At critical juncture

By Governance Today
In Issue 4
January 5, 2016

The Nitish-led new government needs to double down on developmental efforts


Bihar has seen a remarkable development work in the last few years. The question is to how to keep that wheel moving.

American President Abraham Lincoln once said: “Democracy is the government of the people, by the people and for the people”. The Social and economic wellbeing of the citizens is the prime job of the governments, especially in a democracy. As each demand and expectation cannot be met by any government, the overall welfare of the society must be visible. However, that is not always the case and the first socio-economic census of India gives a detailed picture of where our governments have failed us. The statistics look terrible for states like Bihar.

Bihar is politically a very important state but the debate on economy of the state has started only in last decade, especially after the defeat of the RJD in 2005. But a more logical reference point to start the discussion is the socio-economic census (SECC) of the state. According to SECC 2011, only 5.9 per cent of rural households of the state have salaried job and around 93 per cent in the same section earn less than Rs 10,000 per month. In the land holding category, 65 per cent of rural population has no land and the KCC penetration is as low as 2.3 per cent. These figures show that there has been no wealth creation in the state where over 80 per cent of the population is dependent on agriculture.

For the last two-and-a-half decades, Lalu Prasad and Nitish Kumar, have influenced the state in different ways. Lalu’s regime was a period of total neglect to economic development and governance. While the socio-political balance shifted from upper/forward castes to the backward castes, crime rate increased, administrative system got denigrated and economic development took a back seat. Nitish Kumar’s focused on development and brought the agenda of governance and economic development to the centre stage. What a combined entity of the two diametrically opposite approaches to development will deliver, is a question that will be answered only in time.

Politically powerful, economically weak: the uniqueness of Bihar

Bihar is politically important because the state has 40 Members of Parliament and the regional parties based in Bihar have played important role since the beginning of the coalition era. But the state ranks fourteenth in terms of contribution to the national GDP. Despite the fact that Bihar has maintained an impressive growth rate in the last five years, it has a very low per capita income, almost half of the national average. Industries contribute only 4.6 per cent of the state’s GDP and this is because the state has remained aloof from the post-liberalisation period where the growth has been primarily industry driven.

What are the major socio economic challenges facing state?

To comprehend the challenges facing Bihar’s economy, it is first necessary to remember that, with a population of 104.0 million in 2011, Bihar is an extremely densely-populated region, with no less than 1,106 persons living per sq. km. of its area. As per the erstwhile Planning Commission figures, in 2011-12, 33.7 percent of its population lived below the poverty line in Bihar. Almost nine-tenths of its population lives in the villages, where the poverty ratio is relatively higher at 34.1 percent. Bihar had to overcome all these challenges to move ahead on a new growth path.

With the bifurcation of the state in 2000, the vast mineral sector and other big industries went to the carved out state of Jharkhand, leaving Bihar with only agriculture to manage with. But with a prudent development strategy, the state could overcome these challenges.

The GSDP of Bihar at 2004-05 prices in 2013-14 was Rs. 1.75 lakh crore, yielding a per capita income of Rs. 17,294. The estimated GSDP at current prices in 2013-14 is Rs. 3.43 lakh crore, implying a per capita income of Rs. 33,954. As for the rate of growth, Bihar’s economy has not grown uniformly over the period 2000-01 to 2013-14. During 2000-01 to 2004-05, the state income at constant prices grew at an annual rate of 3.4 percent. After that, the economy witnessed a turnaround and grew at an annual rate of 10.2 percent between 2005-06 to 2009-10, and by 10.4 percent between 2010-11 to 2013-14. This later rates of growth were not only much higher than what was achieved in previous period, but one of the highest among all the Indian states.

Among contributors of the growth, during 2005-10, Registered Manufacturing (45.4 percent), Construction (19.8 percent) and Communication (24.7 percent) were the major growth drivers. During the succeeding period of 2010-14, the Banking and Insurance (19.2 percent), Trade, Hotels and Restaurants (17.3 percent), Communication (16.4 percent) and Other Transport (14.3 percent) picked up the baton. This indicates a more diversified growth profile in later years as services started to pick on back of heavy physical construction.


Source: Economic Surver of Bihar, 2014-15

Enabling growth through basic amenities and basic infra

Over last entire decade, the policy focus in the state has been on investment in infrastructure development in which investment has increased manifold in recent years, with increased private sector participation. However, problems like delays in according approvals, land acquisition, and environmental clearance are still holding back the segment and need immediate attention of the new government. Besides, the time overruns in the implementation of the projects must be avoided. The state government has resolved to connect the capital city Patna to the remotest areas in the state, so that people can reach the capital within a maximum of six hours from any place. This is crucial not only in terms of connectivity of people, but also from industrial perspective as speedy product delivery is an important aspect of development, especially in agro based industry that has so much potential in the state. Even after a decade of work, the state continues to remain far behind the all-India average in terms of road length per lakh of population. In 2012-13, Bihar reported only 175 km of road length per lakh of population, as against all-India average of 388 km. However, in terms of road length per 100 sq. km, Bihar with 193 km of road length remained ahead of all-India average of 143 km showing good progress.

Governance at the center stage of economic growth

In the last one decade, the state has seen a major shift in administrative behavior. Nitish Kumar led-NDA government had worked hard to improve governance, a major achievement being marked improvement in law and order situation by enforcing arms act stringently. The consequent stability brought investment and growth.

Another area where the development is clearly visible is electricity. Last seven years has seen a tremendous improvement in power situation across the state. Effective implementation of Rajiv Gandhi Vidyutikaran Yojana has seen many areas coming to the map.

The attendance in schools and hospitals has also increased. Schools and hospitals which used to bear a deserted look now have a semblance of normalcy. Increased presence of children, teachers and doctors have been a game changer. A host of interesting measures like providing cycles to girls, uniform to girls, and recruitment of Shiksha Mitra and teachers have given a philip to educational agenda. A fixed time period for service delivery mechanism has seen a major improvement in the efficiency in governmental work. Fifty percent reservations to women, support to widows, and loans for marriage has been some of the popular welfare measures. However, the absolute level of performance is still sketchy. Hospitals and schools are hopelessly short of infrastructure and are overburdened. Implementation of social programs is not up to the mark and the administration does not have capacity of manpower, processes and procedures to precisely point the inadequacy in the system.

At a crucial juncture

The rate of growth of Bihar economy has been very high during the recent years. During the period 2009-10 to 2013-14, the state economy grew annually at 11.3 percent. Simultaneously, the state government enhanced its development expenditure as a consequence to which, human development in the state showed substantial progress, particularly in the critical areas of education and health. Because of limited resources of the state government, the Per Capita Development Expenditure (PCDE) in Bihar has been low compared to the national average. However, during the last five years, the PCDE of Bihar has grown at 15.2 per cent, not too worse than the all-India level of 16.8 per cent.

According to Census 2011, Bihar is the third most populous state of India, with a total population of 104.1 million. Three demographic features of Bihar which are substantially different from that of other states are — decadal growth rate of population, density of population, and rate of urbanization. The decadal growth rate of population for Bihar (25.1 per cent) is much higher than that for India (17.6 per cent), indicating the absence of the demographic transition that many parts of India have already experienced. With a density of population of 1,106 persons per sq. km., the highest among the major states, the population pressure is a major challenge in Bihar. This high degree of population pressure demands higher resources for the state’s development. Finally, the urbanization ratio is only 11.3 per cent in Bihar, making it the most rural state in the country.

Bihar has always been a laboratory for politics because of its complex social structure. The country could neither ignore the leaders the state has thrown up, nor its political messages. The state has given a clear mandate to the Nitish Kumar indicating that its people have liked the local version of governance. The state could not afford to miss the economic opportunity it can avail in the present scenario. To utilize it full, the state will have to invest heavily in the human resource and promote private enterprise. In short, the development endeavor is still at an initial stage of work-in-progress. But this is a crucial stage which can set the foundation for transforming the state into a mid income state. To achieve that the leadership needs to stay pragmatic and improve steadily; wavering is not an option.

(With inputs from Economic Survey of Bihar, 2013-14)