The Goan economy


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Soscgado, blissful ease, as a popular description of Goan character, appears to contradict the competitive performance of the Goan economy. It does, however, indicate that Goa’s economic strengths derive from sources outside narrow definitions. There may have been a touch of politics when the weekly magazine, India Today, which put Goa first in economic performance among all the states of India in 2003, brought it down to fourth place (after Delhi, Mizoram, Kerala and Punjab) in 2004. Possibly because the BJP-led government at the Centre was replaced by the Congress-led coalition after the parliamentary elections, though it continued to control the state assembly and government in Goa.

Credit, however, must be given to the professional analysts for relying on criteria that gave greater regard to education, health, governance and infrastructure. It is in this wider context that Goa with an area of 3702 sq kms, the smallest state after Delhi, has attained benchmarks of human development that have made its economy among the best performing in the country.

The broader context from which Goa derives its strengths was discerned by Goan intellectuals even in times when it was not orthodox economic theory. Francisco Luis Gomes (1829-1869) who represented Goa in the Portuguese Parliament and urged similar representation for India in the British Parliament, considered value as derived from humanism. ‘The rights of man… comprehend a larger activity than that which relates to the production of wealth, they have their heads in morality and only let their feet appear in political economy.’ This view was at odds with the prevailing utilitarianism of Mill and Bentham.

Four decades later, another great Goan, Damodar Dharmanand Kosambi (1907-1966) perforce had to modify the Marxist framework in his classic description of the economy of Goa; the origins and operations of the community system, the comunidade, a feat of technology and social organization, could not be explained in terms only of the material means of production but in a wider context of ethics and religion.

The rudiments were inherited from the original pre-Dravidian settlers who lived in the foothills of the Western Ghats that descend from the East and Northeast into the Arabian Sea. Their livelihood was mainly pastoral and cattle herding (go-), giving to Goa, according to one interpretation, its name. Migrant communities, mainly Aryan from the northern part of India, then descended over 3000 years ago and created a new homeland by reclaiming land from the Arabian sea and from tidal rivers which are saline up to a distance over 30 kilometres. The saline floodplains were reclaimed and protected by an intricate system of bunds (dykes) and sluice gates. They constitute Goa’s most productive paddy fields, and combined with innovative pisciculture and the growing of coconut palms, are responsible for the staple of fish curry and rice – a distinctive mark of Goan identity.



The management of this reclaimed land which supports 80% of the population to the present day was through an exceptional community organization which provided all the services for agriculture and looked after the needs of the entire community – roads, health care, sanitation, arts, culture and religion. It survived the trauma of the Inquisition of the 16th century and kept alive the spirit of social harmony. Prabhakar Angle (1926-2004) recalled this spirit and termed it social capital ‘that enables cohesive communities to pool their resources, give a helping hand to distressed members, mediate in conflicts, penalize defiant behaviour and reward desirable behaviour.’

Through its long history from the first century of this era, the agriculture economy was kept buoyant with the development of trade and the structure of imports and exports. The network required the services of accountants and managers; the coverage extended to the hinterland, the coastal markets from Saurashtra in Gujarat ports to Cochin in Kerala.

There were golden and dark ages marked by epidemics and famine and invasions. The era of prosperity before the Portuguese occupation was that of the Kadambas, the dynasty that ruled in Mysore and extended their suzerainty over Goa from 1000 to 1300 AD, and as feudatories of the Vijayanagar Empire from 1360 to 1470 AD. During the Kadamba period Goa was a famous entreport, trading in gold, silver, cotton cloth, paddy, black pepper, perfumes, betel nut and leaf, yarn, and jewellery. It was also the centre of religious pilgrimages to the Hindu temple of Somnath and to Muslim Mecca. A successful Governor of Goa, appointed by the Kadambas, was a Muslim whose family of ship builders had saved the Kadamba Raja from shipwreck on his pilgrimage to Somnath.

The Portuguese realized the importance of Goa as an international centre of commerce and made it the capital of their seaborne empire. At its height it traversed an arc from Mozambique in Southern Africa to Aden, Muscat and Oman in the Gulf Region, to Saurashtra, Cochin, Mylapore, in India, and to Malacca, and the Spice Islands of Indonesia. With the decline of the Portuguese Empire and the takeover of its trade routes by the English and Dutch in the 17th century, Goa entered a new phase, servicing the gaps in the interstices of rival networks, using the trading and financial connections which they had built up in India and worldwide, especially in the bourses of Europe.



By 1954, in its economic decline, Goa survived only by its connections with British India. The mainstay of the economy continued to be agriculture, the livelihood of two-thirds of the population of 600,000. Mineral resources were not developed. Per capita income was low. About 30% of the population migrated, mainly to Bombay and nearby cities and towns in search of employment. Their remittances helped in sustaining families and met to a great extent the deficit in the balance of trade.

The situation changed dramatically in 1955 when the Indian Union imposed an economic blockade to force the Portuguese out of Goa. The adverse effects were more than compensated by the spurt in world demand for iron ore; the mining industry in Goa received a boost, exporting by 1961 (when Goa was liberated), a record 6.6 million tons of ore equivalent in value to Rs 19 crore. The mines which were located in the interior and relatively backward areas contributed to employment throughout Goa, not only by the pithead operations but also by development of ancillary enterprises like transportation of mined ore in barges on the main rivers to the major port of Marmagoa.



The economic blockade cordoned off entry of migrant labour and resulted in almost full employment in Goa at record wage levels. The imposition of a simple self-assessment tax on trade turnover in which there was a significant volume of consumer and luxury goods that were smuggled to India, resulted in unprecedented revenue which was kept in a separate fund. Goans believed that their territory could be a viable and autonomous unit, fuelling aspirations that were fulfilled when liberated Goa was given the status of a Union Territory within the federal framework of the Union of India.

The transition to democratic government after 19 December 1961 when Goa was liberated was effected with magnanimity and statesmanship by Nehru’s government in New Delhi and by Parliament. Goan civil servants were given equivalent posts of honour and responsibility and they quickly adjusted themselves to administering under new rules and regulations and as well as the old that were retained and adjusted within the framework of rights and liberties guaranteed by the Constitution. Prominent in this category is the Uniform Civil Code, a legacy of the French Revolution enforced by the Portuguese in Goa and which provides for rights of property and inheritance irrespective of caste, creed, religion or sex. An important feature is the equal right given to women along with men in the communion of assets. Its impact on the development of human resource is perceptible and demonstrates why the code is advocated as a model for the rest of the country.

Pent-up aspirations for democratic participation were progressively fulfilled by newly created panchayats elected for the first time in Goa on the basis of adult franchise. The desire for education which had been stifled by the Portuguese was fulfilled in the efflorescence of colleges by private foundations and of schools, primary and secondary, predominantly by the government, and the upgrading of existing institutions to the level of counterparts in the rest of the country, especially in the disciplines of medical education, pharmacy and engineering. Though Goa entered the Union framework only in the middle of the Third Five Year Plan (1962-1966), the situation was more than made up by liberal funding and decisiveness of the Planning Commission and the Central government.



The annual plan outlay of rupees six crore may look meagre in comparison to the current provision in 2003-2004 of Rs 600 crore, but the productive results were incalculable. It helped to restore the roads and bridges which were destroyed by the retreating Portuguese army, Goans in the defence forces of the erstwhile regime were absorbed into the police force, and trade networks disrupted by the economic blockade were reopened, reviving Goa’s traditional pattern of imports and exports. And for the first time there was industrial investment in the small scale and agro sector and more substantially in the large and medium sectors, especially in pharmaceuticals and beverages where the licensing provisions were relaxed to allow foreign collaborations that were otherwise banned in the rest of the country because of foreign exchange constraints and existing overcapacity.



Liberal finance was given under the notified grant-in-aid code to the many schools and colleges that were established soon after liberation. Development went hand in hand with building up institutions of representative democracy; the electoral rolls, tried and tested with the panchayat elections, were the basis for the elections to the first legislative assembly elected on adult franchise. Within two years of liberation, the first popular government was sworn in on 20 December 1963. The union territory status continued till elevation to statehood in 1987. Overall, this was a period of economic prosperity and development as well as comparative political stability, yet to be equalled.

The main developments took place during the tenure of Goa’s first Chief Minister, Dayanand Bandodkar, a visionary with a deep instinct as to what was good for Goa and the Goans. He revived agriculture and animal husbandry, developed forest sanctuaries (traditionally the sacred groves), established a network of roads and public buildings in keeping with the aesthetic and culture of the place, and brought a large segment of the population belonging to the backward classes into the framework of economic and cultural life, opening up schools, dispensaries and community halls in areas where they lived in hardship and poverty.

Another milestone was reached in 1983 when Prime Minister Indira Gandhi held the Retreat of the Commonwealth Heads of Government in Goa. Significant and productive investments were made for roads, telecommunications, water supply, electricity transmission and distribution, the international airport terminal, and by the private sector for hotels and tourist attractions of Goa’s unrivalled beaches of sun, sand, fronting calm seas and fringed by sand dunes and coconut palms. It also served as a demonstration of the joy of the Goan way of life – its cuisine, song and music and social harmony – an object lesson to some of the Commonwealth Heads uneasy about the military action of 1961.



Notwithstanding political instability which marred the period after statehood – with a succession of chief ministers and two spells of Presidential rule in 1991 and 1999 – the momentum of economic growth continued though with much less impetus. With the commencement of the Tenth Five Year Plan (2002-2007) which ushered in a period of comparative political stability, the claim of Goa to be among the best performing states was not without justification. The replacement level of population reached in the 1990s was maintained. Goa stood high on the index of human development with the highest per capita income (Rs 30,000), negligible maternal mortality, low rates of birth (17.85), death (7.16) and infant mortality (12) and a high literacy rate (82.32).

The Gross State Domestic Product (GSDP) registered an annual compound growth rate of 10% at 1993-1994 constant prices, above the target of 9% set by the Planning Commission, the major contributors being industry and services comprising trade, banking, restaurants, transportation and real estate benefiting from tourism, recorded more than 50% share in the GSDP. The outlay approved for the Tenth Five Year Plan is Rs 3200 crore, a quantum leap from Rs 40 crore in the Fourth Plan (1969-1974). What has remained constant throughout are predominant outlays for health, education, roads, bridges, drinking water, and electricity. The outlay for electric power resulted in spectacular benefits in the electrification of all villages and industrial estates, promoting the state’s own generation of power (in the private sector) and ensuring that the bulk comes through a well connected high-tension all-India grid.

The government’s Economic Survey (2002-2003) added lustre to the image of India Shining till the general elections of 2004 revealed some chinks, most glaringly in agriculture and in the welfare of vulnerable sections of the population. The Government of Goa was quick to respond to the realities in the Economic Survey and the budget of 2003-2004 emphasized the socio-economic benchmarks and the priorities for development of agriculture, health care, education and social welfare especially for the disadvantaged sections – the backward classes, widows, the unemployed, the sick and infirm.



There is more than an echo of the verities of the pre-liberation and union territory periods in the statement of the chief minister of Goa when presenting the budget for 2004-2005 in which agriculture, sustainable employment, education and social welfare head the priorities: ‘Human development therefore should be the integral core of any activity, more so in a welfare state like ours… My vision of human development goes beyond the physical or economic indicators…the real test of development… lies in the quality of life citizens lead. By quality of life, I mean a life of happiness and contentment… A state which strives to provide such a quality of life needs to create an environment of empowerment for different strata of society depending on their needs and concerns.’

The development of such a vision and its challenges and responses has a wider significance and relevance pertinent to some of the issues suggested below.



The 2001 Census, segmented for Goa and the country shows important changes in the demographic pattern. In a total population of 13.4 lakh, the Christians who were in a majority of 64% in 1951 are now in a minority of 26.7%. The Hindus are in a majority of 65.8%. The Census shows a sprinkling of Sikhs, Buddhists and Jains. The significant change is the presence of Muslims, evident for the first time. They now constitute 6.8% of the population. The Census figures should provoke a rethink of an exclusive chauvinistic Goan identity and of fundamentalist assertions. Even the so-called monolithic majority is riven with caste and sub-caste rivalries that cut across religious divide; for instance the original Goan inhabitants and the backward classes are agitating for a separate classification that would substantially raise the present reservation for only 2% of Goa’s population.

While Goa with its literacy, education and social development has reached the level of a zero net growth in population of the dominant religions of Hinduism and Christianity, the large number of people coming from outside Goa can cause radical changes in the demographic pattern. Heavy immigration immediately after liberation is evident in the decadal growth rates and in the doubling of the population during the period 1961-1991. Net immigration has stabilized to about 14% which still is of considerable significance in the population projected at 15.6 lakh in 2011.

20% of the 1.5 lakh of non-resident Goans mainly work in shop floor jobs. The remaining 80% are predominantly in much higher paid professional specialization mainly in the developed countries of the West. The main population pressure outside the Census reckoning is from tourist arrivals. The growth rate of 7.6% from 1985 remains steady, plummeting down in 1998 and 1999 in the global aftermath of the 9/11 tragedy in New York. It has since picked up and in 2003 the number of tourists was over 20 lakh, a growth rate of 27%, of which three lakh were foreigners. Goa will therefore have to contend with a population that will double the pressure on the economy and the infrastructure.



There are conflicting approaches to the demographic challenge. On the debit side, immigration worsens the already precarious situation of employment opportunities for Goans. The number of unemployed Goans per 1000 of the population is alarming – 37 in rural areas and 72 in urban areas as against the all-India figures of 7 and 18 respectively. Unskilled labour from outside Goa does consists of some bad elements, posing a serious risk to the security of life and property situation. More worrisome are health problems caused by migrant labour who are carriers of disease which have accounted for the outbreak of malaria, cholera and hepatitis, and water borne diseases.

These problems are aggravated by a denial of water supply and health care systems to migrant labourers and who tend to form slums which have made an appearance in Goa for the first time. To meet these problems of health and security, the government has taken a decision to extend the welfare system to migrant labour and to monitor its entry and presence from the security angle.

On the credit side, immigration and the impact of tourism brings in much needed investment and technology transfer evident in the number of high quality tourist services and state of art enterprises in the food, agro-based, pharmaceutical, health care, banking, engineering and professional education sectors. In the long run, exposure and technology transfers will provide greater employment to Goans and enhance their professional skills and, above all, add that practical edge to indigenous expertise which has lacked interactions with the wider ambit of science and technology. The outward orientation will strengthen the cosmopolitan and pluralist character of the Goan way of life.



This issue is often debated in an unreal manner, suggesting restrictions on employment of outsiders and sale of land as current in Jammu and Kashmir and some states of the Northeastern region. On the other hand some consideration should be given to the argument that employment ought to be on the principle of Goans first and others only thereafter. It is clear that the Goan identity, and in fact the Indian identity of which it is a part, is a welcoming one. Both in the short and long term it should operate in favour of Goans being employed in markets that are necessary to overcome the geographical limitations of size. But this does not gainsay the need for special training and networking for job placements for Goans.

The ecosystem which is a delicate and comprehensive partnership of man and nature in a social and human, some would say spiritual and mystical, contract is in danger. It constitutes the very foundation of the Goan economy, its prime asset that is responsible for prosperity and way of life. Its expression was agriculture in all its forms – food, fruits, vegetables, fish, medicinal plants and forests. Unfortunately agriculture in Goa is stagnating, though there are efforts to revive it through greater value added programmes of organic farming, development of local breeds of cattle, the cultivation of orchards and flowers and the revival of horticulture.



The last significant effort at productive infusion of technology and management was during the initial period as a union territory and before that by the Jesuit missionaries in the 17th century who brought in cashew that in both seed and fruit is a mainstay of the economy and mango varieties which carry their names. They also introduced the plantation of teak which went into the building of churches, beautiful houses and temples throughout Goa; it also sustained artisanal industry of carved furniture making that is renowned worldwide.

The cultivation of medicinal plants and their processing by schools of Ayurvedic and Unani medicine was a source of admiration and study by European scientists. The development of hi-tech industries based on agriculture will provide the productive basis for the computer-based and information technology capabilities that will otherwise languish for want of appropriate linkages to Goa’s traditional base of agriculture.

The management of the ecosystem as expressed in the comunidade organization involves protecting the reclaimed lands, in particular the regular maintenance of bunds which prevent the intrusion of salinity from the sea and tidal rivers. This system, though only tolerated by the Portuguese, was never stifled. Unfortunately after liberation it has been kept in a state of suspended animation with no income, no responsibility and accountability, but with a semblance of its old authority which has often been conveniently misused for speculation and corrupt alienation of prime land.

The neglect of this institution reflects an approach of treating the land tenure system in Goa as a kind of zamindari whereas it had more of the ryotwari characteristics of land systems of the neighbouring states. Thus agriculture was left to people who were not competent to till it in a sustained and productive manner and even when they abandoned it the superior tenant was prohibited from cultivating it himself. What is needed are comprehensive land reforms that would provide for productive and commercial farming and help maintenance of the protective bunds. The neglect of the bunds has resulted in the salinity of what were once fertile and productive paddy fields and the pollution of wells.



The financial resources to meet the challenges of development need a fresh look. A provision of central assistance on a formula based only on an increase in population and poverty penalizes states for performance. For Goa the reduction in central assistance from an average of 80% of the state plan outlay during the union territory period to the current 15% has led to increased borrowings, raising the dangers of a debt trap.

Goa has much to show in the management of its resources. Not only is the per capita income the highest in the country but so also is the per capita realization of state revenue mainly from sales tax, water and electricity charges. The state budget estimates for 2004-2005 and the revised estimates for 2003-2004 provide for substantial funding for further initiatives in employment, agriculture, infrastructure and social welfare. The revenue expenditure is estimated at Rs 1584 crore and capital expenditure at Rs 597 crore, with a plan outlay of Rs 915 crore. Both the revenue deficit of Rs 7.95 crore and the fiscal deficit of Rs 506 crore are manageable. Evidently there is a case for enlarged central assistance that rewards performance and efficient management of the economy.

Two other areas in need of specific reform, relevant for states dependant on mining development and tourism, relate to the devolution of mining royalty which the Centre takes and transfer of foreign exchange earned by tourism to the states. In Goa, the foreign exchange earned from the export of iron ore of 23.5 million tonnes, was Rs 1200 crore, an all time high for fiscal 2002-2003; the foreign exchange from tourism in Goa is estimated at Rs 1500 crore during an average year and is expected to go up to Rs 2000 crore in 2004-2005. Only two percent of the royalty charges for mining and nothing for the foreign exchange earned from exports of Goan ore and tourism is received from the central government.



Mining operations are an exploitation of Goa’s diminishing asset. The gouging of the hillsides leaves behind bleeding gaping holes once the excavations are completed. Achev (Upheaval) by Pundalik Naik, a moving novel in Konkani, describes the devastation wrought by mining operations on the pristine environment and the negative effect of barge traffic in destroying the protective dykes of the rich paddy fields reclaimed from the sea. More serious for health is the haze of iron ore dust that hangs in the atmosphere like a pall from the heavy truck traffic. Though leading mine-owners of Goa have done remarkable work in afforestation, pisciculture and utilization of abandoned mines as reservoirs of fresh drinking water, and in many cases as green parks and playing fields, much more remains to be done in developing both the road and rail transportation by covered or insulated carriers.



The devolution of a part of the earnings from tourism can help raise investments required to sustain a tourism that is broadbased and linked to historic and cultural places in Goa, shifting pressure away from the beaches to bird sanctuaries, protected forests and sacred groves, and the heritage places within Goa and on the borders such as Sindhdurg, Hampi and Belur. More urgent are the investments required for developing sewerage systems in the long and pristine beaches, where the porosity of the fine sand does not allow filtration of waste water. There is the danger of sullage entering the distribution of potable piped water and causing hepatitis as it did for a brief period last year.

There is need to revise the interest rate on Central loans, especially since external assistance on very low interest and other concessional terms is given by international funding agencies and bilateral donor countries. Such assistance is usually given for social sector projects like water supply, sanitation and rural development. Even if the foreign exchange is not passed on to the state governments, the rupee loan for such projects should be on low interest and long repayment periods. Sustainable development of human resources is integral to economic development and the Goan experience should help in evolving a new paradigm for the country.