Bihar must rethink growth drivers as current model falls short: Report

A Kotak-ICRIER report says Bihar's development model has not delivered due to an unremunerative agriculture sector, urging diversification, rural infrastructure upgrades and institutional reforms

A report has flagged critical structural constraints in Bihar’s farm economy, claiming that the current model of development has not delivered for the second-most populous state.

 

It added that the state’s unremunerative agriculture sector is keeping its per capita income among the lowest in India.

 

The report by the Kotak-ICRIER Centre of Excellence for Agriculture Policy, Sustainability, and Innovations (KICEAPSI), titled ‘Bihar's Economic Dilemma – What It Can Learn from Some Laggard States?’ synthesises five research studies. These trace persistent gaps in the state’s agricultural performance and the urgent policy shifts required to unlock higher rural incomes.

 

“Agriculture is vital to Bihar since about 70-75 per cent of the population depends on farming or allied activities for livelihood. Unless agriculture becomes vibrant and more remunerative, it is difficult for the majority of people in Bihar to become prosperous,” the report said. 

 

The report underscores that India's eastern and central belt, comprising Bihar, Uttar Pradesh, Jharkhand, Odisha, Madhya Pradesh, Chhattisgarh, and West Bengal, trail on most economic indicators. And, Bihar most sharply typifies the development imbalance. 

 

With a per capita national state domestic product (NSDP) at ~69,321 in 2024-25, it ranks as the poorest major state. Agriculture employs 54.2 per cent of Bihar’s workforce and contributes 23.1 per cent to the gross state value added (GSVA). However, over 97 per cent of landholdings are marginal or small, averaging 0.39 hectares, limiting mechanisation and productivity.

 

“With limited expansion of non-farm sectors, millions from Bihar and UP migrate to work in construction and services in other states due to a lack of local livelihood opportunities,” the report added. 

 

The report proposes multi-pronged policy solutions for Bihar’s challenges centred on agricultural diversification, infrastructure, and institutional innovation.

 

It stresses shifting focus from staple crops to high-value horticulture and livestock, strengthening rural infrastructure, promoting farmer producer organisations (FPOs) and digital tools to help aggregate smallholders for better market access and mechanisation.

 

Scaling up renewable energy-driven irrigation to reduce diesel dependence, enabling double cropping and expanding formal non-farm employment, including women’s participation in sectors like apparel manufacturing are some solutions offered. 

 

Comparing Bihar with Madhya Pradesh’s rapid farm transformation, the report states that the contrast between the two ‘BIMARU’ (Bihar-Madhya Pradesh, Rajasthan and Uttar Pradesh) states is striking.

 

“Since 2005, MP’s strong political leadership has driven reforms in irrigation, procurement, and diversification,” the report said.

 

In contrast, Bihar remains diesel-dependent for irrigation, with 77 per cent of pumps being diesel-powered. This fuels higher cost of production and environmental concerns.

 

The report urges Bihar to stress on rural electrification, solar irrigation, and feeder line separation as foundational reforms.

 

It says high-value, regional crops like makhana and litchi — both Geographical Indication (GI) tagged — show promise.

 

The National Makhana Board, established in 2025, is a major institutional step to enhance its production, processing, marketing and exports.

 

However, the report points out that mechanisation in makhana processing remains rudimentary.

 

“An unorganised marketing system adds price volatility, poor infrastructure, and weak farmer bargaining power.

 

The absence of the APMC Act in Bihar hinders data collection and market transparency. Also, limited mechanisation, high costs, and lack of training keep processing inefficient, inconsistent, and prone to export rejections,” the report added.