Chart: Gujarat Lags AP, TN, Bihar in Per Capita Income Growth

13 comments Written on March 7th, 2012 by
Categories: ChartOfTheDay

The per-capita income growth in each state from 2004-05 to 2009-10 (data from RBI) brings out an interesting chart. You would have expected Gujarat to top the chart, but no – Gujarat’s economic growth isn’t as good when it comes to the real data than the image they show.

image

The comparison with neighbour Maharashtra:

Gujarat: 14.8% per year (from 32021 to 63961)
Maharashtra: 15.6% per year (from 35915 to 74027)

I have been looking at Gujarat’s comparative growth in general, from an economic data perspective and other than in power, Andhra Pradesh and Tamil Nadu have done better in many areas (GDP, State Revenues, per capita consumption etc.) Bihar now runs a huge surplus on the revenue account, and while it’s had a low base, the growth has been stellar.

I realize this will attract a lot of pro-Gujarat comments, but please be decent, and note that I’m just plotting the data out there. Even I’ve heard from enough people that Gujarat is doing a great job, which is what I heard/saw in AP in the early part of the last decade, and which I saw in TN with the roads in 06-07. I think Gujarat does a great PR job, but the data isn’t quite following up just yet.

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The man behind Capital Mind. Deepak is a co-founder at MarketVision, a financial knowledge company. Deepak also provides data research and consulting services, and now lives in Bangalore. Connect with him at deepakshenoy@gmail.com.

13 comments “Chart: Gujarat Lags AP, TN, Bihar in Per Capita Income Growth”

Leasing land at ridiculously low rates and waiving taxes on corporates will help burnish the image of a CM who aspires to be a PM; but it does squat all for the people.

Agree with your observations on AP and TN. Maharashtra has a huge Mumbai advantage. It would be interesting to see Maharashtra numbers excluding Mumbai.

I would like to see what the absolute numbers reflect?

Most of the data about the new states really do not reflect much. They are new and their state revenues are new found treasures. Likewise their per capita income growth. In case of Bihar, there is no influx of poor from other states to Bihar, it has always been an out-bound flow, to neighboring states. In case of West Bengal, every year the figure gets modified by the poor immigrants from Bangladesh and Bihar too. So long as those figures are not put together, the data really would not reflect much. But yes, if you are comparing Tamilnadu, or AP to Gujrat- it is interesting.

“Per capita income growth” is not same as “per capita income”. It is not an absolute but a relative scale and hence, states with lower base naturally show stellar performance. It is nothing but just a statistical manipulation. Moreover, “per capita income” itself is also not a panacea. The comparison on “per capita income” calculation should be done only after normalization with due consideration of size of a state and proportion of contribution from a mega city / local business hub. Unless we factor in such careful consideration, alone statistics can prove both — anything and (hence) nothing!!

Absolute scale to measure any development is the available infrastructure, business-supportive government policies, employment etc. Such set of standards can be as folloing : 24 hours electricity throughout a year, sufficient water, good roads even in remote areas, less than 1 % unemployment, scientific agriculture, no labour unrest, business-friendly government policies etc. Please let me know if any of them doesn’t deserve to be included as a parameter of development.

As I said, great PR job.

Sir, I clearly asked to tell if any of the parameters I mentioned didn’t deserve to be considered when it comes to analyzing development. But because you can’t prove your point that way, you just want to disapprove my comment as a PR job!!

Lolzzz!!! How can you even think to be a PR job when I have not at all mentioned any state in my comment??? :P :P :P

Sir, to be frank, that’s a standard response when one doesn’t have anything solid to say for point by point rebuttal.

No, the PR job is that of the Gujarat govt mate, not yours. You basically don’t refute the data, you bring in some random alternate things that seem to make your point, but they don’t refute my facts. That is really the recluse of the person who doesn’t have anything to refute, to take the argument to a different direction from what it is intended to be.

Analyzing development is a complex job, and no,I don’t think Gujarat has done a better job than others – Bihar, Goa and TN have done as well or better; just that Gujarat has much better PR. Its not about what you see or whatever, the macro numbers demonstrate it.

Sir, you are correct that I am not refuting your data. But I am saying that your chosen parameter to analyse development is flawed and irrational. Let me show how :

As a student of statistics, I can say that when it comes to comparison, the parameter used for such comparison should be rugged and real representative. But, neither “GDP growth” nor “per capita income growth” nor “per capita income” nor “per capita GDP” alone can be suitable representative to have such one-dimensional (using only one parameter) comparison as reliable one.

“GDP growth” and “Per capita income (PCI) growth” suffer from their property of being a relative measure. It always suffers from “base effect” i.e. stellar value with low base and nominal value for higher base. Higher “per capita income growth” or “GDP growth” is change in that particular year and it does not indicate current status of development. For example, take “Per capita income growth”. State A previous year pci was 40 which has increased to 60 this year. State B previous year PCI was 70 which has increased to 100 this year. So if you see PCI in absolute terms, state B was better and remains better but if you see “PCI growth rate %” state A is better than State B. Thus, “growth rate” means nothing to reflect actual condition. Rather, it is just use of mathematics to confuse people.

Now, even “Per capita income” and “Per capita GDP” are also not panacea in absolute terms. They are suitable only when all the states are equally comparable and even within the states, the parameters are more or less uniformly distributed. But, unfortunately in India, it is not the case.

To make it clearer, Take Maharashtra, where a huge portion of state-GDP comes merely from one mega city i.e. Mumbai and remaining areas remain underdeveloped without even primary infrastructure such as electricity, roads, water etc. So, even when per capita income of Maharashtra is among the highest in the nation, more than 10000 farmers had to commit suicide!! So, when the distribution of GDP is uneven to such severe extent, this “per capita GDP” or “per capita income” as parameters becomes useless!!

That’s why, I mentioned those very parameters that are backbone for the growth, i.e. various infrastructure and business-friendly environment (corporate friendly economic policies without unnecessary too much red-tapism). Please also note that they are not some random or alternate parameters, as you say, but they are worldwide accepted criteria as basic and primary requirements to judge growth potential. I hope it makes quite clear why your method is irrational to define and analyse development.

I agree that PCI growth has a base effect, but if you look at TN, MH, AP – all of them have comparable numbers. UK, HR and BH may have a lower base but remember this is not one or two years, it’s an average over five years.

Second, as a student of statistics, you will understand that comparisons can always be maligned and when you get into subjective territory, you stop being a student of statistics. Numbers and distribution analysis matter, and they are fairly sound if you assume underlying numbers are correct. However, it is noteworthy that many economists have told me since I wrote this post that I shouldn’t bother with the officially reported GDP, PCI or any numbers of any state because they are all largely figments of someone’s imagination :) So maybe our fighting this is moot.

Third, while MH distribution is uneven, you’ll find that most of MH is very well dealt with, especially coastal. True with AP as well and much of TN. Our coastal areas all over India, save orissa and WB, are rich. And GJ has India’s longest coastline. So comparisons might take that also into consideration and provide other states with an appropriate handicap.

TN and AP aren’t quite as bad (of course, an execption is that Telangana is horrible) Many of the other smaller states are much more even in nature.

What I am really saying is that the data doesn’t reflect a massive GJ outperformance. Standard excuses like you can’t compare X state with Y, or that there is a base effect etc, are moot. My point is that people tell me the state is so hugely better than the rest – the data says it ain’t so, and thereby lies the twist.

Sir, I don’t care whether it is Gujarat that shows poor performance or Delhi or Kerala. Because I am not favouring any particular state (Please read all my comments if you doubt it). But what I want to say is only that you are getting bizarre results (such as Bihar and Maharashtra are shown to be better than Gujarat or Kerala) only because the parameter you have chosen is not a real indicator of development, as I already explained in my earlier comments. Statistics can prove anything (and hence nothing) if one doesn’t carefully choose true representative parameters. So when one chooses such wrong parameters as the only criteria and conveniently (and selectively) ignores basic and primary criteria for growth and development such as electricity, water, roads, labour, government policies etc. (which show real development at ground level), there is no wonder that you get such answers!! It’s not fault of the answers, but a fault of method used for analysis.

In short, your attempt is like declaring an incorrect answer as the correct one, after starting to solve a mathematical problem using wrong sum. Please try to do some analysis based on such basic criteria and then let’s see which state proves to show the real growth on ground.

LIke I imagined, you ignored my comments on TN, AP completely as comparable states. You harp on MH or BH because they fit your world view, but remember that Gujarat was also in a bad way pre 2000 and much of its growth is also from a lower base. Happy to ignore that, like I have with the others.

I see that you don’t care about PCI growth as an indicator of development. Fine. I consider it useful. Your “roads” argument – I’ve seen fabulous roads with Naidu in AP, TN has had a near 5 yr stretch of fabulous roads until recently etc. Developmental parameters wise, whatever you do should eventually reflect in data – whether it’s GDP growth or PCI growth or otherwise. I simply don’t see major outperformance – it’s good performance undoubtedly, but other states have done better and they don’t get enough PR.

I suggest we stop this discussion here because you’re obviously not getting my point. Why don’t you write a post on whatever parameters you have assigned to whatever states you want to choose and then come up with a comparison? Please do your analysis and I’m happy to link/rebut etc.

Ok, we can stop our discussion here. I just wish to clarify that it is not like I ignored some states. But the thing is, success of a method lies in distinguishing actual true results from false results, rather than in showing a random set that includes potentially true results along with false results (that is the case here, as your method is showing only a random set of states irrespective of the development at ground level where Bihar is higher than Kerala or even Delhi). If a method can’t distinguish them with good accuracy, no result obtained using that particular method can be reliable or acceptable, because in such a case, it is impossible to deduce with surety whether a particular result is true positive or false positive.


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