Gujarat elections: How did the State economy fare over the last 5 years

Gujarat has consistently maintained its position as one of the smartest states in India. From maintaining low levels of debt to keeping its fiscal deficit below the limits set by the Finance Commission to an enviable low unemployment rate to attracting a large amount of foreign direct investment, the Western Coastal State has scored well in most financial and economic areas. parameters in the past decades.

Thanks to its long coastline, business-oriented community, well-developed ports, well-connected roads and business-friendly policies and reforms in the last 2-3 years, Gujarat has been at the forefront of business and export-led growth.

The incumbent Bharatiya Janata Party government came to power in Gujarat in December 2017. The state is gearing up for the 15th Assembly elections on December 1, line of business looking at how the current government has performed under other key financial measures.

The name has been damaged for more than two years by the Covid-19 pandemic, so not much can be expected in terms of growth. But the Government has shown resilience due to sustained reforms and progressive policies and has scored well in many parameters.

Sustainable economic growth

Gujarat improved its position in terms of GSDP under the Bhupendrabhai Patel government. While it was the fifth largest country in terms of GSDP in FY17, the ranking improved to fourth place in FY22. The State’s Gross State Domestic Product (GSDP) grew at a compound annual growth rate of 10 percent to ₹ 19.44-lakh crore from FY22, from a GSDP of ₹13.29-lakh crore in FY18.

But this strong growth is nothing new. Himani Baxi, Faculty, Department of Economics, School of Liberal Studies, Pandit Deendayal Energy University, said that regardless of the political party’s strength in the last 3-4 years, Gujarat’s GSDP growth has remained higher than the national average. He said the GSDP growth was attributed to the historically strong performance of all key sectors of the economy, including petrochemicals, dairy, textiles, gems and jewelery and marine exports.

Baxi added that the ‘Gujarat Model’ of development is not limited to business growth. “Recently, many farmers have switched to cash crops. The reform of selling farm produce through APMCs was brought back in 2016. Narmada irrigation has helped farmers to go from one crop a year to three. All this has increased the share of agriculture in GDP.

Financial deficit

State fiscal deficit, as a percentage of GSDP, also remained under control in the last five years, except for FY21, when all States faced the challenge of declining revenue and increasing expenditure due to the pandemic.

According to the revised estimates for FY22, Gujarat’s fiscal deficit stands at ₹29,270 crore or 1.51 percent of GSDP, well below the permissible limit of 4 percent. The Fiscal Responsibility and Budget Management (FRBM) Act allows for a fiscal deficit of 3.5 percent of GSDP. In the Union Budget FY23, the Center has allowed an additional deficit of 0.5 per cent for States undertaking power sector reforms.

Baxi said that even before the Center introduced the UDAY Scheme, Gujarat had already reformed the power sector under the Electricity Act, 2003.

The government also moved from the Old Pension Scheme (OPS) to the National Pension System (NPS) to reduce the financial burden on the State exchequer. “This initiative helped the State to reduce the expenditure that they had committed to, which means a reduction in loans,” said Baxi.

The switch to NPS led to widespread unrest with government officials and the Congress and Aam Aadmi Party promising to return to OPS if elected to power.

Fixed capex

The fiscal deficit is the excess of total expenditure over total receipts. The Government has been able to keep its fiscal deficit under control by carefully managing its expenditure. Total State expenditure grew from ₹1.44-lakh crore in FY18 to ₹1.87-lakh crore in FY22. Within that, while revenue expenditure increased by over Rs 41,000 crore, capital expenditure increased by only Rs 1,800 crore.

Baxi admitted that total State spending has stagnated over the past few years. “Gujarat is very advanced in achieving Public Private Partnership (PPP), be it highway, road construction, bullet train projects or ports. As a result, while the infrastructure is being built, the government does not have to spend a lot of money on capital expenditure.”

The Government has also recorded strong growth in its tax revenue collection. From ₹71,549 crore in FY18, Gujarat’s tax revenue has gone up to ₹97,678 crore in FY22. The Government has estimated a tax revenue of 1,14,883 crore for FY23, of which, State GST accounts for 46 per cent followed by Sales Tax/VAT (27 per cent) and Stamp Duty and Registration Fee (11 per cent). .

Inflow of FDI

Gujarat has been among the top destinations for foreign direct investment (FDI) over the years. Despite the pandemic-hit year, the government attracted a record FDI of Rs1.62-lakh crore in FY21. The year saw several multinational companies such as MG Motor, Procter & Gamble (P&G), ESR India and Indian Oil Corporation pouring in thousands of dollars in investments.

Even in today’s money, the Government attracted huge investments, including the multi-billion semiconductor manufacturing projects of the Vedanta Group and Foxconn in Taiwan; The ₹21,000-crore C-295 aircraft joint venture between Tata and Airbus; and 2,000 acres of Diamond Bourse in Surat, to name a few. A Times of Money A report on Friday reported that billionaire Gautam Adani plans to invest more than $4 billion in a petrochemical complex in Gujarat.

Baxi said that land acquisition is not as much of a problem in Gujarat as it is in other countries. “Farmers here are more entrepreneurs. Some farmers hold pieces of land with the intention of selling them under the Land Acquisition Act.”

He added that business facilitation and time-bound approvals have always been an important part of Gujarat governance even before the idea of ​​’freedom of doing business’ came. That partly explains why the State has become a destination for multinational companies and corporations looking to set up large production units.

Unemployment

The monthly unemployment rate for Gujarat in October stood at 1.7 percent as opposed to other major industrial states like Maharashtra and Tamil Nadu, whose unemployment rate stood at 4.2 percent and 3.3 percent, respectively.

Baxi noted that like many other States, Gujarat has also stopped the recruitment of people in the education sector and other government bodies. However, he added that there are many Special Purpose Vehicles (SPVs) that have been opened, which take into account the recruitment of workers to run entities such as the government or state bodies. “So, the government is not expected to spend a lot of money on these things.”



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