Economic Expansion: Nitish Kumar’s Next Challenge in Bihar

Nitish Kumar must continue to deliver developmental strategies & create opportunities for the youth.

Nitish Kumar is set to govern for the third consecutive term as the chief minister of Bihar. While his victory in alliance with his former rival Lalu Prasad from Rashtriya Janata Dal and Indian National Congress was no mean feat, his next challenge begins with the formation of a stable government and ensuring rapid expansion of Bihar’s economy. To be more precise, continuing to deliver developmental strategies for the state and creating opportunities for the state’s youth.

Fast-Tracking Growth in Bihar

Bihar needs to grow like China did (until recently), but not by building ghost cities and sweat shops. The state has the lowest per capita income and the size of its economy is still very small. In this context, the 9.3% compounded average growth rate (CAGR) of the previous 10 years is too little for a state where over 40% of the population still lives below the poverty line. The Ministry of Statistics and Programme Implementation (MOSPI) data show that state’s economy was the 14th largest in the country in 2014-15, moving up by just one notch from the 15th position it occupied in 2004-05 when Nitish Kumar first assumed office as the chief minister.

The size of the economy in 2014-15 was estimated at Rs 1,89,789 crore. Maharashtra, a state where many people from Bihar emigrate in search of employment, is about five times bigger – at Rs 9,47,550 crore.

The Great Divide

People in Bihar have only a slight fraction of the income of those living in Delhi. At Rs 36,143, Bihar’s per capita income is just 15% of Delhi’s Rs 2,40,849. People in the neighbouring Uttar Pradesh were relatively better off with per capita income of Rs 40,373.

According Rangarajan Committee estimates, based on per capita monthly consumption expenditure data for 2011-12, over 40% of Bihar’s population, which is about 44 million people are living below the poverty line. Bihar’s growth in the past decade was aided by construction and a telecommunications boom. But there is a need for more businesses investments in the state to drive up growth and create employment for its people.

Bihar Among Least Industrialised States

While law and order in the state has improved in the 10 years of Nitish Kumar’s reign, the state needs to do a lot more to attract investments. Currently Bihar ranks at 21 in the World Bank and Department of Industrial Policy and Promotion Report on Assessment of State Implementation of Business Reforms – making it an unattractive place for business. In comparison, other poor and backward states such as Jharkhand and Chhattisgarh are ranked at third and fourth positions respectively, as they are seen to be implementing multiple reform measures. Bihar is currently among the least industrialised states.

The Annual Survey of Industries, published by MOSPI, estimates the state had only 3,345 registered factories in 2012-13 employing 1,00,512 workers. In comparison, Tamil Nadu, the country’s most industrialised state had 36,869 factories, 11 times more than Bihar, employing 16,02,447 workers (about 16 times more workers).

The two locomotive factories GE and Alstom, which together invested a total of $5.6 billion in Bihar, could signal a new phase in the state’s industrial development. The two projects will also bring ancillary units to feed to the two locomotive plants. Nitish and his government should capitalise on the spotlight on the state to create an environment where more businesses see Bihar as a gateway to consumers in the eastern part of the country and as a place where cost of setting up a plant will be competitive with an abundant supply of workers. It will also involve cutting down bureaucratic red tape.

Containing Migration

The state has a highly agrarian economy with vast tracts of the state under farming, a lot of which is under-productive. Bihar cannot and should not ignore agriculture given its natural advantage such as a highly fertile soil, access to water from several rivers for irrigation and sub-tropical climate. The Rainbow Revolution, akin to the Green Revolution, proposed by Nitish Kumar as a pilot in the past, can change the face of Bihar’s agriculture if it is implemented well throughout the state. It also has the potential to raise rural incomes and contain the current wave of migration that the state is experiencing.

But migration from Bihar is unlikely to stop. Nor should an end to migration from the state be desired. Bihar has among the youngest population in the country and there is no shortage of able-bodied individuals to work in farms and factories not just in other northern Indian states such as Punjab and Haryana but also in gradually ageing states such as Kerala.

Bihar could reap demographic dividend with increased focus on education and skill development, for both boys and girls. Nitish and his allies should use the massive mandate they got in the recent Assembly election to change the face of the state with a model of development that is based on inclusion and meritocracy. He owes it to the people who voted for him.

(The writer is a Delhi-based senior journalist)