The Bihar Growth Story & What’s Missing

Bihar has been reporting astounding economic growth numbers, 13.1% at last count. More pertinently, there is a palpable sense of change and optimism about the future. But where has this growth come from? Does Bihar really beat the other big states now? More importantly, what has economic growth delivered for Bihar?

To try and answer some of these questions, IndiaSpend’s Dhritiman Gupta delved into Bihar’s economic & social data going back a decade. The broad conclusions were; first, the state has ridden an agricultural growth wave in the last decade, like Gujarat. However, it’s a reversal in industrial growth that could be a key reason for growth numbers leaping up.

Second, despite its economic successes, in the same period, Bihar has failed to bring about similar changes in poverty reduction, per capita income and literacy. In absolute numbers, the number of poor in Bihar has increased in the last 5 years, unlike in most other states.

Biggest GDP Gainer

Let’s first look at the GDP figures of Bihar vis-à-vis a few big states, selected on the basis of their similarities with respect to Bihar (Gross State Domestic Product or GSDP figures & poverty rates) in 2000-01. We’ve also included a few advanced states like Maharashtra, Tamil Nadu, and Gujarat.

Even though simple comparisons of GSDP and growth over long periods may yield little, there are some important points that can be taken away from this table (Table 1).

Firstly, between 2000-01 and 2005-06, Bihar’s GSDP had grown by 34.8% (a simple aggregate), while similar states like Orissa had registered 93.6% growth. Even states which were on a much higher base than Bihar, like Maharashtra and Gujarat, recorded good growth rates of 94.2% and 123.7% respectively.

But between 2005-06 and 2010-11, Bihar almost doubled its GSDP, growing 84% (again as a simple aggregate) while all the other states were stagnating. Even a state like Gujarat, which did not have as high a base as Maharashtra in 2005-06, could only grow 56.2%. This also makes Bihar the biggest GDP gainer in the country (at least among larger states) since 2005-06.

Table 1

State-wise Growth Across The Decades

(GSDP at constant prices 2004-05)

Source: Planning Commission Data

Bihar’s Year-Wise Growth Figures

Now, let’s look at Bihar’s year-wise growth rates. In a previous report, we had looked at that data to conclude that Bihar had actually done better than almost all states including Maharashtra, Gujarat and Tamil Nadu.

Here, we look at Bihar’s performance against ‘similar’ states like Orissa, Madhya Pradesh, and Rajasthan. We’ve not included Bengal in this report.

Table 2

Growth In Bihar Post Nitish Kumar Against Other States

(Figures in %)

Source: Planning Commission Data

In terms of average growth over 2005-12, Bihar was one of the highest in India at 11.32%, just behind smaller states like Sikkim and Uttarkhand which had figures of 13.4% and 12.2 % respectively.

Madhya Pradesh, Orissa and Rajasthan had similar growth rates of 8% over the period 2005-12, but almost 3% lower than Bihar.

In terms of improvements in growth rate when we compare the periods 1994-02 and 2005-12, Bihar again leads this pack of 4 states with 6.3%. Rajasthan comes in last and kept growing at similar rates as 1994-02.

Bihar’s Agricultural Boost

The natural question here is: what led to Bihar’s massive recovery? If we split up growth rates across sectors - agriculture and industry- we find that not only has Bihar demonstrated the fastest agricultural growth in the country, it also managed to reverse its industrial fortunes.

Bihar’s average agricultural growth rate over the period 2004-09 was 8.1%, the highest in the country. Bihar was closely followed by Gujarat, with a figure of 7.4%.

The corresponding figures for Orissa, Rajasthan and Madhya Pradesh were 2.9%, 1.1% and 0.8% respectively. Even though the average growth rates over the 5-year period masks wide yearly fluctuations, the figure of 8.1% is high.

Now let’s look at industrial growth rates.

Table 3

Industrial Growth Rates For The Decade

Source: Planning Commission Data

Bihar had an average industrial growth rate of 5.8% over 2004-09. Contrast this with Orissa which grew 17.5%, the highest in the country.

However, if we consider that over 2000-04, Bihar had a negative industrial growth rate of -4.7%, then its achievement over the next 5 years is notable. But Madhya Pradesh and Rajasthan also had negative industrial growth over 2000-04 and then recovered smartly over 2004-09.

Another way of looking at Bihar’s growth story relative to other Indian states is that it’s not industrial growth but agricultural stagnation that’s preventing these 3 states in specific and in general from catching up with Bihar’s overall growth numbers.

Whichever way you look at it, steady agricultural growth and good industrial recovery have been the cornerstone of Chief Minister Nitish Kumar’s success. But now comes the critical question: has the general well being of Bihar’s people improved?

Lowest Per-capita Income In Country

Let’s look at Bihar’s per-capita net GSDP and poverty reduction records.

Table 4

Bihar’s Per Capita Income Trends

Source: Planning Commission Data

(States covered are ones with lowest per-capita income in 2000-01. Only Gujarat is the exception.)

*NSDP: Net State Domestic Product is the production of citizen irrespective of his geographic location. For example, NSDP of Bihar will include production of people anywhere in India and exclude production of non Bihar people working in Bihar.

Bihar has the lowest per-capita income in the whole country in all the 3 years taken. In 2000-01, Bihar’s per-capita income was 40.5% of the all-India figure. In 2010-11, it was 37.8% of the all-India figure. However well Bihar may have grown it has failed to counter the deprivation of its people, relative to other states.

The Nitish Kumar Effect

But it must also be acknowledged that since Nitish Kumar took over the reins, per-capita income grew 74.4% increase, higher than all the states taken here. In the same period Gujarat (on a higher base) grew 45%.

Again contrast this with 2000-01 and 2005-06, when Bihar’s per-capita income grew just 19.2%. Progress has thus been swift, even though Bihar’s per capital income still lags its sister states.

Over 50% Of Population BPL

Let’s look at the state’s poverty reduction record. The states taken include ones with the highest poverty rates in 2004-05.

Table 5

Bihar’s Track Record In Battling Poverty

(BPL-Below Poverty Line, Tendulkar Methodology used)

Source: Planning Commission Data

In 2004-05, 54.4% of Bihar’s population or approximately 50 million people lived below the poverty line (BPL). The figure reduced marginally to 53.5% in 2009-10. The absolute number of poor people had, however, increased to 54 million; an increase of 4 million (total population: 101 million).

Look at Bihar’s record in poverty reduction against states like Orissa and Madhya Pradesh which reduced the percentage of BPL people by 20.2% and 11.9% respectively.

Of the bigger states, the absolute number of poor people has only gone up in Bihar, Uttar Pradesh and Chhattisgarh. For Uttar Pradesh the increase was 0.7 million (total population: 195 million) and for Chhattisgarh it was around 1 million (total population: 25 million).

Over this period, Gujarat reduced the number of poor people from 17 to 13 million. The best performer, however, was Maharashtra cutting the number of BPL people from 39 million to 27 million; a reduction of 12 million. Tamil Nadu and Orissa were also not far behind reducing the number of poor people by 7 million each.

Worst Literacy Rate In India

Now we will look at some social indicators beginning with literacy rates. Here we have included states which had literacy rates below 60% in 2001.

Table 6

Literacy Rate Comparison

Source: Planning Commission Data

When it comes to literacy rates, Bihar ranks last of the 35 states in states and union territories in 2001 as well as 2011. To be fair, the state reported a 16.8% rise in literacy rates over the 10-year period.

But all states in a ‘similar’ situation as Bihar in 2001, namely; Jharkhand, J&K and Uttar Pradesh, also recorded impressive improvements, thereby leaving Bihar in the same relative position as in 2001.

Weak Life Expectancy Rates

Now let’s look at life expectancy figures for the state.

Table 7

Bihar’s Life Expectancy

Projected life-expectancy figures of the Planning Commission

Source: Planning Commission Data

Life-expectancy in Bihar is much less than states like Kerala and Maharashtra. But interestingly, males in Bihar are expected to live more than in the other four states taken. However, females in Rajasthan are expected to live more than females in Bihar.

In fact, Bihar actually is an exception of sorts. In all states except Uttar Pradesh and Bihar, females are expected to live more than their male counterparts. Of the 15 states for which data is available, females are expected to live more than males in 13 states in 2001-05 and 14 states in 2006-10, the only exception being Bihar.

The state of Bihar has some way to go before catching up with the gains made by industrialised states like Maharashtra and Gujarat, if that is an objective of sorts.

Bihar’s social indicators are still weak and perhaps somewhat contrary to the positive perception the state has enjoyed recently. However, the fact is that there is, as we said at the start, a sense of change and expectancy.

Bihar still has a way to go before recovering from the lost decades, particularly when it comes to poverty. Holding and nurturing the growth surge thus becomes all the more critical, Nitish Kumar or not.

Note: We’ve not included services growth in these estimates as state figures were not available