Bihar ‘Growth Miracle’: Myth and Reality  


There has of late been a lot of media hype about the recent ‘CSO’ (Central Statistical Organisation) data on Bihar’s ‘growth miracle’ in the last 5 years. At a five-yearly average of 11.03 per cent, Bihar under Nitish Kumar has apparently been next only to Gujarat which clocked a growth rate of 11.07%, only marginally higher. The CSO has of course been quick to distance itself from this statistical miracle, attributing the figures to data supplied by the Bihar government.
Be that as it may, an average GSDP growth rate of 11.03 per cent per annum in the last five years (from 2004–05 to 2008–09) is, no doubt, quite impressive at first sight. But a closer look makes it clear that it is more a case of statistical illusion than any real transformation on the ground.
Starting from a very low base, even an otherwise relatively marginal increase in GSDP/NSDP in absolute terms would give a very impressive picture in terms of growth rate figures. For instance, Bihar’s NSDP (Net State Domestic Product) may have nearly doubled from Rs. 66,040 crore in 2004 to nearly Rs. 1,19,443 crore in 2008–09, which is still paltry when compared to TN (Rs. 2,99,119 crore), Maharashtra (Rs. 5,04,950 crore) or Gujarat (Rs. 2,57,694 crore).
Coming to the sectoral picture of the Bihar economy, agriculture has reportedly registered an unbelievably high growth rate of 9 per cent per annum average between 2004–05 to 2008–09, with agricultural NSDP increasing from Rs. 18,155 crore in 2004–05 to Rs. 26,399 crore in 2008–09. This 9 per cent growth rate claim certainly does not tally with the stagnant and crisis-ridden agricultural scene on the ground. Once again, it is a case of statistical illusion. Actually, the agricultural NSDP in Bihar in 2005–06 at Rs. 17,812 crore was lower than Rs. 18,735 in 2000–01 and the intervening years witnessed virtual stagnation in Bihar agriculture. In view of this prolonged stagnation, recovery in 2006–07 which saw an agricultural NSDP of Rs. 23,700 crore marked a sharp increase in growth rate in 2006–07 over 2005–06, something like 29% in a single year!!! This jacked up the overall trend growth rate per annum in the last five years. rally
But after 2006–07, it was again a story of stagnation in Bihar agriculture with the NSDP recording Rs. 23,251 crore in 2007–08 (marginally lower than in the previous year of 2006–07) and hence showing a relatively higher increase to Rs. 26,399 crore in 2008–09 over the previous year (i.e., 13.5 per cent, in the year of Kosi disaster when, according to the government figures themselves, about 1,20,000 hectares of land went under water in August, destroying not only the kharif crop but also sharply reducing the rabi acreage.) If we calculate the trend growth rate of the average per annum from 2000–01 to 2008–09, the average agricultural growth rate of Bihar works out to a modest 4.5 per cent per annum. Thus, the relatively “impressive” growth rate during Nitish period was more due to the stagnation in the earlier period and the recovery is also marked by repeated spells of stagnation in between in the Nitish era itself.
It should also be noted that much of Bihar’s agricultural ‘growth’ revolves around horticulture. Bihar is the fourth largest horticultural producer in the country. Fruits and vegetables are cultivated in about 8 lakh to 1 million hectares of Bihar, or nearly 20 per cent of net cropped area, producing 3.2 million tonnes of fruits and 7.6 million vegetables. But, leaving the corporate trade in litchi, not even 1 per cent of this horticultural produce is processed and not even five per cent of the horticultural area is covered by coldstorage infrastructure (the whole State has only 200 coldstorages with a meagre 4 lakh tonnes capacity) and hence one can imagine the low prices and distress sale by farmers and the stranglehold of mercantile capital. In 2008, potato farmers suffered heavy crop loss due to blight disease and farmers got no compensation.
The overall industrial sector – comprising mining & quarrying, manufacturing (registered and unregistered), construction and electricity-gas-water supply – NSDP has also clocked a significant 25.4 per cent growth (23.4 per cent in GSDP) over the five years from a negative growth earlier. But the manufacturing subsector within industrial sector tells a different story. The manufacturing sector in Bihar grew from a paltry Rs. 3379 crore in 2004–05 to Rs. 4852 crore in 2008–09 but the manufacturing NSDP of Maharashtra in 2008–09 was Rs. 90,819 crore, 18 times more than that of Bihar! Why, the manufacturing NSDP of the tiny Puducherry (Pondicherry) was more than the big Bihar’s, at Rs. 5203 crore in 2008–09!
The secret of high growth in Bihar during the Nitish period lies in the exceptionally high growth in construction. The construction sector in Bihar grew from Rs. 3766 crore in 2004–05 to Rs. 12,033 crore in 2008–09, almost three-and-a-half-fold increase. This jacked up the overall growth rate to some extent.
What explains this major stride in construction growth in Bihar? Housing boom? No, not at all. Bihar records a pathetic figure even in Indira Awas Yojana (state-subsidised housing with Central assistance), and with only 10% urbanization we can hardly talk about any major boom in urban housing. What then is the secret behind this construction growth in Bihar? Actually, the substantial growth in Bihar NSDP is accounted for by public investment in which the Central Plan assistance is a very major component. Central assistance to State Plans as well as Central Plan projects in Bihar has nearly tripled during the Nitish period and averages around Rs. 6000 crore per annum (Rs. 30,000 crore in the last five years).
In the four years of Nitish raj, 1854 “bridges” have reportedly been constructed and 6800 kms of roads laid. But this figure includes 1600 mini-bridges and even culverts! This is evident from the amount spent by the Nitish Government – Rs. 1340 crore was spent from the State’s coffers to build 1854 “bridges”! Most of them were constructed under the centrally funded national highway project which involved four-laning of major highways, or all-weather rural roads construction under Pradhan Mantri Gram Sadak Yojana (PMGSY).
True, private investment in Bihar in the last five years has also recorded an increase. But to put it in perspective, Bihar’s aggregate private investment in the last five years stands at nearly Rs. 20,000 crore, whereas in a state like Tamil Nadu, in a single year alone (in 2008), it exceeds Rs. 31,333 crore, and that too in organised/registered manufacturing! If one closely examines the investment pattern in Bihar, the bulk of private investment – and also of the overall investment including public investment – is accounted for by construction sector and not (registered) manufacturing or agriculture/primary sector The Bihar State Investment Promotion Board has listed only 115 investment proposals for medium and large units (not all industries but include hotels, colleges and hospitals) approved. Out of these, 45 are ethanol and/or sugar units (35 of them being only ethanol), 5 cement units and 6 thermal power units. The rest are insignificant except a tractor unit and a few steel rolling mills needed for construction industry. So it is construction, especially the Central funds for roads, which is driving Nitish Kumar’s growth story.
This reinforces one fundamental truth about a backward state like Bihar – growth in Bihar can only be initiated and sustained by a spurt in public expenditure and the neo-liberal model which relies overwhelmingly on the market and private initiative of big capital has little relevance even from the limited objective of raising economic growth. Yet, Bihar government continues to woo big private capital and borrow its economic policy inputs from the notorious DFID (Department for International Development, a United Kingdom government department which promotes corporate interests and neo-liberal economics in the developing world). The International Growth Centre funded by DFID has chosen Bihar along with African countries like Ethiopia, Ghana, Sierra Leone and Tanzania and neighbouring Pakistan and Bangladesh to supply policy inputs for ‘development’!
Mere increase in public expenditure will however not be enough to sustain growth, let alone reach its benefits to the sectors of the economy and sections of the people who suffer the most because of lack of development. What is needed is to orient and prioritise public expenditure so that sectors like agriculture and small scale enterprises that cater for the overwhelming majority of Bihar’s population get the maximum attention and benefits. Such a trajectory of growth must begin with land reforms, investment in irrigation and agricultural development, increased agricultural credit for small peasants and tenants and, of course, increased generation and improved transmission of electricity. In the absence of this, growth will remain tilted heavily in favour of a tiny nexus of criminals, middlemen and corrupt officials and their political bosses and patrons.

Tailpiece: Along with construction, Bihar has witnessed another boom in recent years – liquor boom despite continuing popular protests, especially by rural women. Governments however continue to justify the liquor boom by pointing to growing revenues from increased excise earning. But in Bihar, the excise minister has raised the issue of a massive excise scam and instead of appointing a commission of inquiry into the alleged scam, Nitish Kumar has thrown the minister out of the cabinet. So much for his rhetoric of transparency and good governance !