In Bihar Assembly poll rush, politics of plenty meets fragile finances

A string of welfare schemes and promises tests the state's budget, which is already heavily dependent on central support and spends little as capital outlay. Yash Kumar Singhal explains

As Bihar gears up for an Assembly election, the state’s finances are once again in the headlines to gauge whether the torrent of promises unleashed by rival parties is even fiscally prudent.

 

The elections to the 243-member Assembly are expected to start within a month. The contest pits the ruling National Democratic Alliance (NDA), with the Bharatiya Janata Party (BJP) and Janata Dal (United) as main players, against the Indian National Developmental Inclusive Alliance (INDIA), led by the Rashtriya Janata Dal (RJD) in the state. Adding another dimension is the newly minted Jan Suraaj, led by political strategist-turned-reformer Prashant Kishor.

 

RJD leader Tejashwi Yadav has claimed that the Nitish Kumar government will fail to deliver on its pre-poll promises due to revenue paucity. The charge is political, but may contain a grain of truth.

 

Bihar’s fiscal deficit stood at 4.15 per cent in 2024-25 (FY25). Nearly 86 per cent of total expenditure went into revenue spending, while the capital outlay — at 13.34 per cent — was the lowest since FY23. The state’s own tax revenue has also weakened, slipping from 25.5 per cent of total revenue receipts in FY23 to 22.2 per cent in FY25.

 

Against this strained backdrop, pre-election giveaways risk deepening the financial cracks. Prime Minister Narendra Modi recently unveiled the Mukhyamantri Mahila Rojgar Yojana, a self-employment scheme under which women entrepreneurs will receive ₹10,000 to start their own ventures and, based on performance, an additional ₹200,000 after six months from the state government. On Friday, the chief minister cumulatively transferred ₹2,500 crore into the accounts of 2.5 million women under the programme. 

 

Days earlier, the prime minister had transferred ₹7,500 crore to 7.5 million women in Bihar.

 

Other initiatives, too, have flowed thick and fast. Modi inaugurated the Jan Nayak Karpoori Thakur Skill University, launched the redesigned Bihar Student Credit Card Scheme, and announced expansions of state universities, the formation of a new Youth Commission, and a revamped Mukhyamantri Nishchay Swayam Sahayata Bhatta Yojana, offering a monthly allowance of ₹1,000 to 500,000 graduates for two years.

 

The state government has also raised pensions for senior citizens, women, and people with disabilities, alongside hiking honorariums for Anganwadi and ASHA workers. These measures are set to further inflate revenue expenditure, already on the rise, leaving little fiscal space for capital investment.

 

Additional sops by the NDA government include a ₹25,000 allowance for each of 10,000 Vikas Mitras to purchase tablets, increased stipends, ₹10,000 grants for Shiksha Sevaks and Talimi Markaz workers to buy smartphones, and an unemployment allowance for the youth.

 

An increase in grants-in-aid and the state’s share of central taxes has kept the revenue balance barely afloat. In FY25, Bihar recorded a revenue deficit of 0.04 per cent of its gross state domestic product (GSDP), after registering a surplus the previous year. However, the state’s outstanding debt remains troublingly high at 37.1 per cent of GSDP — the second highest in a decade.

 

On paper, Bihar’s economy has been performing better than the national average, with its GSDP growing faster for three consecutive years. Still, per capita income remains just one-third of the national figure in FY25. Encouragingly, the state’s unemployment rate fell to 3 per cent in 2023–24, slipping below India’s 3.2 per cent for the first time in recent years.

 

Meanwhile, the Opposition INDIA bloc has unveiled its Ati Pichhda Nyay Sankalp, a 10-point pledge to woo Extremely Backward Classes (EBCs). The plan promises increased EBC reservations, a dedicated law to prevent atrocities, and a 50 per cent quota for backward classes in government contracts.  The move is strategic: EBCs make up 36 per cent of Bihar’s population, according to the caste survey, a bloc powerful enough to shift the state’s political arithmetic.

 

Bihar continues to be one of the worst performing states on social parameters. One-third of its population lived in multidimensional poverty between 2019 and 2021, the highest for any Indian state.

 

Women, the focus of this election’s welfare blitz, continue to lag on key social indicators. The gender ratio at birth worsened between 2019-21 and 2021-23, even as India’s overall ratio improved. Bihar’s maternal mortality ratio rose from 100 to 104 over the same period, while the national average fell from 93 to 88.

 

Despite incremental economic gains, Bihar remains some distance from shedding its long-held BIMARU tag — a label that continues to haunt its political promises and economic prospects alike.