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T N Ninan: Why Bihar is poor

That Bihar has achieved double-digit economic growth over the past five years is a wonder

T N Ninan  |  New Delhi 

The surprise market these days, when it comes to new telephone connections, is… Vehicle manufacturers also report new buoyancy when it comes to sales in India’s Such assertions would have been considered scarcely credible till the news broke a couple of weeks ago, that Bihar’s economy in the last five years has grown at an annual average rate of more than 11 per cent — well above the national average, for the first time. The little-known story, though, is how has been done in over the years by Central policy. Admittedly, such complaints by states about getting step-motherly treatment are almost routine, and therefore have limited credibility. But in the numbers and disparities are hard to ignore.

The state’s road density (per head of population) is the lowest, at about 40 per cent of the national average. Other than Kerala and the hill states, it also has the lowest rail route density. And, believe it or not, the state has less than 1 per cent of the country’s power generating capacity — yet, no new thermal capacity has been sanctioned by the Centre in the last five years. The only private sector project, by the RPG group, has been stymied because it has not been given any coal linkage. About half the state’s villages have neither a road nor an electricity connection. And per capita power consumption is about 12 per cent of the national average. These are all stark pointers to economic backwardness, for which the state has become a byword. What is worth noting is that the country’s poorest state, with very limited revenue resources of its own (just 10 per cent of Haryana’s, per capita), has also got less from the Centre than the national average.

Going by numbers compiled by the Asian Development Research Institute in Patna, Bihar’s per capita Plan outlay has been the lowest among all states in most Plan periods. Some of this is undoubtedly Bihar’s own fault; in the period, Bihar’s Plan outlay collapsed to barely a fourth of the level in other poor states like Orissa and Madhya Pradesh. But even under Nitish Kumar, the state continues to be under-invested for development. The Institute, in fact, points out that relative under-investment in Bihar has a long history, going back to the late 19th century, while the original damage was done by the Permanent Settlement a few decades before that.

If this is the economic history of the state, much damage was done in the past half century by the policy of freight equalisation — which neutralised whatever location advantage the state had for attracting natural resource-based industry. Indeed, special tax benefits to better-off states like Uttarakhand have indirectly compounded the damage. The chief minister complains now that the state is being prevented by the Centre from developing its abundant water resources, while the absence of local economic activity means that the bulk of the money that banks collect as deposits in the state is loaned out in other states. The lack of local employment means that training institutes that prepare students for the competitive exams have become the growth sector in the state, while most youngsters go north-west or west in search of jobs — creating tensions in cities like Mumbai.

The wonder in this situation is that the state has achieved double-digit economic growth over the past five years. Perhaps that is because economic activity was at a low ebb in the years that went before. The even bigger wonder is that Maoists have not gained a bigger foothold in the state than they have.

First Published: Sat, January 16 2010. 00:07 IST