Impact of Human Capital on Impact of Human Capital on Financial Capital:Financial Capital:

A Case of Surat CityA Case of Surat City

Dr. Kirti S. ZankhariaAsso. Prof. Department of Economics,

Veer Narmad South Gujarat University,Surat, Gujarat – India

E-mail: zankhariakirti@yahoo.com

Dr. Dhaval J. PandyaAsst. Prof. Department of Economics,

Udhna Citizen Commerce College,Surat, Gujarat - India.

E-mail: djp_econ@yahoo.co.in

IntroductionIntroduction

The key objective of any nation is to accelerate the pace of economic development and for that economic growth is a pre requisite.

In the process of economic development, the physical capital, financial capital and more importantly human capital plays a major role.

On one hand human capital generates positive externalities like generation of output, employment, income and export and on the other hand there is an improvement in physical and social infrastructure.

About Surat… About Surat… Surat is a port city in the Indian state of Gujarat originally

known as “Suryapur”.

Surat witnessed so many ups and towns till date. However, during the post-independence period, Surat had experienced considerable growth in industrial activities along with trading activities.

At present Surat is economic capital of Gujarat and also one of the leading economic hubs of India. Surat is one of the major industrial cities contributing a major share of output especially in textile and diamond sectors.

National Council of Applied Economic Research (NCEAR, 2009) declared Surat as most prosperous city in the country with the average annual household income of 4.57 lakh. Surat’s average annual household income is twice as much as the national per capita income and almost equal to China’s per capita income

About Surat About Surat Surat is also India’s fastest growing city with annualized GDP growth

rate of 11.5 per cent over the past seven years . (CMIE, 2007)

The population Surat is ____ Growth Rate of Surat is as high as 81 percent per annum encompasses________ sq. Km. of area. (Census, 2011)

Surat is the richest city in India with per capita household income at Rs. 4.57 lakh. (NCEAR, 2009)

Surat is the youngest city in India.

Surat is the Zero Unemployment city in India.

SMC is the second richest Municipal Corporation in Western India.

Surat has as many as 21 flyovers which is highest in number so far as any city of Gujarat is concern.

Surat is one of the Cleanest city of India ranks at 3rd position.(MOUD,2010)

Contribution of Surat Towards Contribution of Surat Towards Economic Development…Economic Development…

Surat cuts 92 percent of world’s diamond pieces and earned India USD 15 Bn. Through its exports.

Surat is been claimed that 80 per cent of world’s finished diamonds are cut and polished in city.

So far as textile industry is concerned 28 percent of the nation’s total man-made fiber production.

18 percent of nation’s man-made fiber exports are done from Surat only.

The manmade fiber industry in the city weaves about 900 Cr. Meters of fabrics worth Rs. 30,000 Cr. per annum.

Surat has around 6.5 lakh power loom machines, 400 textile processing units, 5000 texturising and air texturising machines and over 50000 embroidery machines.

Contribution of Surat Towards Contribution of Surat Towards Economic Development Economic Development

Surat contributes ` 42 Bn. in the form of excise, ` 85 Bn. in the form of income tax, ` 62 Bn. in the form of customs to the Central Government of India and ` 27 Bn. in the form of sales tax to the Gujarat State Government.

Today, Surat has made an important position in the national as well as world’s economy. Economy of the Surat is characterized by large number of industries particularly the labour intensive industries which attracts the migrants towards the city. However it should not be forget that these migrants give birth to some negative externalities.

Surat Attracts Human Capital…Surat Attracts Human Capital… The recent population growth of the city is mainly due to the

two labour demanding industries i.e. textile and diamond. These two industries has attracted the migrants from within Gujarat State (viz., Saurashtra and arid northern parts of Gujarat) and other States of Indian continent, in particular from Maharashtra, Uttar Pradesh and Orissa States.

Examining the magnitude of migration in Surat data reveals that there is a massive growth of migration in Surat city between the 1961 to 2001. For instance, in 1961 there were 28.84 percent of migrants in Surat city which drastically increased to 57.62 percent in 2001 which shows that in last four decades this migration has become double. This speaks of city’s economic growth and also the nature of its major industries.

Migration in SuratMigration in Surat

It is noteworthy that the average annual growth rate of Surat city’s migration (46.25%) is not only for higher than the Surat district’s migration (5.61%). But it is even higher compared to Surat city’s population growth rate (21.90%) during 1961 – 2001 periods. This spectacular growth of Surat city is because of prosperity of the large influx of human capital.

Parameters 1961 2001Average Annual

Growth Rate (AAGR)

Surat City Migration 83068 1619967 46.25

Surat District Migration 777822 2523947 5.61

Surat City’s Population 288026 2811464 21.90

Surat District Population 2451624 4995174 2.59

Work Force of SuratWork Force of SuratCensus Years

Main Workers Non Workers

Persons Male FemalePerson

sMale Female

1961 (Surat town)

191841 (31.89)

77596 (51.61)

14245 (10.34)

196185 (68.11)

72737 (48.38)

123448 (89.65)

1971 (SMC)

149271 (31.64)

132435(52.99)

16836 (7.59)

322385 (68.35)

117467 (47.00)

204918 (92.40)

1981 (SMC)

262093 (33.74)

235991 56.44)

26102 (7.28)

511764 (65.89)

181196 (43.33)

330568 (92.21)

1991 (SMC)

508864 (33.95)

468974 (57.54)

39890 (5.83)

986491 (65.81)

345291 (42.37)

641200 (93.75)

2001 (SMC)

909694(37.37)

831019 (68.55)

78675 (7.41)

1504560

(61.81)

533309 (38.85)

97125 (91.50) Looking to the work force in Surat city over a period of time we

can infer that the labour force in Surat in on rise. Another noteworthy feature of city is that non-working population is declining. This is an indication of improving employment scenario.

For example, the percentage of main workers increase from 31.89% in 1961 to 37.37% percent in 2001. While that of non-workers reduced from 68.11% to 61.81% for the same period

Nature & Pattern of MigrationNature & Pattern of Migration Moreover, it should be noted that the nature of migration in

Surat is occupation specific. For example, the migrants in Surat city particularly the specific migration (inter-district migration./migration within state) are mainly from Bharuch, Bhavnagar, Mehsana, Valsad and Panchmahal districts and these migrants are absorbed in the diamond industry of city. While that of non-specific migration (migrants coming from other State of India) are from Maharashtra, Uttar Pradesh, Orissa, Andhra Pradesh, Rajasthan and Madhya Pradesh are contributing to the power loom sector (Textile industry) of Surat city.

Maximum number of migrants in Surat are coming from Maharashtra (9.44 percent) followed by Uttar Pradesh (5.76 percent) and Orissa (3.20 percent).

The rapid growth of Surat city is acknowledged by labour intensive activities which attracts the human capital from other regions of the nation.

Three Dimensional Financial Capital Three Dimensional Financial Capital GenerationGeneration

Financial Capital

Generation

Financial Capital

Generation

CentralGovt.

CentralGovt.

Local Govt.Local Govt.

State Govt.State Govt.

Generation of Financial Capital Generation of Financial Capital through Human Capitalthrough Human Capital

The growth of human capital in the city leads to financial capital generation. The city of Surat not only generates revenue for the urban local body (ULB). But also creates financial capital for State Government and Central Government of the country.

Talking on the financial status of Surat a special status in its own revenue sources for its efficient way of functioning and has shown an operating surplus, in spite of a number of developmental activities.

The SMC has shown a mix of surplus and deficit in its revenue and capital accounts particularly from 2001 to 2009 period. The revenue account portrays a surplus, whereas the capital account has shown a deficit, indicating transfers from the revenue account surplus. The capital account deficit has been on account of developmental activities of the corporation in the form of medical college, schools, libraries, gardens, indoor stadium, science center, roads, pavements etc.

Generation of Financial Capital Generation of Financial Capital through Human Capital- Urban Local through Human Capital- Urban Local

BodyBody The significant surpluses in the revenue account of SMC, which

have increased from ` 57.82 Crs. in 1994-95 to ` 354.55 Crs. in 2008-09, while the capital account has registered a negative closing balance in 1994-95, capital account had deficit of ` 50.92 Crs. which soared to ` 298.01 Crs. in the year 2008-09. This drastic increase in the deficit of capital account is because of expenses made by SMC on the development of physical infrastructure.

In a nutshell, a substantial amount of revenue surplus has been transferred to capital account for asset creation, which is one positive sign for the city’s development. However it should not be forget that this huge generation of capital by SMC is not possible without the rigourous efforts made by the human capital of Surat which is mainly working in the two major industries of Surat city.

Generation of Financial Capital Generation of Financial Capital through Human Capital- State through Human Capital- State

GovernmentGovernment Sales tax is one of the important parts of revenue

generation by the State Government. by virtue of Entry 92 A in the Union list to levy tax under Article 269 of the Constitution of India. If we talk about Surat, the revenue collected through the impossible of sales tax was ` 171.23 crs. in 1995-96 which consistently increased to ` 2917.87 crs. for 2010-11. The average annual growth rate of sales tax collected through Surat during 1995-96 to 2010-11 is 2917.87* percent (*upto December. 2010).

The main reason for this big collection is sales tax is two – a) Size of consumer market andb) Growth of consumer market.

Generation of Financial Capital Generation of Financial Capital through Human Capital- Central through Human Capital- Central

GovernmentGovernment At Central level the we have taken into account revenue

generated through income tax, Excise & Customs. The revenue collected from city through these sources are proved to become a key growth driver for Surat’s economy as well to the nation's economy.

(A) Income tax : Surat in 1994-95 contributed ` 152.11 crs. which shoots up

to ` 1873.50 crs. in 2009-10. The average annual growth rate of income

tax during 1994-95 to 2009-10 is 36.71 percent.

(B) Excise & Customs : There was ` 1314.21 Crs. of income generated from Surat in

1994-95 which increased to ` 3833 Crs. in 2005-06. The average annual growth rate of excise and customs collected from Surat is 17.42% during 1994-95 to 2005-06 .

Income through Various SourcesIncome through Various Sources

Years OctroiIncome Tax

(Incl. Corporate Tax)

Excise and Customs

Sales Tax

1994-95 112.68 152.11 1314.21 -1995-96 140.14 230.00* 1352.27 171.231996-97 158.41 269.45 1691.87 189.621997-98 181.62 271.50** 1811.85 208.641998-99 195.17 295.00* 2269.95 267.421999-00 223.04 370.52 2305.37 493.202000-01 230.13 426.00 1986.61 530.252001-02 235.39 432.35 2265.21 476.742002-03 285.62 509.90 1540.00 588.642003-04 301.95 605.00 1467.00 696.642004-05 354.79 736.91 1491.00 782.222005-06 406.12 1006.85 3833.00 960.312006-07 486.20 1170.30 548.90 1642.752007-08 347.35 - 1093.92 1596.542008-09 NA 1648.49 618.22+ 2662.152009-10 NA 1873.50 NA 2750.562010-11 NA 491.80 # NA 2917.89

Policy ImplicationsPolicy Implications