Bihar Economy in a Death-trap

[Speech delivered at the inaugural session of the conference of the Bihar Economic Association, Department of Economics, Patna University held from 29 to 31 January 1997. From Liberation, April 1997.]

Ladies and Gentlemen,

Prior to me, the representative from the Right, Mr.Singh from the BJP, has spoken on the theme. I am perhaps the sole representative from the Left here. Well, Right is Right and Left is Left, still Left often proves right in matters of economy.

I have been asked to speak on the political economy of underdevelopment in Bihar. As the subject is economy, I would prefer to speak in English to convey my ideas better to the distinguished audience present here.

Bihar is underdeveloped, there can be no dispute over that. But so are several other states and regions of India. Then what is so special and specific about Biharís underdevelopment?

On the eve of independence, Bihar had the lowest per capita income among all the states, and that too lower by a wide margin, although it produced 8 per cent of Indiaís foodgrains, it was 4th among the states in terms of industrial output and the largest producer of coal and steel.

Now, after 50 years of Indiaís independence, Bihar is still the state with the lowest per capita income, barely Rs.10 or so on daily basis, which is less than one-third of Punjabís, another predominantly agrarian economy. And if Dr.GS Bhalla, who spoke in this very conference day before yesterday, is to be believed, Bihar is the only Indian state where the per capita income has over the years actually declined.

This perpetual backwardness, this prolongation of Biharís underdevelopment, or better still non-development, deserves a comprehensive and in-depth study.

Bihar is caught in a trap, a poverty trap, in a vicious circle, and it is not going to be an easy job to break out from that.

Often, hopes have been generated, say in the í50s, when the economy expanded at quite a satisfactory rate, as also in the latter part of the í70s to mid-í80s, when total production of foodgrains had risen, and also the income from agricultureís share had gone up by about 27 per cent.

In the í90s too, statistics do show a high growth rate in foodgrains production as well as a real increase in area under HYV cultivation. Per hectare fertiliser consumption too has increased from 54.14 kg in 1989-90 to 64.51 kg in 1994-95. Household savings have risen considerably as witnessed in the astounding growth of non-banking financial institutions; take, for instance, JVG whose operational base is in Bihar. In the í90s, hopes had particularly risen with the ascendancy of a social-justice regime, which in caste-class terms enjoyed the powerful backing of intermediate castes comprising mainly middle peasantry.

Now after nearly 7 years in power, the government is tottering under the biggest scam of the country, Bihar has entered into yet another phase of political instability, and Bihar is back to square one.

True, there are demographic and technological factors too that are responsible for Biharís underdevelopment. North Bihar has the second highest concentration of population in India after Kerala, but the whole area has no mineral resources. Moreover, it is a flood-prone area. Then coal has been largely replaced by oil and natural gas, and mica has given way to fibre optics. With this, Chhota Nagpurís strategic advantage has also significantly declined.

Still, these are not the only factors responsible for Biharís underdevelopment.

One of the major dimensions of this perpetual backwardness is external, i.e. the status of Biharís economy vis-a-vis the national economy. Some people draw a striking parallel with the North-South divide on a global scale, where the Southís underdevelopment is closely related to the Northís development. One is the condition for the other. So is the case of Bihar in relation to the economy of few developed states. Several economists and social scientists have termed Bihar as an internal colony. Bihar has been the supplier of cheap labour and raw materials to agriculturally and industrially advanced states. Uniform pricing policy of coal and steel had taken away the locational advantages from the Chhota Nagpur industrial zone.

Then again, plan allocations until the advent of the Gadgil formula, were heavily tilted against populous states like Bihar and UP. Even after that, per capita plan allocation in the 7th Plan was Rs.622 for Bihar, less than the national average of Rs.920. Per capita investment from all sources ó public and private ó in Bihar has been lower than other states for over 30 years including the í80s. Substantial part of the savings go out of the state. Investment of long-term institutional funds through IDBI and other such institutions, and UTI, LIC and GIC etc. is lowest in Bihar. Even in the phase of globalisation and liberalisation, the investment scenario is rather bleak here: Bihar got the lowest, just 0.14% of foreign capital investment from August 91 to May 96. In central plan outlays emphasis now has shifted to poverty alleviation and welfare schemes, where the element of capital formation is quite low.

A federal government at the Centre, though led by the same party that is ruling in Bihar, hardly inspires any confidence in terms of according any any preferential treatment to Bihar. The government is, on the contrary, more susceptible to the pulls and pressures of the powerful lobbies of advanced states.

To add insult to injury, in Bihar even half of the amount allotted to and in plans sanctioned is hardly spent due to callous administration.

Perpetual backwardness or the internal colonial status is, therefore, unlikely to be broken just by more allocation of central outlays or by waiting for the entry of foreign capital. Invoking the regional plank may be good politics for marginalised politicians, but it is bad economics indeed.

The impetus to break the vicious circle must come from within, generating vast internal resources. And here we enter into the other major dimension of the underdevelopment, the internal dynamics of Bihar economy.

Firstly, the arena of land reforms. Radical land redistribution is urgently needed to endow the land to enterprising small farmers. Small landholdings in the possession of small and marginal peasants should be given institutional backing to make them economically viable.

To enforce radical land reforms the political class must be prepared to go the whole hog, up to the nationalisation of all land and its redistribution to enterprising small farmers on lease basis. It is equally necessary to guarantee minimum wages to agrarian labourers both in relation to big as well as small farmers.

Secondly, the large amount of rural and semi-urban savings must be tapped by the state government agencies and redirected to farm-investments as well as building up infrastructure and improving social services.

Thirdly, pressure should be mounted on commercial banks in Bihar to improve their credit-deposit ratio and also for increased investment by term-lending institutions, the IDBI groups, LIC, GIC and UTI etc.

Fourth, the Centre should be pressurised for according preferential treatment to Bihar owing to its historical legacy of backwardness.

Only in the context of the internal vibrancy can the measures to attract capital, including foreign capital, for industrial development be meaningful.

Indiaís ruling establishment doesnít bother much about the predicament of the common man in Bihar. With an expanding consumerism they can still sell the largest number of Maruti cars in Bihar. Patna witnesses the highest sale of premium brands of garments like Louis Philippe and Monte Carlo. Large savings from Bihar are channelised to build the fastest growing JVG empire. The best of Bihari brains can always be drained by JNU and Delhi University.

It is for the common people of Bihar and the intelligentsia, who are perturbed by the fact that nearly half of Biharís population goes to bed without food, to take the initiative to break the vicious circle. But you cannot expect it to be done by a political class which is deeply enmeshed in corruption, nor can it be achieved through a bureaucracy that is deep in league with the feudal forces.

An incorruptible political leadership with a grand vision for Biharís development that stands above the factional caste strifes of elites, coupled with the powerful mass initiatives at the grassroots, can alone break the shackles of poverty in Bihar.

Either you have a radical solution or continue with the perpetual backwardness, there is no middle-of-the-road option. There is no use crying oneself hoarse over the rise of extremism in Bihar. In history, extreme situations demand extreme solutions.

Sankat jab vikral ho jata hai, Mahabharat tab anivarya ho uthta hai! (When the crisis becomes colossal then a Mahabharat becomes inevitable!).