Bihar has just completed the formation of its new government. The newly-formed NDA government has secured its 4th consecutive term with Nitish Kumar remained as the face of the government. The electoral verdict was given in NDA favor for its commitment of providing 19 lakh employment opportunities in the state which is in deep economic distress due to Covid-19, lockdown, reverse -migration and subsequent massive flood. The appointment of Tarkishore Prasad as the new finance minister is a clear sign that center expects big economic reform and bold changes in Bihar.

Bihar is the third most populous state in the country with GSDP USD 86 Billion and a per capita income of ₹47,541 at current prices and ₹33,629 at constant prices. On a better side, Bihar economy growth is on a higher side than Indian Economy, the main growth drivers of the economy in Bihar has been service sector which contributes 61 % in GSDP while the contribution in other sector remains marginally low; Agriculture is 20% and Industry 19%.

Current State of Bihar :

• GSDP:  The growth rate of Bihar’s GSDP (at constant prices) was 10.5% in 2017-18 and 2018-19, higher than the GDP growth rate of the country in both years. 
• Sectors:  In 2018-19, agriculture, manufacturing, and services contributed to 20%, 19% and 61% to the economy.  These sectors grew by 0.6%, 6.3%, and 13.3%, respectively. 
• Per capita GSDP:  The per capita GSDP of Bihar in 2018-19 (at constant prices) was Rs 33,629, 9% higher than the corresponding figure in 2017-18.  In 2017-18, the per capita GSDP of Bihar was the lowest among all states.

• Unemployment:  According to the Periodic Labour Force Survey (July 2017-June 2018), the unemployment rate in Bihar was 7.2%, which is higher than that at the all-India level (6.1%).

Bihar has been an agrarian economy with more than 60 % of people are directly engaged in agriculture. Ganga basin region constitutes the major part of Bihar making it soil fertile enough to grow a wide variety of crops. Although there is no negative correlation between development and agriculture. Examples in the developed world like Australia, New Zealand which is predominantly agrarian economy give a positive message to Bihar. Though crop production is high crop productivity is low. Likewise Industry in Bihar remains stagnant which is suffering from a dual crisis; lack of investment owing to average performance in Ease of Doing Business and absence of entrepreneurship due to brain drain. Service Sector tough attends a double-digit growth but offer little opportunity for employment leading to Jobless growth.

Challenges in Bihar Economy :

1. Low revenue collection [GST Collection, VAT]: This Partially due to lockdown and Covid-19 and items like Liquor which remains banned in the state.
2. The influx of Migrant Labours [Reverse Migration]
3. Low Skill and Opportunity
4. Low per capita income.
5. Huge dependence of the population on agriculture.
6. Heavy population pressure.
7. The existence of chronic unemployment and under-employment.
8. Slow improvement in Rate of Capital Formation.
9. Inequality in wealth distribution.
10. Poor Quality of Human Capital

 

World wide there has been a shift in focus on jobs, the government no longer wants to be in business. As Prime Minister, Modi clearly stated there is no business of government to be in business. As the stand of central and state government are in sync, the start government is now busy in making structural reform. For India to become 5 trillion, Bihar must grow to 300 Billion economies in the next 5-8 years.

The moment is now for us to be vocal, but we need to expand the definition of local rather than shrink it. We should rework our economic models, initiate forward-looking labour policies, create an equilibrium between land, labour and capital, and make economic development more inclusive. Bihar indeed has right demographic to march to a newer height. 

Currently, too many of us in Bihar depend on agriculture and allied activities. An extraordinary network of roads built in the past decade during Nitish Kumar tenure can be leveraged to rebuild the part of Bihar that can be referred to as the ‘middle Bihar’. Our disproportionate urbanization has resulted in rural-urban divide getting the lion’s share of economic opportunities.  It is time to create commercial opportunities and employment in all towns of Bihar. Bihar workers benefitted immensely by providing information technology services to the rest of India by getting employed outside Bihar. There’s no reason why these towns cannot do that for both Bihar and Rest of India businesses. Most of our industrial townships were created in the 1960s and 70s went to Jharakhand after partition.  Besides building industrial ecosystems, these towns produced some of the finest human resources thanks to their high quality educational institutes. Now we need to repurpose them. The 60s until the 80s witnessed some of our brightest minds migrate to the rest of India, and many first-generation professionals have excelled in their respective fields. Similarly, post the 1991 economic liberalization, a similar exodus from small towns to mega cities took place as new suburbs were created in India. This lifted thousands out of poverty and uplifted a whole generation of middle class. Many of us are living examples of this. Our Children go out from Bihar to get employed in some of the best IT companies in the world. 

Improving the per capita gross domestic product of Indians will unbridle the advantage of a huge consumer base and improve the quality of consumption, which currently lags Indian standards. India is one of the biggest consumption economies and needs proactive demand-generation, especially after covid. 

As we go through this policy window, we must take some collective bold decisions and put forward the strength of our 38 districts. They must compete fiercely, but also cooperate to catapult Bihar’s growth. This is doable, as has been observed in the functioning of the implementation of several government schemes. We also need a roadmap for our districts to act according to their natural endowment. In the next decade, we need districts capitals and other town to house the headquarters of new startups. That is what made the Southern Indian economy so much bigger than the rest of states in Eastern India. We need more manufacturing set ups in Bihar; they bring high standards, best practices and healthy competition. Regulatory cholesterol also needs to be reduced.

Self-confidence begets self-reliance. But it cannot be accomplished with apathy and lack of societal ownership. Perhaps nationalism in the true spirit should withhold us from continuously seeking to feed our inner beasts.

Bihar is among the most populated state and is growing at a healthy pace. There is an extraordinary opportunity waiting to be seized. While the neighbouring states will benefit, it will also provide Bihar the economic and geopolitical standing that it deserves. Today’s economy, supply chain, manufacturing and the fates of states are all intertwined, and there’s no way for a self-reliant Bihar to grow without being open to doing business with the rest of India. 

Namaste Bharat Team will come up with series of articles on the State of Bihar economy” and will suggest making Bihar Economy as Self Reliant [Atma Nirbhar] and what state and do to provide employment opportunity.

About Author: 

Ashok Kumar Choudhary is a retired banker who has wide experience in handling rural banking and credit. He is also a Trade Unionist and has held a leadership position in Bharatiya Mazdoor Sangh, trade wing of RSS.