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Hari Om Gupta

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2 Attracting investments in Bihar

Introduction:

Bihar is the 12th largest state in terms of geographical size at 99,200km² and 3rd largest by
population. Close to 85% of the population lives in villages. Almost 58% ofBiharis are below the age of
25. This is the highest proportion in India.

Bihar lies mid-way between the humid West Bengal in the east and the sub humid Uttar Pradesh in the
west which provides it with a transitional position in respect of climate, economy and culture. It is
bounded by the country of Nepal to the north and by Jharkhand to the south. The Bihar plain is divided
into two parts by the river Ganges which flows through the middle from west to east. Bihar has notified
forest area of 6,764.14 km²,[4] which is 6.8% of its geographical area. Hindi and Urdu are the official
languages of the state, whilst the majority of the people speak one of the Bihari languages ³ Angika,
Bhojpuri, Magadhi, Maithili, and Bajjika.

Ancient Bihar (which consisted of Anga (East Bihar and some parts of Bengal), Videha/Mithila (north-
eastern Bihar and some parts of northern Bengal),Magadha (South Bihar) and Vaishali (Bihar)) was a
centre of power, learning and culture in ancient and classical India. From Magadha arose India's first
great empire, the Maurya Empire as well as one of the world's most widely adhered-to

Hari Om Gupta, 3rd Semester, Real Estate Management, SPA, New Delhi November 2010






3 a n n s mn s n Bha

religions, Buddhism. agadha emires, no aly under he aurya and u a dynas ies, unified large
 ! !
arts of outh sia under a entral rule. Its aital atna, earlier no n as ataliputra, as an
important entre of Indian ivilization. "alanda ! as a entre of learning estalished y the #th entury
$E in Bihar.

Today, Bihar lags ehind the other Indian states in human, economic development
terms, Economists and social scientists claim that this is a direct result of the s ewed policies of
the central government, such as the freight equalisation policy, its apathy towards Bihar,and lack of
Bihari su%nationalism (resulting in no spokesperson for the state). The current state government has
however made significant strides in improving governance.

The Improved overnance has led to an economic revival in the state through increased investment in
infrastructure, etter health care facilities, greater emphasis on education, and a reduction in crime
and corruption. Indian and gloal usiness and economic leaders feel that Bihar now has good
opportunity to sustain its growth in economic development, and as such have shown interest in

investing in the state. recent "ew York Times article talks aout vastly improved law and order

situation in the state and the economic growth shown in past # years. nother BB$ article titled "Where
&ackward' Bihar leads India" talked aout how the state has made strides in the areas of women
'
empowerment, udiciary reforms, tax reforms, and pulic safety. In period of ())3 to ())*, the inflow
of foreign tourists has seen a near-six fold rise from +,,))) to 346,))).

The Economy of Bihar is largely service oriented, ut it also has a significant agricultural ase. The state

also has a small industrial sector. s of ())*, agriculture accounts for 35%, industry -% and service
55% of the economy of the state. anufacturing sector performed very poorly in the state etween
())(.())6, with an average growth rate of ).38% compared to India's /.8%. However, due to efforts
of $hief inister "itish Kumar, Bihar has ecome the second est manufacturing state in India. Bihar
was the lowest 0 per capita in India, although there are pockets of higher than the average per capita
income. Between ,--- and ())8, 0 grew y 5. ,% a year, which was elow the Indian average of
/.3%. ore recently, Bihar's state 0 recorded a growth of ,8% etween ())6²2007, and stood at
'
-42510 $rores 1upees ($21 illion nominal 0). This makes Bihar the fastest growing ma or state. In
actual terms, Bihar state 0 is ranked 2nd out of 28 states. $orruption is an import hurdle for the
government to overcome according to Transparency International India, which highlighted Bihar as the
Union's most corrupt state in a 2005 report. 0espite many recent economic gains, significant
challenges remain to do usiness in the state and the government has also stated that comating
corruption is now the iggest challenge facing the administration. In "itish Kumar's governance there

Ha
m u a, 3 rd m s r, a Es a  anamn ,  ,  h o mr 
4 Attracting investments in Bihar

2
has been an immediate change in Bihar. Life e pectancy in Bihar (61 years) which is almost on par with
the national life e2 pectancy of 62.7 years.

Bihar has significant levels of production

for mango, guava, litchi, pineapple, brinjal, cauliflower, bhindi, and cabbage in India. Despite the
state·s leading role in food production, investment in irrigation and other agriculture facilities has been
inadequate in the past. Historically, the sugar and vegetable oil industries were flourishing sectors of
Bihar. Until the mid fifties, 25% of India's sugar output was from Bihar. Dalmianagar was a large agro -

Hari Om Gupta, 3rd Semester, Real Estate Management, SPA, New Delhi November 2010
5 Attracting investments in Bihar

industrial town. There have been attempts to industrialize the state between 1950 and 1980: anoil
refinery in Barauni, a motor scooter plant at Fatuha, and a power plant at Muzaffarpur. However, these
were forced to shut down due to central government policy which neutralized the strategic advantages
of Bihar. Hajipur, near Patna, remains a major industrial town in the state, linked to the capital city
through the Ganges bridge and good road infrastructure.

The state's debt was estimated at 77% of GDP by 2007. The Finance Ministry has given top priority to
create investment opportunities for big industrial houses like Reliance. Further developments have
taken place in the growth of small industries, improvements in IT infrastructure, the new software park
in Patna, and the completion of the e3 pressway from the Purvanchal border through Bihar to Jharkhand.
In August 2008, a Patna registered company called theSecurity and Intelligence Services (SIS) India
Limited took over the Australian guard and mobile patrol services business of American conglomerate,
United Technologies Corp (UTC). SIS is registered and ta3 ed in Bihar. The capital city, Patna, is one of
the better off cities in India when measured by per capita income.

Education: Historically, Bihar has been a major centre of learning, home to the ancient
universities of Nalanda (established in 450 CE) and Vikramshila (established in 783 AD). Unfortunately,
that tradition of learning which had its origin from the time of Buddha or perhaps earlier, was lost during
the medieval period when it is believed that marauding armies of the invaders destroyed these centres
of learning.

Hari Om Gupta, 3rd Semester, Real Estate Management, SPA, New Delhi November 2010
 4
6 ttracting investments in Bihar

Bihar saw a revival of its education system during the later part of the British rule when they
esta>lished ?atna University (esta>lished in 1917) which is the seventh oldest university of the Indian
su>continent. @ome other centres of high learning esta>lished >y the British rule are ?atna
Aollege (esta >lished in 1839), Bihar @chool of Engineering (esta>lished in 1900; now known
as Bational Institute of Technology, ?atna), ?rince of Wales Cedical Aollege (esta>lished in 1925;
now ?atna Cedical Aollege and Hospital), @cience Aollege, ?atna (esta>lished in 1928) among others.
D
fter independence Bihar lost the pace in terms of esta>lishing a centre of education. Codern Bihar
has a grossly inadequate educational infrastructure creating a huge mismatch >etween demand and
supply. This pro>lem further gets compounded >y the growing aspirations of the people and an increase
in population. The craving for higher education among the general population of Bihar has led to a
massive migration of the student community from the state.

Bihar >eing a comparatively less literate state in India, with women's literacy >eing only 33.57%, is
D
striving to clim> as the government has esta>lished various educational institutions. t the time of
independence, women's literacy in Bihar was 4.22%. It is a pleasant surprise to find that in spite of the
meagre investment on education in Bihar, specially compared to other Indian states, the students have
D
done very well. Eamed national institutes of learning such as IITs, IICs, BITs and II C@ have always
have had a good representation from Bihar which is usually higher than their proportion of the
population. Bihar has a Bational Institute of Technology (BIT) in ?atna and an Indian Institute of
Technology (IIT)in ?atna. 5ther institutions of higher learning and coveted positions in the government
D
also show a greater share than the percentage of their population. recent survey >y ?ratham rated the
a>sorption of their teaching >y the Bihar children >etter than those in other states.

Bihar esta>lished several new education institutes >etween 2006-2008. BIT Cesra started its ?atna
D
extension centre in @eptem>er 2006. 5n 8 ugust 2008, IIT of India was inaugurated in ?atna with
students from all over India. Bational Institute of ?harmaceutical Education and Fesearch (BI?EF) is
G D
>eing set up in Ha ipur. 5n 4 ugust 2008, Bational Institute of Eashion Technology, ?atna was
esta>lished as 9th BIET of India. Ahanakya Bational Haw University a law university and Ahandragupt
Institute of Canagement, a management institute was esta>lished in later half of 2008.@teps to revive
the ancient Balanda University as Balanda International University is >eing taken for which countries
D
like Japan, Korea and Ahina have also taken initiatives. The rya>hatt Knowledge University is almost
D
framed to start in ?atna this year to deal with technical & medical studies & research. The .B. @inha
Institute of @ocial @tudies is a premier research institute in the state. The plan is to create the world·s
>est university in the place which introduced the concept of university to the world. Bihar is pioneer in
the field of yoga with its internationally renowned institute Bihar @chool of Yoga in Cunger.

4
Hari 5m 6upta, 3 rd 7emester, 8eal Estate 9anagement, 7: , ;ew <elhi ;ovem=er 2010
 I
7 ttracting investments in Bihar

Bihar e-Governance Services & Technologies (BeST) along with the Government of Bihar has initiated a
unique program to estaTlish a centre of excellence called Uentre, a finishing school to equip students
with the latest skills and customized short term training programs at an affordaTle cost. The centre aims
to attract every youth of the state to hone up their technical, professional and soft skills and prepare
them for the present industry requirement/joT market.

(http://en.wikipedia.org/wiki/Bihar)

Investments in the state has suffered in past Tecause of various reasons. Vet·s look at them in time
phases:

1. Wast ² TrouTlesome.
2. Wresent ² Wositive.
3. Xuture ² Jptimistic.

Yast ² Trou Zlesome: Wost Independence Bihar has suffered heavily due to political neglect, anti
industrial policies, etc all other reasons may Te summed up as given Telow and are discussed under
separate heads.
[
WJVITIU V \EGLEUT: Bihar was an important part of India's struggle for
[
independence. Gandhiji Tecame the mass leader only after the Uhamparan Satyagraha. fter
Independence, the congress came into power and Bihar was judged as Test administered state at that
[
time. fter that for two decades, the Uongress ruled the state with the help of puppet chief ministries
hand in glove with the central government ignoring the welfare of the people of the state. Since then all
successive governments have Teen marred Ty corruption charges, law and order got worsened,
unemployment increased, industrial units were closed down. This led to large scale migration of laTour
to other industrialised states.
[
\EGLEUT TJ I\]UST^IES: The state has a small industrial sector. s of 2008, agriculture accounts for
35%, industry 9% and service 55% of the economy of the state. _anufacturing sector performed very
poorly in the state Tetween 2002²2006, with an average growth rate of 0.38% compared to India's
7.8%. Historically, the sugar and vegetaTle oil industries were flourishing sectors of Bihar. Until the mid
fifties, 25% of India's sugar output was from Bihar. ]almianagar was a large agro - industrial town.
There have Teen attempts to industrialize the state Tetween 1950 and 1980: an oil refinery in Barauni,
a motor scooter plant at Xatuha, and a power plant at _uzaffarpur. However, these were forced to shut
down due to central government policy which neutralized the strategic advantages of Bihar.

I
Hari Jm Kupta, 3 rd Lemester, Meal Estate Nanagement, LO , Pew Qelhi PovemRer 2010
8 Attracting investments in Bihar

` `
POOR INFRASTRUCTURE: Thanks to British Raj, An e cellent rail network e ists in Bihar, through which
any part in India can be accessed. Good quality ground water is available across Bihar. Problem areas
are rural road connectivity and electricity. Many industrialists are discouraged to invest because of
absence of electricity, which is the basic necessity for all industries. This has worsened due to inaction
of successive state governments.

LOW HUMAN DEVELOPMENT INDICES: Bihar ranks much lower than other states in human development
inde` . With score of 0.449, It ranked 35th in the list of Indian states and union territories for human
development inde` in the year 2005. The literacy rate stands at 52% in which male component is
59.7% and female component at 33.1%. Healthcare facilities were absent or minimal this had led to
high infant mortality rate.

LAW a ORDER PROBLEM: with absence of industries, employment and lack of a strong social setup anti
social elements developed. Illegal activities were on the rise, crime became an indispensable part of
caste based politics. All major political parties provided tickets to criminals for contesting polls and
now these criminals decorate the Bihar legislature. Armed with political protection the criminal setup

Hari Om Gupta, 3rd Semester, Real Estate Management, SPA, New Delhi November 2010
 b
9 ttracting investments in Bihar

further flourished. Businessmen and industrialists had to pay protection money to criminals for the
safety of iusinesses and their own life. Killings and kidnappings iecame part of everyday life. This
affected Businesses, traders and iusinessmen had no other choice iut to migrate. This jesulted in
closure of industrial and iusiness estailishments which were already limited.

POLARIZATION OF INDUSTRIES IN SOUTH BIHAR ( NOW JHARKHAND): South Bihar had vast resources
coal and minerals due to which it was home to heavy industries in automoiile, steel, power, railway,
manufacturing etc. iut in year 2000, Bihar was divided into 2 states, Jharkhand and Bihar in 2000 on
cultural and linguistic grounds, iy the then BJP-led union government as mentioned in the BJP
manifesto. This caused a huge loss to Bihar in terms of revenue generation, industries, natural
resources and education.

Hari cm Gupta, 3 rd Semester, deal Estate eanagement, SPA, few gelhi fovemher 2010
10 Attracting investments in Bihar

Present ² Positive:

After year 2005 Bihar has shown tremendous growth in all sectors me it industrial growth, healthcare,
education, governance, infrastructure etc. this has led to an image makeover of Bihar, now people are
optimistic amout Bihar which was written off till recently. New investments are coming up my private and
pumlic sector alike. Huge untapped potential is set to unleash. Following section covers all promamle
factors which have led to the turnaround of the image.

nHANGE IN LEADERSHIP. NEW GOVERNMENT, SINCE 2004 -05: the miggest change is in leadership that
is change in government, Lalu Prasad Yadav let RJD had ruled the state for past 15 years and was
defeated my Nitish Kumar led NDA in 2005 elections. The new government took major initiative in
infrastructure. New roads were muilt, existing repaired and upgraded. Rural connectivity improved. Law
and order promlem was dealt with. Major industrial houses were invited for identify potential
investments. Social initiatives were taken to strengthen society and for women empowerment. Some
popular initiatives to strengthen system and society include:

1. 50% reservation for women in village panchayats.

2. Jaankari service for RTI act.

3. Free micycles for girl students.

4. Recruitment for govt joms which were lying vacant for years.

5. New Industrial policy.

6. Opening of educational institutions.

INVEST IN INFRASTRUCTURE: Basic infrastructure like Bijli, Paani, Sadak was looked after and
strengthened, which had suffered heavily due to years of neglect. New Roads are meing constructed,
Rural electrification is on rise. Two thermal power plants which were non ² functional have meen
restored and production has restarted this year. Educational Infrastructure Is Strengthened, New
institutes are meing estamlished. One each of IIT, IIM and NIFT are coming up in Patna. Construction of
Nalanda World University, which was a premier seat of education in ancient India, is meing done with
assistance from oriental countries like Japan and China.

INDUSTRIAL REFORMS INTRODUCED: Heavy Pumlic and Private sector participation in Industrialization.
SAIL, BPCL, NTPC etc investing in small and medium size production units. Bihar has attracted private

Hari Om Gupta, 3 rd Semester, Real Estate kanagement, SPA, New Delhi Novemler 2010
11 Attracting investments in Bihar

investments worth Rs.1032 core in the last four years; The Bihar State Investment Promotion Board has
cleared 220 investment proposals in the past four years. An International Finance Commission (IFC)
report titled, "Doing Business in India 2009," has given Patna a numper-two rank in the category of
starting a pusiness. (New Delhi is numper one.) "Business start-up is least expensive in Patna,"
according to the IFC report.

Most of the investments are in the food processing, power, sugar, cement and agriculture sectors.

LAW & ORDER PROBLEM: There is visible improvement in law & order situation following statistics
prove the same:

x  There were 14,664 murders in Bihar between 2006 -Augu2010, down from 22,040 in the five years
from 2000.

x  There were 484 kidnappings between 2006-10, down from 2,196 kidnappings from 2000 to 2005.

x  Roughly 53,600 criminals were convicted between Jan 2006-Sept 2010; 9,280 were sentenced to
life imprisonment and 132 sent to the gallows.

This has helped in resurrection of businesses and tourism. In period of 2003 to 2008, the inflow of
foreign tourists has seen a near-six fold rise from 61,000 to 346,000.

Hari Om Gupta, 3 rd Semester, Real Estate Management, SPA, New Delhi Novemoer 2010
12 Attracting investments in Bihar

Future ² Optimistic:

At the moment the future of Bihar looks great. The growth is tremendous but the size or scale is small
and hence a lot remains to be achieved. To sustain the development following steps should be taken:

CREATE LAND POOL: land is the basic necessity for any kind of development. Bihar has very fertile land
hence agriculture is in predominance. Thus creating land pool is the biggest challenge which the govt. is
facing. All industrial houses look for ready availability of land parcels for investment. Among other
strategic advantages land pool is the biggest advantage which other states enjoys over Bihar. Bihar
govt. has only 3387.08 Acres of land, such short supply can severely affect Bihar's growth story. The
manin reason for such a short availability is that the land here is very fertile and costly. Hence land is
not available cheaply. The state govt. should make efforts to create a land pool to make land readily
available for future investments. if it actually wants to compete with other states for driving home
investment projects. Also the land should be made available at reasonable rates and should be
competitive with other developed states.

ESTABLISH QUALITY INSTITUTIONS : Creation of Manpower pool very important for sustaining the growth
and attracting investments. Good quality employable workforce at various levels shall be made
available for ready absorption. For this Quality technical colleges (engineering, pharmacy and
management) shall be established to attract ITES and manufacturing industries. Training institutes for
creation of skilled and semi skilled labor is a must for manufacturing industry. Along these lines central
institute of plastic engineering and technology (CIPET) is set to establish three branches in Purnia,
Bhagalpur and Chapra.

PRODUCE POWER: Bihar generates only about 5% of its power needs. This is an area where the state
govt. needs to focus most as it is the single largest deterrent to organizations considering investment
opportunities. Now since the coal reserves are transferred to Jharkhand, the state govt. shall have to
establish non coal based power generation facilities like, hydro power, nuclear power and solar farms.
Another potential source of power generation could be Gas based power plants. Bio fuels are another
interesting area. With the availability of large reserve areas, bio-fuel production can be taken up to
meet the requirements of Ethanol for blending purpose with petrol and for Bio-Diesel.

INFRASTRUCTURE: Strengthen power grid structure to avoid tripping of power and to ensure continuous
availability. Rural electrification should be taken up aggressively to bridge rural urban divide. This shall
also help in development of small scale industries in food processing and animal husbandry. Bihar has
good railway network, this should be used more effectively for industrial mobilization. MG lines shall be

Hari Om Gupta, 3 rd Semester, Real Estate Management, SPA, New Delhi November 2010
13 Attracting investments in Bihar

converted into BG. Linkages to raw material centers shall be created. Long delayed project of river trade
linkages shall be implemented immediately.

ORGANIZE INVESTMENT MEETS: Organizing investment meets are a good way of attracting investments
to the state. This has been very effectively demonstrated by developed states like Gujarat, Maharashtra
and Karnataka. Recently investment meet organized by the state of Madhya Pradesh was a huge
success. They were able to attract large investments in manufacturing and education. Bihar can adopt
similar ways of attracting investments by showcasing the growth and opportunities available.
Prefaerably such meets shall be organized in major cities to ensure greater participation.

Hari Om Gupta, 3 rd Semester, Real Estate Management, SPA, New Delhi November 2010
14 Attracting investments in Bihar

References:

www.wikipedia.org

http://www.bihartimes.in/articles/sajjad/lackofvision.html

http://indianeconomy.org/2005/11/22/development-development-what-development/

http://www.hotneus.com/bihar-shows-the-way-sonia-gandhi.html

http://books.google.com

The Times of India.

The Newyork Times.

Where Backward Bihar Leads India, BBC.

Hari Om Gupta, 3 rd Semester, Real Estate Management, SPA, New Delhi November 2010