In July this year, a viral video from the industrial town of Ankleshwar, Gujarat, captured a chaotic scene where more than 500 students, armed with degrees and certifications, gathered for a walk-in interview at a private chemical company. The event, scheduled across ten locations, had drawn an overwhelming number, reflecting the dire state of employment in the region.
Interestingly, candidates with diverse qualifications, such as B.E. in Chemical Engineering and ITI certifications, showed up for the interview for roles like supervisor, plant operator, mechanical filter, shift in charge and executive positions. As the crowd swelled, the hotel's (interview venue) railing, buckling under the weight of the crowd, gave way, causing a young man to fall and damaging nearby vehicles.
Panic set in as the crowd scrambled to assist the fallen candidate. The hotel's staff struggled to regain control, their attempts to maintain order drowned out by the din of desperation. However, this disturbing scene was not an isolated incident but a part of a larger issue affecting Gujarat – the struggle for employment.
In December last year, the state government told the Assembly that 2.38 lakh educated youth in Gujarat were unemployed. The highest number of educated unemployed are registered in Rajkot, Bhavnagar, Mahisagar, Panchmahal, Anand, Dahod, and Surendranagar. Notably, several reports have suggested that the unemployment rate of Indian youths is higher than that of adults.
In March 2024, the International Labour Organisation (ILO) in its report stated, the youth unemployment rate has been rising over the past several decades– from 5.6 per cent in 2000 to 6.2 per cent in 2012 and then increasing threefold, to nearly 18 per cent in 2018 and reaching around 15.1 per cent in 2020
After expressing its concerns about the ILO report, the Modi government also questioned a Citigroup report, which revealed that India “will struggle to create sufficient employment opportunities” even with a seven per cent economic growth rate. The Union Ministry of Labour and Employment said that the report fails to consider the positive trends and comprehensive data from official sources.
While Gujarat has experienced industrial growth and infrastructure development, several challenges contribute to the unemployment issue. One of the primary causes is the skill gap between what industries require and the available workforce. Many individuals, particularly in rural areas, lack the necessary skills and training to meet the demands of modern industries.
"The automation and technological advancements in manufacturing have reduced the demand for unskilled labour. To address this, the authorities must focus on skilling initiatives, improving access to education, and expanding vocational training. Private sector companies can collaborate with the government to create more localised employment opportunities,” said Vinoth Kumar, Founder, Labourhome, an end-to-end workforce management enterprise.
Notably, Gujarat has implemented several employment generation schemes, such as the Mukhyamantri Yuva Swavalamban Yojana (MYSY) and Gujarat Urban Livelihood Mission (GULM). However, experts said that there is room for improvement in terms of scalability and inclusivity. While these schemes have provided relief to some, a more comprehensive approach is needed to cover a wider demographic, especially in rural areas.
“What can be done is an emphasis on public-private partnerships that focus on continuous skill development and creating industry-ready workers. These efforts can be supported by technology-driven platforms which not only source jobs but also ensure proper placement, productivity tracking, and social security benefits for workers, thus making the process more transparent and reliable,” Kumar added.
Modi’s Gujarat Model
Gujarat's development model has garnered attention for its significant impact on the state's fiscal health and economic growth. Notably, Narendra Modi's rebranding efforts gained national attention in 2004, with the phrase "the Gujarat model of development" becoming synonymous with his name. As he campaigned for BJP's Lok Sabha candidates, his reputation as a development champion grew exponentially.
Mukesh Ambani, one of India's leading businessmen, led a delegation to the United States in late 2006 to promote "Vibrant Gujarat". In 2008, Tata announced his decision to pull out of West Bengal due to disputes with farmers over land acquisition and turned to Gujarat. Modi rolled out the red carpet for Indian and foreign businessmen, promising a hassle-free experience in Gujarat.
In FY24, Foreign Direct Investment (FDI) inflows reached approximately USD 7.3 billion. The state's Gross State Domestic Product (GSDP) has outpaced national averages, with a reported growth rate of approximately 12.87 per cent from 2015-16 to 2020-21 and a projected GSDP of about USD 309.54 billion for 2023-24, contributing 8.6 per cent to India's GDP.
The state's industrial base is diverse, with substantial contributions from sectors such as chemicals, petrochemicals, textiles, and pharmaceuticals. Gujarat accounts for about 30 to 35 per cent of India's pharmaceutical sector and is the largest producer of processed diamonds globally. Gujarat is also slowly moving towards being a dominant player in Automobiles. Recently, it has taken steps to bring in semiconductor manufacturing in the State.
“Gujarat's fiscal health is characterised by a consistent revenue surplus, attributed to prudent financial management and a rationalised tax structure. This financial stability has enabled the government to invest in major infrastructure projects, further enhancing the state's growth trajectory. However, while the current growth model has shown remarkable success, questions remain regarding its sustainability. The reliance on specific sectors, such as petrochemicals and textiles, may pose risks if global demand fluctuates,” said Hemant Navinchandra Shah, Chair, Gujarat Chapter, PHDCCI.
A report by ThePrint stated that the Gujarat model was “marauding development on steroids”. The report (based on an excerpt from ‘India Is Broken’ by Ashoka Mody) stated that the businesses received virtually free land, large loans at about zero interest rates, generous tax breaks and no-fuss environmental clearances and taxpayers bore the cost.
In 2013, the Office of the Comptroller and Auditor General (CAG) pulled up the Gujarat government for granting about USD 120 million (Rs 750 crore) in “undue” favours to big companies. The Press Trust of India (PTI) reported, “The major beneficiaries of government’s largesse,” were “big corporate entities like Reliance Industries, Essar Steel and Adani Power.
Gujarat's favoured businesses focused on high-profile, capital-intensive projects in sectors like petroleum, steel, chemicals, and pharmaceuticals. While these initiatives generated impressive headlines and contributed to GDP growth, they failed to create substantial new job opportunities. “They polluted the land and rivers flagrantly while also depleting the state’s groundwater,” ThePrint report added.
In August 2024, the CAG highlighted many flaws in the financial practices of the Gujarat government. Tabled in the Gujarat assembly during the monsoon session, the State Finances Audit Report of the CAG for the year ended 31 March 2023 suggested the formation of ‘State Finance Commissions’ and the adoption of a control mechanism to start proper implementation and monitoring of the state budget.
The Comptroller and Auditor General (CAG) flagged an excess spending of Rs 64.48 crore across five grants in 2022-23, violating legislative provisions and indicating poor planning. Better budget tracking could have prevented this. The CAG also raised concerns about repeated overspending on retirement benefits and family pensions for panchayat employees, exceeding Rs 500 crore between 2018-19 and 2021-22, and Rs 61.70 crore in 2022-23.
The auditor while reviewing the 2022-23 accounts noted that the savings totaling Rs 528.99 crore from nine grants and four appropriations were never surrendered.
The CAG said, “An original provision of Rs 789.57 crore was made and an expenditure of Rs 335.17 crore was incurred under revenue major heads instead of capital major heads.” The CAG also flagged the underutilisation of the Nirbhaya fund scheme in Gujarat. The Nirbhaya Fund was set up as the Centre for utilisation in projects specifically designed to improve the safety and security of women. It has two components, namely the ‘Safe City Project’ and ‘Cyber Crime Prevention against Women and Children’.
Gujarat Model: Entrepreneurial Spirit & Middle Class
The people of Gujarat are known for their entrepreneurial spirit, which has fostered a conducive environment for startups and small businesses. The state's early-stage entrepreneurship activities doubled from 7.2 to 14.8 per cent between 2017 and 2018. Interestingly, the topmost Industrialist of the Country are Gujaratis
The Gujarati middle class has played a pivotal role in driving the state's economic growth, significantly influencing the socio-economic landscape of Gujarat. This demographic has been a key driver of consumption, entrepreneurship, and investment, contributing to the overall economic dynamism of the state. However, the implications of the Gujarat model of development have been mixed, benefiting some sections while disadvantaging others.
PHDCCI’s Shah told BW Businessworld, “The Gujarat model of development has produced mixed outcomes, benefiting some while leaving others behind. Addressing the challenges of social inequality and improving human development indicators will be crucial for ensuring that the economic growth is sustainable and inclusive, thereby benefiting all sections of society, including the middle class.”
The Gujarat model of development has had a mixed impact on income inequality and poverty in the state. While the model has driven economic growth and industrialisation, leading to higher incomes for some sections of society, it has also exacerbated inequality and left certain segments behind.
The Gujarat model has primarily benefited the urban middle class and upper classes, with the fruits of economic growth not adequately reaching the rural population and marginalised communities, Shah added. Poverty rates in Gujarat remain high, with 16.63 per cent of the population living below the poverty line as per the 2011 census. This is higher than in some less developed states like Rajasthan and Uttarakhand.
The state's Gini coefficient, a measure of income inequality, has increased over time, indicating rising inequality. The rising inflation has eroded the purchasing power of the middle class, negatively impacting their standard of living. Inflation has been particularly high in sectors like housing, healthcare, and education, which form a significant portion of middle-class expenditure.
Industry leaders said that while Gujarat has experienced high economic growth, this has not translated into proportional improvements in human development indicators like health and education. Poverty alleviation programs and social welfare schemes have not been as effective as desired, with the state lagging behind in parameters like infant mortality rate, malnutrition, and access to education.
Shah mentioned, “The Gujarat model has delivered economic growth but has fallen short in terms of inclusive development and poverty alleviation. Rising inequality and the impact of inflation on the middle class highlight the need for a more balanced approach that prioritizes social welfare alongside economic progress. Addressing these challenges will be crucial for ensuring the sustainability and equitability of Gujarat's development trajectory.”
Fiscal Health
Gujarat's fiscal discipline can be evaluated through several lenses such as debt management, revenue generation and expenditure control. However, despite the positive aspects of the state’s fiscal discipline, there are inherent risks like dependence on borrowings, economic volatility and social spending. As of March 2023, Gujarat's total outstanding debt was approximately Rs 3.5 lakh crore, translating to 22.5 per cent of its Gross State Domestic Product (GSDP).
PHDCCI’s Shah added, “Gujarat's fiscal discipline is a critical aspect of its economic management, particularly given its reliance on borrowings and the current debt levels. This level of debt indicates a relatively manageable ratio compared to other Indian states, suggesting that Gujarat has maintained a degree of fiscal discipline despite its borrowing needs.”
Shah also stated that the state must remain vigilant against the associated risks. By adopting proactive measures and ensuring a balanced approach to growth and social investment, Gujarat can sustain its economic momentum while safeguarding its fiscal health. For the fiscal year 2023-24, Gujarat's total tax revenue is estimated to reach Rs 1.34 lakh crore, marking an annual growth rate of 9.68 per cent compared to the previous year, where the revenue was Rs 1.24 lakh crore.
State’s Education Sector
According to industry experts, a stable and supportive policy environment, advanced infrastructure, responsive administration and a robust, diverse manufacturing base, all of which contribute to its economic growth. This has also helped the education sector grow through strategic investment in education infrastructure, tech-driven learning, improvement in education in rural areas and initiatives like Study in Gujarat, which aims to promote Gujarat as an education hub and attract students from India and abroad to pursue higher education.
On 1 September, while slamming the government over the vacant teaching post in the state, Congress leader Manish Doshi said, “They are misleading the public with false claims of teacher recruitment. The Education Minister recently said that they recruited 4,000 teachers which is not true. Over 32,000 teaching positions have remained vacant in Gujarat for an extended period, leaving around 50,000 TET-TAT qualified candidates waiting for permanent appointments,” Congress leader Manish Doshi said.
Talking about the solutions to solve challenges facing Gujarat’s education sector, Anunaya Chaubey, Provost, Anant National University, a private institution located in Ahmedabad said, “Taking a tripod approach that fosters collaboration among the government, industry and academia can help build careers, encourage entrepreneurship and develop and preserve crafts. By driving innovations and addressing practical challenges faced by industries and society, such collaboration can create a robust innovation ecosystem.”
Chaubey added that industry-academia collaboration, technology integration in education and learning, developing critical thinking and problem-solving abilities in young students and fostering collaborations with global institutions can be a few ways to leverage the state’s economic growth. The industry-academia collaborations can make education more practical and industry-relevant.
Experts also noted that the state can also leverage existing schemes, like the Namo Laxmi Scheme, Namo Saraswati Scheme, Namo Shri Scheme, etc., to further enhance education outcomes.
