Mumbai, Jan 28: Picking holes in the much-talked about Gujarat model of development, an economics professor from University of California today said the Prime Minister's state has led only a jobless growth and that too at the cost of the state exchequer.
"Gujarat model is a model of growth, but not of job creation...as a very substantial part of its growth is in sectors like petrochemicals, petroleum refineries and pharma, which are highly capital intensive and skill intensive sectors. These sectors do not create jobs for the relatively uneducated and unskilled people, which are an overwhelming majority of our labour force," Pranab Bardhan, professor of Graduate School at the Department of Economics, University of California, Berkley, said.
He was addressing the students of Indira Gandhi Institute of Development Research here. Admitting that under Narendra Modi, Gujarat has done relatively well in the past 15 years or so on the growth chart, he said such a model is not what a country like India needs as Gujarat has not created space for semi-skilled or unskilled labour.
Reeling out data that Gujarat achieved high industrial growth on tax incentives, Bardhan said, "I saw some estimates that capital subsidies far exceed the total agricultural subsidies by seven times.
Here is a situation, where we are subsidising capital in one of the most successful states. What does it do? It encourages capital intensity, it does not encourage job creation." He also said when it comes to subsidising industry, the country as a whole is not better either.
"If you take the country as a whole, the amount of total tax exemptions and tax concessions to the corporate sector far exceed our total budget on food, fertiliser and the NREGA expenditure put together. I heard that there is a proposal to remove some of these tax exemptions in the Budget, which would be a step in the right direction," Bardhan said.
Calling for restructuring capital subsidies, he said it makes sense to take away some of these capital subsidies and restructure into 'wage subsidies'. This will not be for everybody, but only for new hires, apprentices and workers in professional training. While lauding the Skill India programme, he said vocational skilling is the crying need in our country and advocated corporates to follow their German counterparts who offer a good example vocational training.