industrial nodes of Ahmedabad and Vadodara. Table 8: Per Capita Income of Gujarat by Industrial Sector Income* Employ- Per Income* Employ- Per ment Capita ment Capita Primary sector Agriculture Mining and quarrying Secondary sector Manufacturing Tertiary sector Total Note: * at constant prices Source: Census of India, 1981 and Table 9: Percentage Distribution of Main Workers in Gujarat, Male Female Male Female Male Female Cultivators Rural Urban Agricultural Rural labourers Urban Household Rural Industry Urban Other workers Rural Urban Source: Census of India, 1981, 1991 and 2001(Provisional Reports) Table 10: Workforce Participation Rate Gujarat and India Gujarat All-India Rural Urban Rural Urban Rural Urban Main workers Male Female Marginal workers Male Female Main workers Male Female Marginal workers Male Female Source: Census of India, 1981, 1991 and 2001 (Provisional Reports). Table 11: Rural Employment per 1,000 Persons (NSS Usual Status Principal and Subsidiary) in Gujarat Total Employment Non-agricultural Agricultural Employment Employment Male Female Male Female Male Female Source: NSSO: Employment and Unemployment Situation in India, various rounds, New Delhi, National Sample Survey Organisation, Ministry of Statistics and Programme Implementation, government of India. Economic and Political Weekly July 9,

8 Table 12: Rural Unemployment Rates in Gujarat Usual Status Current Weekly Current Daily Status Status Male Female Male Female Male Female Source: As for Table 11. Table 13a: Employment Situation in Class I Cities of Gujarat and in All Cities in India, 50th ( ) and 55th ( ) Rounds of the National Sample Survey (per thousand males aged 15 years and above, according to usual status) Self-Employed Regular Salaried Casual Labour Ahmedabad Surat Vadodara All class 1 cities Urban India Source: NSSO (2001): 55th Round (July 1999-June 2000): Employment and unemployment situation in cities and towns in India , New Delhi, National Sample Survey Organisation, Ministry of Statistics and Programme Implementation, Government of India, August. Table 13b: Employment Situation in Class I Cities of Gujarat and in All Cities in India, 50th ( ) and 55th ( ) Rounds of the National Sample Survey (per thousand females aged 15 years and above, according to usual status) Self-Employed Regular Salaried Casual Labour Ahmedabad Surat Vadodara All class 1 cities Urban India Source: As for Table 13a. Table 13c: Unemployment Situation of Males in Class I Cities of Gujarat and in All Cities in India, 50th ( ) and 55th ( ) Rounds of the NSS According to Usual, Current Weekly and Current Daily Status Usual (Adjusted) Current Weekly Current Daily Ahmedabad Surat Vadodara All class 1 cities Urban India Source: As for Table 13a. Table 13d: Unemployment Situation of Females in Class I Cities of Gujarat and in All Cities in India, 50th ( ) and 55th ( ) Rounds of the NSS According to Usual, Current Weekly and Current Daily Status Usual (Adjusted) Current Weekly Current Daily Ahmedabad Surat Vadodara All class 1 cities Urban India Source: As for Table 13a. In Tables 13a-13d, we have produced the data from the 50th and the 55th Rounds of the NSS relating to the employment and unemployment situation in the cities and towns of India to throw some light on these contrasts. One remarkable feature of these Tables is that they indicate that not only the booming city of Surat but also the city of Ahmedabad experienced a near full employment situation in , but even in that year Vadodara continued to have a very high rate of unemployment compared with the other cities (though not relative to other cities or urban areas for India as a whole). Moreover, the unemployment situation had worsened in that city between and Another feature that is worth noticing is that except in the case of females in Surat, there was a much more drastic decline in regular or salaried employment in the Class I Gujarat cities than in their counterparts in the rest of India or in the case of urban India as a whole. In the case of Surat, there was an actual increase between and , in regular employment for women, but not for men. VII Conclusions The paper concludes that the economy of the state of Gujarat has experienced relatively rapid economic growth owing to high growth of income witnessed by the manufacturing and services sectors. The industrial development of Gujarat is, in fact, characterised by falling employment per unit of capital with rising labour productivity and emoluments, increasing capital output ratio and consequent fall in capital productivity. It is generally argued that as an economy develops its dependence on agriculture declines. But the state of Gujarat did not experience such a transformation during the period considered in the study. Agriculture still remains the predominant sector in respect of labour absorption. A strong mismatch has been observed in the movement of income and employment share in agriculture. Gujarat grew in an unbalanced and volatile fashion during the past 30-year period. The economic growth of the state is mainly sustained by the secondary and tertiary sectors and apparently this growth has had no positive impact on the primary sector. This indicates a peculiar disarticulation between the primary and the secondary sectors. EPW idsk1@vsnl.net Notes 1 Figure shows the triennium ending average value (T.E. Value) of NSDP at prices. 2 This is the central and south belt between Mehsana in north Gujarat and Umbergaon in south Gujarat where 92 per cent of the industrial investments in large and medium industries were made in the 1980s: Hirway and Mahadevia 1998, p Tenth Five Plan, Vol 3, Planning Commission, government of India. 4 As shown in the ASI. 5 Other workers include persons working in forestry, livestock, nonhousehold industry and services. References Awasthi, Dinesh N (2000): Recent Changes in Gujarat Industry Issues and Evidence, Economic and Political Weekly, Vol 35, Nos 35-36, pp Economic and Political Weekly July 9, 2005

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