The Modi Model

The town square in the village of Khoraj in India’s western Gujarat state isn’t much to look at: a small temple, a few parched trees, an empty meeting hall where the electricity has gone out — again. But on a warm December morning, there are a few new additions to the dusty crossroads where farmers amble by: three brightly colored kiosks where competing banks have come to woo new customers like Mahesh Chawada, a 45-year-old farmer who just received a $262,000 check from the state for his 5 hectares of wheat fields.

In May 2012, Chawada and many of Khoraj’s other inhabitants were told that the government of Gujarat wanted their land. Khoraj, home to about 5,800 people, falls within an industrial corridor in the central part of the state, near the fast-growing hub of Sanand, where global companies like Ford, Tata, Nestlé and Bosch have set up shop. Soon, the small farm plots of Khoraj, too, will be a new industrial park. The state’s purchase of some 1,050 hectares has brought unprecedented wealth to many farmers living off a few hundred dollars a year. What they’ll do now that their land is gone is unclear. The government says the deal was voluntary, but Chawada says officials told him and other villagers otherwise. “They said, if you agree, great; and if you don’t, we’ll take it anyway,” he recalls, looking at the folded check that he takes out of the pocket of his flower-print shirt. “I’d say it’s 60-40 — some people are happy, some people aren’t happy.”

That sums up the mood in Gujarat. Narendra Modi, chief minister since 2001, has fashioned the state into a business-friendly destination for domestic and foreign companies. His supporters say the government’s streamlining of an inefficient bureaucracy has paved the way for better governance and greater investment, generating new revenue and social gains in the state. His critics say Modi has rammed through changes and that his single-minded determination to attract new business has caused uneven growth. “He’s totally undemocratic,” says Hemant Kumar Shah, an economics professor at H.K. Arts College in Ahmedabad, Gujarat’s biggest city. “If you give me two choices — democracy and development — I would choose democracy.”

Until recently, that debate simmered mainly in Gujarat, because, until recently, nobody thought Modi, 63, might be India’s next Prime Minister. After bloody communal riots broke out in 2002 in Gujarat, in which over 1,000 mostly Muslims were killed, many alleged that Modi incited or tolerated the violence. He has always denied that, and no court or inquiry has found him responsible. But because he is identified with the Hindu right, Modi was considered too divisive to be a political player on the national stage.

Last September, however, the opposition Bharatiya Janata Party (BJP) anointed Modi as its prime-ministerial candidate ahead of general elections this spring. The BJP is favored to win the most parliamentary seats. Thus Modi and the 2002 Gujarat riots are back in the spotlight, as is his track record in the state. Modi — who did not respond to requests to be interviewed for this story — has touted his decisiveness and his state’s successes as proof of his suitability to run India and bring the nation out of its economic slump. India Inc. buys that assertion. In a joint Economic Times/Nielsen survey in September, nearly three-fourths of Indian CEOs said they wanted Modi to lead the country. But is Gujarat really doing that well?

For and Against
In Sanand, a few cows chew lazily on old burlap sacks in the shadow of a towering sign bearing the distinct script of Ford Motor Co. Here, Ford has been building assembly and engine plants to sell vehicles domestically and for export. The company will ultimately invest more than $1 billion and employ about 5,000 workers. In Gujarat, many of the usual barriers big companies run up against in India — unavailable land, red tape, bad roads — are lower. Kel Kearns, Ford’s assembly-plant manager in Sanand, says several factors — access to officials, uninterrupted power supply, fast customs clearance — have made setting up this scale of operation feasible. “I’ve been through two years of trying to make stuff happen,” says Kearns. “It doesn’t mean I don’t have issues — I’ve had plenty — but I can resolve them. [The state government] thought about what it would take to attract someone like us, and they set it up. Simple as that.”

Gujarat’s economy is growing. From 2005 to 2011, the state’s average annual growth rate was 10%, higher than the national average of 8.45%, though other wealthy states like Tamil Nadu and Maharashtra expanded faster during the same period. Gujarat’s government says the state has a surplus of power, every village has an electricity connection and enrollment of children of primary-school age is 100%. “People have started feeling like we are doing something great,” says Bhagyesh Jha, an official in Modi’s administration.

Sudarshan Iyengar, an economist and vice chancellor at Gujarat Vidyapith, a university in Ahmedabad, acknowledges that the Modi administration has been effective in cutting red tape, making life easier for people like Ford’s Kearns. But, he says, much of Gujarat’s economic boom is hype. At the 2011 Vibrant Gujarat investment summit, the government announced 7,936 memorandums of understanding then worth $450 billion, but much of that new business has yet to materialize. Iyengar also argues that Modi has been riding Gujarat’s traditional place as India’s industrial hub, established long before he became chief minister. “Modi is not doing something extraordinarily special,” says Iyengar. “He is building on something that already existed.” Also, Gujarat’s literacy rate and life expectancy are lower than those of other rich states, and child malnutrition remains high. Given, too, the fractiousness of India’s politics and the power that regional parties have, there’s no certainty that Modi can implement on the national scale what he has accomplished in Gujarat.

Old Wounds
In the Muslim slum of citizen nagar in Ahmedabad, the sentiment is not in favor of Modi. Rows of cement homes perch at the edge of a garbage dump so large it looks like a small hill. On a winter afternoon, drums full of burning oil send black, acrid smoke into the neighborhood’s dirt lanes. Many of Citizen Nagar’s residents moved to this makeshift settlement after being driven out of their homes by the 2002 riots. They believe that religious tensions persist. “Young Muslims are facing problems all over Gujarat,” says Zuned Mansoori, 20, a rickshaw driver. “The government is only making things better for Hindus.”

Officials reject claims that Muslims, who make up about 9% of the state’s 60 million people, have been neglected. “Why separate by religion?” says Pratik Doshi, a Modi aide. “Look at the needy, look at the weak, and support them.” Adds A.K. Sharma, a close lieutenant of the chief minister: “The Muslim population in Gujarat is doing as well as the Hindu community.” That’s only partly true, according to the 2006 Sachar Committee Report, a paper commissioned by New Delhi on the status of Muslims in India. It found, for instance, the rate of poverty among rural Muslims in Gujarat was lower than that of Hindus, but in urban areas it was double.

Anywhere, of course, people can slip through the cracks. In Ghoda, a village a few hours’ drive from Ahmedabad, a young woman, Shakari Ben, sits under the roof of her red-mud house, its walls scorched black from the cooking fire. Small chickens peck at nothing on the mud floor. Ben produces a stack of five round chapatis and a 10-kg sack of flour. “This is all the food we have in the house right now,” she says. Sure, there is an electricity line running to her lean-to home, but her two boys, who stick to her side sucking their thumbs, both have bellies that look bloated, a textbook symptom of malnutrition. When asked what more she would like the government to be doing for her family, she looks perplexed by the question. “Nobody has ever come here, and nobody will ever come here,” Ben says. The upshot: a lot has been achieved, but a lot remains to be done. What’s happening in Gujarat, economist Iyengar says, “is a model. It’s not the model.”