Bihar growth: The devil is in the details

Once considered laggard, Bihar in the last couple of years has emerged as one of the fastest growing state of the country. The figures, released by the Ministry of Statistics and Programme Implementation, put the state on the top. With a growth rate of 13.1 per cent in 2011-12, Bihar beat some advanced states like Gujarat, Punjab, Tamil Nadu and Karnataka. Some major states like Uttar Pradesh and Punjab have clocked lower than national average of the GDP.

The growth story of Bihar is, however, riddled with many contradictions. Abhijit Sen, economist and member, Planning Commission, said: “Bihar has now the catch-up growth rate after remaining backward for a long time but it is not necessary that it would cover a long distance in achieving the objective of development with justice.” It will take long years to cover up the huge development deficit.

Interestingly, the growth was jacked up largely by construction sector. The huge growth in construction activities was largely propelled by public investment in the last few years. The annual plan expenditure jumped from `4,000 crore to `24,000 crore, and construction of roads, bridges and government buildings were a major component. The sector is growing at an average rate of nearly 20 per cent. “Assuming the optimistic estimate to be correct, how could construction—with a less than 10 per cent share in the GSDP—push up growth by over 4 percentage points in three years?” asks R Nagraj, Professor, Indira Gandhi Institute of Development Research.

Another factor contributing to the high growth rate is the lower base.  The Gross State Domestic Product (GSDP) of Bihar at 2004-05 prices was estimated at `1.63 lakh crore. Whereas the GSDP of Maharashtra was `7 lakh crore and Gujarat has about `4 lakh crore. Bihar is at the lowest rung with a per capita income of only `13,362, which was one third of the national average of `35,993 and one fifth of `62,729 in Maharashtra.

Moreover, the major factor diluting the growth story is the fast-growing population of the state. According to the 2011 Census, Bihar’s population is 103.8 million, 8.5 per cent of India’s total population. The state has a population density of 1,102 persons per sq km, the highest in the country, against the national population density of 382 per sq km. From 2001 to 2011, the rise in population density in Bihar was as high as 25 per cent whereas it was only 18 per cent at the national level.

“The growth story reveals less and conceals more. Agriculture and allied sectors, on which about 89 per cent of the state’s population depends, have registered negative growth thrice in the past six years. It is a matter of concern,” said N K Chaudhary, Patna-based senior economist. Chaudhary said most of the growth is taking place in the tertiary sector and such a growth would not be sustainable unless the government is able to ensure concomitant growth rate in primary and secondary sectors. He claimed that the growth was not pro-poor as was evident from the rise in number of poor people in the state. The current growth trend was creating islands of development in the ocean of poverty.

“The state government is trying its best to increase its revenue which is lowest after West Bengal and doing massive investment in agriculture. It has also started some institutional reforms particularly in agriculture to maintain the pace of growth,” said senior economist and member secretary of the Asian Development Research Institute (ADRI).

But despite the consistent double-digit growth, poverty is not decreasing. So it makes many analysts ponder where is the impact of growth.

Recently-released Planning Commission data suggest that the number of poor in Bihar has increased by 50 lakh between 2004-05 and 2009-10. Thus the state added the largest number of poor in the country. If 53.5 per cent of Bihar was under the poverty line in 2009-10, the figure was 54.4 per cent in 2004-5.

The tall claim of inclusive growth with justice doesn’t keep its pace with the growth story and in a changed situation, the economic management and good governance would keep the state on top or the whole myth would get exploded.