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The Goan Economy


The Real Story

It’s human nature. Somehow losing something good is worse than never having had it at all. This seems to be especially true in the case of Goa’s economic growth. We had become so accustomed to double digit growth rates that their absence today feels something like a recession. A sharp reduction due mostly to the mining ban – from 22 percent growth to 8 percent, pharmacy according to admittedly questionable government figures – is making Goans from all walks of life decidedly uncomfortable, find especially considering a pervasive lack of good jobs that’s sending many young Goans packing.

Nevertheless, the Goan economy is still growing despite the 18-month-old ban on iron ore mining, the state’s main source of revenue. And while the local economy has long been several steps ahead of the rest of India, much of what’s true for India holds true for Goa as well. And what is that? The bottom line is that India remains one of the poorest nations on earth in terms of per capita income, and the optimists’ view is that there’s really nowhere else to go but up, especially considering the dismantling of the command economy that’s taken place since the 1990s. Pessimists say there’s plenty of places to go other than up, especially when you consider the high levels of corruption, red tape and crony capitalism.

Here in Goa, the upside is that everyone and their mother seems to want a piece of this tropical paradise, and a certain entrepreneurial spirit seems likely to continue to drive growth, no matter what mischief this or that politician may be up to. The downside is that policies to promote sustainable growth and an investment-friendly environment seem to be largely absent.

The administration of Chief Minister Manohar Parrikar is getting decidedly mixed reviews for the expected state budget for 2014-15 of Rs 10,526-cr, which represents only a nominal increase from the previous year. Sanjay Dessai, who teaches at the Damodar College of Commerce and Economics, questions the budget’s priorities, and the government growth estimates on which they’re based.

“With less emphasis on plan expenditure (based on careful analyses conducted by ministries and commissions) it is difficult to achieve double digit growth. The ideal situation should have been to cut expenditure on distribution of unproductive schemes and freebies and more allocation should have been given for plan expenditure for growth oriented activities,” Professor Dessai explains. He also questions how the government arrived at a 22 percent growth figure for 2011-2012, when previous estimates put it at closer to 9 percent, saying the government’s estimate “looks like a magical figure.”

It seems clear the BJP-led Goa government headed by Parrikar has unveiled a “please all” budget with an eye to winning the coming Lok Sabha election on April 12. And, sure enough, there are plenty of pleased people.

Goa Chamber of Commerce and Industry (GCCI) president Narayan Bandekar says of the budget, “All in all this is a very progressive budget which GCCI expects to spur investments, promote growth and employment and social contentment.” He was particularly happy with the reduction in Stamp Duty for the construction industry, a major demand of the GCCI.

Francis Braganza, president of the Travel and Tourism Association of Goa (TTAG) was circumspect in his reaction. The TTAG pre-budget note contained many demands which have not been considered. “We are not disappointed but expected much more by way of direct benefits,” Braganza said. To be sure, tourism has now taken over as Goa’s main revenue earner, and the government’s budget focuses quite a few resources on this sector.

Noted analyst Prabhakar Timble, a former senior bureaucrat, says, “Two years have already passed after the new government took over the reins and the vibrancy normally associated with anything new is fading with every passing day. The business and trade organizations find no positive change in any processes which could be called as investor friendly.”

Of the many promises made by Parrikar in the budget, perhaps the one grabbing the most attention was the promise to create 50,000 new jobs in the next five years. For this to happen, according to another economic analyst who did not want to be named, there has to be a growth in the labour-intensive manufacturing sector, which comprises around 35 % of the Gross State Domestic Product.

But there have been no new substantial investments in this sector in the last few years. According to figures provided by Industries Minister Mahadev Naik, from 2012 till January 2014, only 9,864 jobs were created in the industrial (including manufacturing) sector, while 298 workers lost their jobs, and 23 industries closed down. Around 1,500 workers employed by Sesa Sterlite have also been recently served retrenchment notices, while around 150,000 semi-skilled and unskilled workers in the mining industry have already been rendered jobless. There is also no sign of the mining starting again.

With Goans on the one hand opposing large polluting industries, and on the other demanding jobs, the Goa government is clearly in a quandary over how to create jobs. A major problem is that there is hardly any land available for large-scale industries.

 According to Parrikar, the problem is that huge swathes of land in industrial estates which were diverted for the creation of the Special Economic Zones are in limbo because the SEZ imbroglio is going on in the courts and the land has been frozen. He says the Goa government is making legal efforts to unfreeze the land so that new industries can be set up. He has also proposed a new Investment Promotion Board which is likely to become a reality after the Lok Sabha elections.

Which means the Goan economy – once the most prosperous in the country – is not going to look too rosy for quite some time, because the number of people who need jobs keeps growing. In the decade from 2001-2011, Goa added 1,10,877 persons to its population. With a high literacy rate of 87.40 %, the number of educated persons entering the workforce is constantly rising. But the job market is rather stagnant. Many of these persons then migrate to other parts of the country or abroad in search of good, remunerative jobs, creating a social imbalance in Goa because of the large number of low-wage migrants entering Goa in search of jobs.