BIHAR’S DEVELOPMENT CHALLENGES

A Final project made in partial fulfillment of the course Economics-II

During the academic session 2017-18, semester IV

Submitted By:
SANDHI GREWAL
1557
B.A. LL.B (Hons.)
Submitted to: Dr. Shivani Mohan
Faculty of Economics-II

APRIL, 2018
CHANAKYA NATIONAL LAW UNIVERSITY, MITHAPUR PATNA, 800001

1
 DECLARATION PAGE

I here-by declare that project work reported in the B.A.LLB(Hons.) entitled “BIHAR’s
DEVELOPMENT CHALLENGES” submitted by me at “CHANAKYA NATIONAL
LAW UNIVERSITY” is an authentic record of my own work,carried out under the
supervision of “Dr. Shivani Mohan” for the partial fulfillment of the course “Economics-
1I”. This project work is not submitted by me elsewhere for any other degree/diploma
certificate in any Institute or University. I am fully responsible for the contents of my
project report.

SANDHI GREWAL

ROLL NO-1557

B.A.LLB (Hons.)

4th SEMESTER

2
 ACKNOWLEDGEMENT

I owe the present accomplishment. Any project completed or done in isolation is unthinkable.
This project, although prepared by me, is a culmination of efforts of a lots of people.

Firstly, I would like to thank our teacher Dr. Shivani Mohan for her valuable suggestions
towards the making of this project.

Further to that, I would also like to express my gratitude towards my seniors who were
a lot of help for the completion of this project.

The contribution made by my classmates and friends are, definitely, worth mentioning.

I would like to express my gratitude towards my family members help also.

Last, but far from the least, I would express my gratitude towards the Almighty for
obvious reasons.

THANK YOU.

3
 Contents

TOPIC ............................................................................................................................. PAGE NO.

Declaration Page .......................................................................................................................... 2

Acknowledgement ....................................................................................................................... 3

Chapter 1:Introduction ................................................................................................................. 5

Chapter 2: Empirical evidence .................................................................................................... 10

Chapter 3:Growth and structure ................................................................................................ 15

Chapter4: Social and agrarian framework ................................................................................... 22

Chapter5: Conclusions ................................................................................................................ 24

Bibliography .............................................................................................................................. 26

4
 INTRODUCTION

Over last ten years, Bihar has been among the star performers on many developmental indices,
including growth rates. The state developed substantial road network and increased its per capita
income in these years which was facilitated by the high investment in basic infrastructure.

However, the state has been trailing the urban development graph when compared with the other
states of the country. The state often finds its place in the headlines for wrong reasons, including
low level of urbanization. Bihar ranks second least urbanized state among the 35 states and
Union Territories put together. The percentage of urban population to the total population of the
state stands at as low as 11.3 per cent. Needless to say, the state needs to put in gargantuan
efforts to develop urban centres which could facilitate economic growth and offer rising quality
of life to its inhabitants.

In times when cities are looking forward to developing into smart cities and town, Bihar is
gasping to have the basics of urbanization. So what is pulling it down? Is it the real fact or
ambiguities in the survey processes that are making it look worse? Of course this is debatable but
there is a lot more to it than figures.

A report ‘Issues on Urban Development in Bihar’ the state is showing high income growth but it
has not been converted into a rapid reduction in poverty, which as per experts is the root cause of
the low levels of urbanization in the predominantly agricultural state.

Weak Economic Base is mainly underpinning low urbanization in Bihar. Infrastructure deficit is
a continuous constraint in urban sprawl. Population growth and mass influx into urban
habitations have been developing stress over the existing infrastructure and services;
consequently affecting the quality of life of the urban inhabitants.

A resident of Bihar for decades and environmentalist with the UNDP, Deepak Kumar, explains
that there are two major factors that have contributed to the non-realization of the goal of
urbanization. Firstly, it is unplanned township and secondly, mismanagement in the urban
governance.

This apart, the state has been failing to attain an efficient and equitable financial allocation for
urban infrastructure. A government employee in the Urban Development department on the
condition of anonymity explains how any project faces difficulties pre and post execution.

“There are a number of social issues that affect decision making during planning. Any
development plan has to first get sanction from a number of departments. If that is through then
there are hurdles like encroachments, compensation for the displaced, stirs over demands of
some or the other groups, delay which in turn culminates into additional cost, then additional
sanction requests followed by further delay and the story drags on.

5
Migration is another issue that contributes to the sluggish growth. “There has still been a rampant
scale of inter-state mass migration due to lack of feasibility in encouraging the secondary and
tertiary sectors, particularly industry and construction. The issues of Urban Development in
Bihar points out that even though there is a low level and low pace of urbanization, the state
already has a strong evident historical industrial corridor from Bhagalpur to Rohtas. Lack of
correlation of the urbanization pattern and urban growth shows that the growth pattern isn’t
linked with the existing urban growth. The low rate of urbanization in the central and northern
Bihar is mainly attributed to the fact that there has still been large dependence on primary sector
and low growth registered therein.

Several cities and towns of Bihar have been included in the Atal Mission for Rejuvenation and
Urban Transformation (AMRUT). The scheme, launched in 2015, by the government of India
focuses on establishing infrastructure that would ensure adequate robust sewerage networks and
water supplies essential for urban transformation. A large number of small cities have been
included in the program, including Gaya, Bhagalpur, Muzaffarpur, Biharsharif, Darbhanga,
Purnia, Arrah, Begusarai, Katihar, Munger, Chapra, DinapurNizamat, Saharsa, Hajipur, Sasaram,
Dehri, Siwan, Bettiah, Motihari, Bagaha, Kishanganj, Jamalpur, Jehanabad, Buxar and
Aurangabad. In context of urbanization efforts, the 2031 Master Plan for Patna has highlighted
some important guiding principles which show the direction for future urban planning process.
The focus on concepts like multiple nuclei based urban planning, rural urban continuum and
transit oriented development are the futuristic and long term approach which will go a long way
in defining the urbanization effort of the state. Other states also need to follow these principles in
their own urbanization drive. Bihar, comprising about 3 per cent of the total geographical area of

India and about 9 per cent of its total population (102 million according to the 2011 Census), is
the most densely populated stateof the country. However, with an urban population of just 11 per
cent, it is the least urbanized among the major states of India. Until recently, it was also among
the slowest growing, but the growth rate of the state’s GDP has considerably accelerated during
the last seven years, with the state economy growing at over 10 per cent per annum. Even so,
Bihar continues to be among the economically most backward states in the country, with one of
the lowest per capita incomes and highest incidence of poverty. This chapter briefly situates
today’s Bihar in its historical context, and summarizes its key economic and social features – the
structure of its economy, the pattern of economic growth and some of the main aspects of human
development. It also points to some important regional variations across the state. 1

1
https://www.telegraphindia.com/1170224/jsp/frontpage/story_137424.jsp

6
OBJECTIVE OF THE STUDY:

The objective of this project is to find

 What are the reasons behind backwardness of bihar.
 Find the innovating planning process for accuracy and efficiency in bihar
 What are the scheme is taking by the government to remove the problems of bihar.

HYPOTHESIS

1. lack of education for women and girls was the main cause for high population growth
rate
2. Bihar has problem of mass level of youth unemployment and lack of opportunity for the
skilled people.
3. Owing to poor public infrastructure for surface water and increased water stress, farmers
of Bihar have shifted to ground water irrigation as in the case of other states.

RESEARCH METHODOLOGY

The researcher will be using doctrinal method of research for this research work.

SOURCES OF DATA

 Primary sources- Reserve Bank of India Act,1934 and other official document.
 Secondary sources- websites, articles, news paper, books, journals etc.

LIMITATION AND SCOPE OF THE STUDY

Due to lack of time, finance and lack of resources my research work is wholly based on doctrinal
method of research, my research work doesn’t rely on non-doctrinal research or empirical
research. For further research this can be a means of doctrinal research.

7
 2. EMPIRICAL EVIDENCES
This section explores the factors responsible for low levels of development of Bihar and is
organized around structural, institutional and macro-economic factors.

Weak agrarian structure

Bihar is primarily agricultural states with about 80% of their population livingin rural areas and
depending on agriculture directly or indirectly. Land, the primarybasis of agriculture, and social
and political power have remained in the hands of the elite class. Although some efforts were
made in land reform, the elite class frustrated them as it went against their economic and political
interest. Consequently, about one-third of rural households of Bihar is were landless and another
15% operated holdings smaller than 400 m(NSS Report No. 492, 2002–03, p. 176, cited in
Mishra,2007). A similar situation existed in UP (Dreze & Gazdar,2006).While large landlords
still control vast expanses of land, agriculture generally remains in the hands of small holders
and tenants. Tenants who have low levels of savings and who must share the harvest with
landlords have little capital to invest in agriculture and less incentive to do so because of their
insecure property rights. The landholders, who have the capital, have little interest in investing
because agriculture is not their prime occupation and most of them live in towns and cities. As a
result, private investment to increase agricultural productivity has remained suboptimal. The
situation has been further exacerbated by low investment by the public sector in building
physical and economic infrastructures.2

Poor physical and economic infrastructure

Like private investment, public investment in agriculture in Bihar and UP has remained
inadequate. Per hectare capital expenditure in agriculture in Bihar is less than one-fourth of that
of Punjab and less than half the national average (Guruswamy & Kaul,2003).Bihar and UP have
not made enough investment in irrigation infrastructure. Only 50% of agricultural land is
irrigated in Bihar and 60% in UP, compared with 90% in
Punjab and 87% in Gujarat. Owing to poor public infrastructure for surface water and increased
water stress, farmers of Bihar have shifted to ground water irrigation as in the case of other
states. There was a huge surge in the 1980s in Bihar and UP in ground water irrigation. This,
however, did not yield higher productivity because the poor electricity supply and sharp increase
in diesel prices increased the costs of irrigation, land preparation and threshing (Ramagundam,
2009; World Bank,2009). Fertilizer and pesticide prices also increased substantially. Yet, while
input prices had increased significantly, the output price of agriculture remain most stagnant.
Thus, the output input price ratio changed and reduced profitability. To keep the farming
remunerative, the states of Punjab, Haryana, Gujarat, Maharashtra and Karnataka provided
concessions in electricity and diesel prices. The Bihar government, however, could not provide
such concessions to farmers due to financial constraints (Kishore,2004). In addition, most of the

2
https://www.researchgate.net/publication/315014138_Agricultural_Development_in_Bihar_Some_Empirical_Evi
dences

8
farmers in Bihar and UP are not able to receive the price incentives given by central government
through food grain collection owing to small land holdings and little ow public and private
investment, poor physical and institutional infraow public and private investment, poor physical
and institutional infrastructure ,unequal land distribution, poor agrarian social structure including
persistence of feudal elements not only hindered the growth of productivity in agriculture but
also reinforced social inequality that creates structural barriers to the overall development of the
society and economy structure.3

Macro-economic factors

Transfer of resources from the centre to the states The Indian Constitution divides government
functions and financial authority between the central and state governments. Central government
provides financial support to state governments through different mechanisms, such as the
finance commission, planning commission, allocations to line ministries for centrally funded
programmes and through special projects implemented by central government and additional
central assistance. Bihar and UP have been receiving less per capita allocation from the centre
for development expenditure than any other of the states. Until the 7th Plan (1990), Bihar and
UP received less than half the
national average allocation. Although in the 8th Plan Bihar and UP received slightly higher per
capita resource allocations, they still received much less than the all-India per capita average.
After the 8th Plan, allocations to Bihar and UP were once again reduced. Bihar received less than
half the all-India average and UP got two-thirds to two-fifths. If the planned allocation is
compared with the developed states such as Punjab, Haryana, Gujarat and Maharashtra, it is clear
that Bihar and UP have been systematically deprived of funds. In the 1st Plan, Bihar and UP’s
planned allocation was less than one-fourth of Punjab. This pattern has continued for almost the
entire plan period. Contrarily, Gujarat, Maharashtra and Haryana received per capita allocation
of more than double that of Bihar and UP during the entire plan period. Because Bihar and UP
have relatively undeveloped industry and services sectors, the fiscal resource base of both states
is relatively small. Moreover, their low administrative capacity (coupled with the reliance on
patronage politics) has weakened the ability of both states to collect revenue. Bihar and UP were
not even able to manage the matching funds required for centrally sponsored development
programmes . The weak administrative capacity has also led to low utilization of development
funds in Bihar and UP. For instance, in the 8th and 9th Plans Bihar’s utilization rate of all
development funds was less than 50% (Saxena,2007). In spite of the greatest need for
development assistance from the centre, Bihar has the lowest resource utilization rate in India
(Saxena,2011)The unused funds in Bihar are transferred to more efficient states. Moreover, since
resource allocation partly depends on resource utilization capacity, Bihar and UP received
relatively low per capita allocations. This has resulted in avicious circle starting from a low fiscal
resource base, leading to low resource capacity to attract matching funds, low absorptive
capacity, low investment, poor infrastructure, low human resources leading once again to low
private investment and low fiscal resource base.4

3
https://www.researchgate.net/publication/315014138_Agricultural_Development_in_Bihar_Some_Empirical_Evi
dences
4
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2408418

9
Chapter 3: AGENDA,ISSUES, CHALLENGES FOR BIHAR
.

The economics books describe governance, deliverance and development as interrelated

processes with a mutually reinforcing character. Simply put, governance affects development in
a number of ways and development is also understood to influence governance by creating more
resources for expenditure on deliverance.It's a two -way traffic on an interlinked highway. But in
Bihar, the road has just too many roadblocks. No wonder, the governance exercise and the
delivery mechanism is a very difficult process under conditions of poor development. Bihar is
largely considered as a state that has historically faced the double whammy of low level of
development and low level of governance. "We have miles to go. Because we are fighting for a
better future against a history of non-deliverance,". 5

The can-do, bootstrap approach embedded in the new government's mental makeup, however, is
yet to deliver the desirables."Bihar has not been a functional state in the past. Naturally, the state
had no structure to deliver. Now, there has been a sincere attempt to build the structure. Once
this is done, development, equity and commitment to state goals would be visible,"

In fact, Bihar is faced with a plethora of challenges, which includes absence of the delivery
mechanism.

Modi identifies the huge shortage of about 700 officers in the state civil services rank alone as a
big bottleneck. "We have made excellent policies, our commitment too is exemplary. But, we
need officers to implement the schemes at the grass-roots.At present, almost half of the Bihar's
blocks are currently manned though stop-gap arrangements and as additional assignments
attached to the meagre lot of the deputy collectors.Similarly, the deputy collectors are also
doubling as circle officers as well. This has not helped much and left Bihar with a huge backlog
in both the offices. 6Worse still, Bihar runs with almost half the required strength of state
administrative service officers too. It is equally short of IAS officers. The shortage is one major
reason why the state is at the bottom on many parameters.In fact beyond the shortage, many from

5
https://www.ibef.org/states/Bihar.aspx
6
https://economictimes.indiatimes.com/news/economy/indicators/bihar-is-national-topper-in-fy17-growth-with-
10-3-pc/articleshow/63083871.cms

10
the available lot of IAS officers are willing for central deputation. "Many IAS officers have
failed to join us in building Bihar. In fact, it was a huge opportunity. It still is, but not many
appear to be willing in backing the political leadership to the hilt," Modi told India Today.

This is not without reasons. Many officers are reluctant to complement state government's
initiatives with a matching zeal after having witnessed a few of their "over-enthusiastic"
predecessors facing various charges. This is one huge reason why the implementation machinery
in Bihar is considered the weakest link, as it almost ensures poor supervision and quality control
of the development schemes.In some cases, local officials, unscrupulous contractors and the
Naxalites appears to have developed a coalition interest in plundering the public money. Modi
admits that corruption at the junior level is a big impediment

This is not all. Bihar's revenue mobilisations capacity stands constrained by its heavy
dependence on agriculture sector, which is a low revenue generator. In fact, this is the reason
why the government has not been able to make heavy investment in agriculture development.7

Naturally, the cycle goes on.Obviously Bihar needs to diversify to come out of this vicious cycle.
One way out is to promote industry. But, Bihar has a mountain to climb in terms of attracting
real time investments for generating non-agricultural employment.While the law and order has
surely improved, the non-availability of electricity in Bihar is a big barrier, limiting progress
prospects. In fact, Bihar where power cuts are a way of life is faced with a worsening electricity
shortage.

At present, on an average the state needs 1500-1800 MW of power and the allocation from the
Centre is not even 10 per cent. Over the past decade, electricity demand too has been galloping.
In fact, the shortage is so big that it has-to a large extent- so far thwarted Bihar's rush for
development.

The State Investment Promotion Board has cleared proposal to commission 14 thermal power
projects worth Rs 72,511 crore. But all these schemes have so far remained a non-starter in the
absence of coal linkages. In fact, these projects are capable to change the face of Bihar if

7
https://www.ibef.org/states/Bihar.aspx

11
commissioned, but they have not taken off as coal linkages have not been granted by the Centre.
If these proposed power projects were successfully synchronised it would not only make Bihar a
power surplus state with an additional 12,580 MW, but also provide jobs to nearly 15,000 people
directly.

Crisis may not be the correct word to describe such a long-standing shortage, which has its
origins in every link in the electricity supply-chain- from fuel through generation, transmission
and distribution. But crisis is how it has sometimes felt during the last few months, because of a
combination of factors, including Bihar's desperation to move up the development ladder.

In fact, Chief Minister Nitish Kumar has already written to Prime Minister to this effect.
Kumar has also sought a special status for Bihar seeking assistance and support on various
issues, including Kosi Reconstruction and Rehabilitation. The centre is yet to decide.If we talk
about the brass-tacks, Bihar's basic trouble lies in the fact that it has failed to outrun the growing
poverty with its growth rate.According to state government figures the State has 1.22 crore
Below Poverty Line population (BPL). But, State also has received over 5.7 lakh complaints
from as many applicant families, who are seeking the BPL status to this effect. There is a bright
chance that eventually the number of BPL population in Bihar may touch 1.5 crore, which is a
big number to cater to. Massive migration from Rural Bihar is closely related to poverty. It is
predominantly a distress migration to escape the hardship of poverty and is often caused by the
incapability of the local economy to provide sustain livelihood, ensure sufficient income and
employment security.Though rural indebtedness is a universal phenomenon, it is more
pronounced in case of the poor people. Another disturbing phenomenon is the inaccessibility of
the institutional credits for the poor. The credit reserve ratio in Bihar is still pegged at 30.46 per
cent. In fact, it is less than 25 per cent in 12 districts of the state.During the earlier days, the little
empowerment of the indigenous entrepreneurial class and that of the Bihar's business community
also had some economic and political implications. In a political landscape dominated by rural
oligarchy, the business class had little capacity to influence the politicians. 8

This has surely changed now in Bihar. No wonder, despite the bottlenecks everything is not

8
http://indianexpress.com/article/india/bihar-growth-rate-10-3-in-2016-17-economic-survey-5079463/

12
spinning out of control for Bihar. The state has the sturdy conviction that destiny can be
commanded with sheer courage and perseverance.

Over last ten years, Bihar has been among the star performers on many developmental indices,
including growth rates. The state developed substantial road network and increased its per capita
income in these years which was facilitated by the high investment in basic infrastructure.

However, the state has been trailing the urban development graph when compared with the other
states of the country. The state often finds its place in the headlines for wrong reasons, including
low level of urbanization.

As per the figures of the 2011 census, Bihar ranks second least urbanized state among the 35
states and Union Territories put together. The percentage of urban population to the total
population of the state stands at as low as 11.3 per cent. Needless to say, the state needs to put in
gargantuan efforts to develop urban centres which could facilitate economic growth and offer
rising quality of life to its inhabitants.

In times when cities are looking forward to developing into smart cities and town, Bihar is
gasping to have the basics of urbanization. So what is pulling it down? Is it the real fact or
ambiguities in the survey processes that are making it look worse? Of course this is debatable but
there is a lot more to it than figures.

A report ‘Issues on Urban Development in Bihar’ by Amitabh Kundu, suggests that the state is
showing high income growth but it has not been converted into a rapid reduction in poverty,
which as per experts is the root cause of the low levels of urbanization in the predominantly
agricultural state.9

Weak Economic Base is mainly underpinning low urbanization in Bihar. Infrastructure deficit is
a continuous constraint in urban sprawl. Population growth and mass influx into urban
habitations have been developing stress over the existing infrastructure and services;
consequently affecting the quality of life of the urban inhabitants.

A resident of Bihar for decades and environmentalist with the UNDP, Deepak Kumar, explains
that there are two major factors that have contributed to the non-realization of the goal of
urbanization. Firstly, it is unplanned township and secondly, mismanagement in the urban
governance.

This apart, the state has been failing to attain an efficient and equitable financial allocation for
urban infrastructure. A government employee in the Urban Development department on the
condition of anonymity explains how any project faces difficulties pre and post execution.

“There are a number of social issues that affect decision making during planning. Any
development plan has to first get sanction from a number of departments. If that is through then

9
http://www.governancetoday.co.in/the-challenge-of-urbanizing-bihar/

13
there are hurdles like encroachments, compensation for the displaced, stirs over demands of
some or the other groups, delay which in turn culminates into additional cost, then additional
sanction requests followed by further delay and the story drags on. If lucky it completes, if
unlucky then gets abandoned,

Migration is another issue that contributes to the sluggish growth. “There has still been a rampant
scale of inter-state mass migration due to lack of feasibility in encouraging the secondary and
tertiary sectors, particularly industry and construction.

The issues of Urban Development in Bihar points out that even though there is a low level and
low pace of urbanization, the state already has a strong evident historical industrial corridor from
Bhagalpur to Rohtas. Lack of correlation of the urbanization pattern and urban growth shows
that the growth pattern isn’t linked with the existing urban growth. The low rate of urbanization
in the central and northern Bihar is mainly attributed to the fact that there has still been large
dependence on primary sector and low growth registered therein.

According to the Kundu report it is a matter of concern that the number of urban centres in the
state is very low in relation to its population and area even in comparison with other less
developed states in the country. Surprisingly, the number of these centres has gone down from
135 in 1991 to 130 in 2001, which has not been noted in case of any other state. Furthermore, of
the 130 urban centres, only five are Census towns while the others are statutory towns – these
have been declared as towns by the state government. The Census towns thus constitute less than
four percent of the urban centres in the states, compared to the national figure of 26 per cent.

The urbanization figures all over and across reports paints a sorry picture.The biggest road block
is that Bihar needs a progressive urban development policy for rapid urbanization which is not
the case. Kumar explains that a progressive urban development policy will propel the process, of
setting up urbanized areas, as the polar engine of growth.

Another hindrance is the impediments of urban governance. There is an urgent need to mitigate
these impediments that could attract stakeholders and investors for generating opportunities of
employment through sectorial diversification.

A very interesting view, certainly not good for the state’s growth, comes up while talking to
people on why is it that development or urbanization is not happening at the desired pace.
Around 10 people interested in contributing to the state’s growth failed to do so because of the
tedious and lengthy processes involved if someone wanted to offer any help, donation or grants
for the development of the state.10

Then there are legislative challenges that keep the state from urbanizing. Bihar Municipal Act
2007 didn’t consider relevance of services like administration, health, education, finance, trade
and transport for the process of notifying new statuary towns. The Act itself ignores the
increasing built-up area, role of agglomeration (Agglomeration economies are the benefits that
come when firms and people locate near one another together in cities and industrial clusters),

10
https://www.indiatoday.in › Web Exclusive

14
and out growth in the process of notification of new statuary towns. There is a need to eliminate
legislative infringement as a policy intervention for better sustainable urban governance.

The Government needs to liberalize the legislation to facilitate conducive and safe environment
for investment in real estate and manufacturing sector. This will felicitate exploration of the
employment opportunities in such a way that the dependence on primary sector would decline to
a certain extent whereas the share of construction and manufacturing sector in offering
employment would increase. Consequently the interstate migration would slow down.

It is extremely significant that despite low level and low pace of urbanization in the state, a
strong urban industrial corridor has come up on the route connecting Delhi and the cities of Uttar
Pradesh with north Bengal. This can be attributed to trading route from north east India
strengthened by the Delhi-Jalpaiguri railway line. The industrial growth of Bihar had a setback
after the division of the state but there are indications that the growth is picking up in many of
the southern districts that can be attributed to resource support primarily in terms of coal and
electricity from the state of Jharkhand.

The north Bihar has a large number of districts that have less than seven percent population
living in urban centres. Unfortunately, not many of them exhibit rapid urbanization largely over
the past two decades, due to their weak economic base. The low rate of urbanization in most of
the districts in the central and northern region of Bihar can be attributed to their dependence on
primary sector and a low rate of growth recorded therein.

Most of the indicators do show worrying figures but at the same time there is a silver lining.
During the last decade, even though Bihar projected a moderate shift in the trend of urbanization
it has recorded rapid economic development. Several policies of the government like Housing for
All by 2022 and Swachh Bharat Mission that focus on urbanization have given much needed
initiation for development especially for states like Bihar.

Several cities and towns of Bihar have been included in the Atal Mission for Rejuvenation and
Urban Transformation (AMRUT). The scheme, launched in 2015, by the government of India
focuses on establishing infrastructure that would ensure adequate robust sewerage networks and
water supplies essential for urban transformation. A large number of small cities have been
included in the program, including Gaya, Bhagalpur, Muzaffarpur, Biharsharif, Darbhanga,
Purnia, Arrah, Begusarai, Katihar, Munger, Chapra, DinapurNizamat, Saharsa, Hajipur, Sasaram,
Dehri, Siwan, Bettiah, Motihari, Bagaha, Kishanganj, Jamalpur, Jehanabad, Buxar and
Aurangabad.

This apart three cities – Muzaffarpur, Biharsharif and Bhagalpur have listed under the ‘to be
smart cities.’ Experts believe that Smart Cities and AMRUT would pace up the momentum of
expanding urbanization in Bihar.

In context of urbanization efforts, the 2031 Master Plan for Patna has highlighted some
important guiding principles which show the direction for future urban planning process. The
focus on concepts like multiple nuclei based urban planning, rural urban continuum and transit
oriented development are the futuristic and long term approach which will go a long way in

15
defining the urbanization effort of the state. Other states also need to follow these principles in
their own urbanization drive.

At the end of the day, urbanization is interplay of economic development, city planning and
public service delivery. Bihar needs to work on all these areas in order for efficient and
sustainable urbanization to take place. The economic growth of the state has been strong over
last decade; now is the time to work on more direct and complex issues of urban planning.

4.CHALLENGES AND OPPORTUNITIES FACING INDIA’S

POOREST STATE

29.8% of people in India are living in poverty. The main reason is because of the high population
that grows every year in India. It says that 60% of the poor people live in Bihar and some other
states. The reason is mostly because about 85% of people live there. The other reason is because
flood comes in and out a lot in Bihar so it's hard to grow crops there which causes lack of food. I
think that if we move some people to different states, the poverty level will lower down so every
state in India would have about the same population. This topic is important because it tells you
the REAL reason why Bihar is living in poverty. If I was one of the poor people in Bihar, I
would make the most money as I can and move to a better place so I could have a better life with
my family.

In most places in Bihar, two out of three people are low castes. It says that about 86% of the
people in there are living in poverty right now. Nitish Kumar says, “Delhi will come to halt if
Biharis stop work.” Unfortunately, Bihar and the government couldn't help people get to
education or help get a good job. This article is important because this tells you how the
government is trying to help Bihar develope. I think that if the government helps the poor get
education and a job, Bihar would develop quickly and no one would suffer for food or shelter!

The very poor and people who were higher castes than him hated him because of "populist
politics". That time, more than 40% of people lived in poverty in Bihar and very little people
could read or write. It would've But the biggest change is that development will finally get its
place in Bihar. The middle class will again start taking interest in Bihar," 11

11
http://www.governancetoday.co.in/the-challenge-of-urbanizing-bihar/

16
To understand why Bihar has remained largely a poor and an under-developed state even after
more than six-and-a-half decades of independence, it is important to first become aware of the
following facts:

1) Bihar is India’s third-most populous state after Uttar Pradesh and Maharashtra. According to
the 2011 Census, the population of Bihar is 103 million, which is about 8.58 percent of the total
population of the country.

2) Over the last decade, the state has witnessed a 25 percent growth in its population, which is
among the highest in India; and with a fertility rate of 3.7, it is only going to increase further.

3) The state also has the highest density of population of over 1,000 persons per sq km

4) With a literacy rate of 63.82%, Bihar ranks lowest among all the states of India12

Now if we go back in history, we would find that:

1) Bihar, actually, was a centre of power, learning and culture in ancient India. The ancient
universities of Nalanda and Vikramshila, established in the 5th and 8th century respectively,
were important centres of learning that attracted a large number of foreign students and scholars.

2) Ancient Bihar, which consisted of Anga, Videha/Mithila, Magadha and Vajji, gave India its
first and greatest empire, the Maurya empire.

3) During the Gupta empire that also originated from Magadha in 240 AD, the country
flourished in science, mathematics, astronomy, commerce, religion and philosophy. It was
during this period that India was called the ‘Golden Bird’.

4) From Magadha, also arose one of Asia’s most popular religions, Buddhism. Lichchivi, or
modern day Vaishali in Bihar, gave the world its first democracy with a duly elected assembly
of representatives and administrators.

5) Ancient Bihar was also an important centre for scientific developments and Aryabhatta, who
was a resident of Patliputra, observed in 498 AD that Earth revolves on its own axes and around
the Sun.13

12
http://www.governancetoday.co.in/the-challenge-of-urbanizing-bihar/
13
https://www.quora.com/in/What-are-the-main-problems-of-Bihar

17
Bihar tragedy can be traced to the British period when it was a part of the Bengal Presidency:

1. One of the early interventions of the colonial administration was deindustrialisation of the
country, which included the extreme act of extermination of the artisans. Bihar had
suffered considerably because of this policy.
2. As regards the agricultural sector, all its potential was slashed, thanks to the Permanent
Settlement that was introduced in Bengal presidency which included Bihar, which meant
the creation of a class of landlords whose only objective was collection of rent, with no
interest for agricultural development. Thus, the scope for new cultivation had become
negligible by the 1880s and 1890s (According to the Cambridge Economic History of
India).

3) Highly unequal regional pattern of public expenditure and investment.

For example, in 1927-28, the per capita expenditure on general administration in Bihar
(which included present Orissa) was only Rs. 75, compared to Rs. 411 in Bombay
Presidency. The lower per-capita expenditure on basic services like health and education
in the eastern region, especially in United Bihar, under the colonial administration is an
important factor that led to a sharp deterioration in the social development indexes in the
post-independence period.
4) With the demise of industrial economy of Bihar during the nineteenth century and
agrarian crisis becoming acute, significant migration of labour force from the state
became a steady phenomenon. The statistics of migration from Bihar are alarming.
According to 1921 census, whereas 4,22,000 people came to Bihar, 19,17,000 went out
of Bihar. The migration was not limited to Calcutta or Assam alone. Many went as far
away as Fiji and Mauritius.14

Now lets look at what happened in Bihar during Post-Independence Period:

14
https://www.quora.com/in/What-are-the-main-problems-of-Bihar

18
1) When India became independent in 1947, it was obviously hoped that the regional disparities
that had emerged in the country during the colonial rule will be gradually lessened through
appropriate policies. Unfortunately, it was not to be the case. The Freight Equalization Policy
of 1948, whereby basic raw materials like steel, coal and other minerals became available at the
same price, destroyed the comparative factor advantage for Bihar. This did not allow the state in
developing manufacturing and value-added activities. It also destroyed all incentives for industry
to locate in a mineral rich State like Bihar since they could purchase all inputs at same price in
other states as well.

2) The failure to break away from the past in implementing tenurial and land reform changes
resulted in excessive social stratification which prevented both vertical and horizontal mobility.

3) Excessive preoccupation with caste dominated political discourse in the matrix of Governance
pushed the developmental agenda to the margins.

4) The failure to transit from a feudal based economy to a market oriented economy did not
facilitate rapid economic development.

5) Poor governance also resulted in decline of well established institutions which impacted
adversely also in key areas like education and health.15

CHAPTER 4 :- INDUSTRIAL AND AGRICULTURE SECTORS

The acute poverty in Bihar can be traced to the economic backwardness of both the agricultural
and industrial sectors. The reasons for the extreme backwardness of agriculture are both
institutional and technological. Whereas structural and institutional factors acted as a powerful
barrier to the agrarian transformation (there is limited occupational opportunity outside the
agriculture sector in Bihar), the technological factors such as poor development of
infrastructure like irrigation and power, non-availability of modern inputs, low quantum and high
cost of credit and poor extension services, contributed much to the dismal performance of the
state's agricultural sector in the post-independence period. 16

15
https://www.quora.com/in/What-are-the-main-problems-of-Bihar
16
http://www.biharchamber.org/about_bihar

19
Even before bifurcation, the state lagged much behind other states in respect of
industrialization. After division, however, the situation became worse as the bifurcation of the
state also changed the parameters of development matrix in Bihar, particularly in terms of
resource endowments.

Though the colonial legacy had a role to play for the poor social development of Bihar, but in the
post-independence period it further worsened owing to inadequate attention paid by successive
governments in the areas of education and healthcare. But its not as if Bihar is doomed to
remain a tragedy in the geography of India. Post-2005, with a new government under Nitish
kumar, Bihar has made good strides to erase the ills of stagnant economy and poor human
development index. Still, the recent turn-around notwithstanding, the development challenges
facing Bihar remain huge and staggering.

Future of India is inextricably linked with the future of Bihar which in-turn depends on the
quality of governance, political stability and the template of inclusive development. If the present
development pattern of Bihar is any indication, the State can only move upward and forward.

Bihar is located in the eastern part of India. The state is surrounded by Nepal in the north, West
Bengal in the east, Uttar Pradesh in the west and Jharkhand in the south. The state enjoys a
unique location specific advantage because of its proximity to the vast markets of eastern and
northern India, access to ports such as Kolkata and Haldia and to raw material sources and
mineral reserves from the neighbouring states.17

The Gross State Domestic Product (GSDP) of Bihar grew at a CAGR of 12.14% between 2011-
12 and 2016-17. Bihar's per capita GSDP increased from US$ 365.1 in 2011-12 to US$ 598.3 in
2016-17.

Bihar is one of the strongest agricultural states. The percentage of population employed in
agricultural production in Bihar is around 80 per cent, which is much higher than the national
average. It is the third largest producer of vegetables and the sixth largest producer of fruits in
India. Food processing, dairy, sugar, manufacturing and healthcare are some of the fast growing
industries in the state. The state has planned initiatives for the development of other sectors such

17
https://www.telegraphindia.com/1170224/jsp/frontpage/story_137424.jsp

20
as education and tourism and also provides incentives for information technology and renewable
energy.18

The state enjoys a unique location specific advantage because of its proximity to the vast markets
of eastern and northern India, access to ports such as Kolkata and Haldia and to raw material
sources and mineral reserves from the neighbouring states. The state has a large base of cost
effective industrial labour, making it an ideal destination for a wide range of industries.

Total FDI inflows in Bihar and Jharkhand, between April 2000 and September 2017, stood at
US$ 113 million.

Recent Developments

 As of June 2017, 1,114 major & minor roads in the state were completed under
Mukhyamantri Setu Nirman Yojna along with 824 major, minor & mega roads under
various other heads.
 As of August 2017, 4 cities of Bihar namely, Bhagalpur, Bihar Sharif, Patna &
Muzaffarpur are to be developed as smart cities. As on April 2017, under the AMRUT
scheme, US$ 13.84 million were sanctioned to the state of Bihar as a part of the approved
central share towards the projects.
 As of March 2017, 21 super specialty departments in 3 government hospitals have been
finalised by the state & central government, which are expected to be operational by
2019, with a funding of US$ 29.75 million for each.
 In March 2017, the state government passed the Bihar Private Universities (Amendment)
Bill, 2017, that aims at relaxing norms to open a private university.
 With 69.31 million mobile subscribers in February 2017, Bihar has reached the third
largest mobile subscriber base among all Indian states.19

18
https://www.telegraphindia.com/1170224/jsp/frontpage/story_137424.jsp
19
https://www.firstpost.com/india/bihars-development-has-come-a-long-way-education-healthcare-top-priority-
says-nitish-kumar-4215149.html

21
Key Sectors:

 Food Processing and Dairy: In 2016-17, total fruit production in Bihar was 4.27 million
tonnes and total production of major vegetables was recorded to be 14.23 million tonnes.
Bihar is the sixth largest producer of fruits and third largest producer of vegetables in
India.
 Education: The state government has allocated a capital outlay of US$ 3.92 billion as per
the budget 2017-18 for the development of education sector.
 Textile & Leather Industry: Government has allocated a sum US$ 1.53 million during FY
2015-16, for the development of five common facility centres (CFCs) under the Jute
Common Facility Centres (CFCs) scheme for product development, training, market
development, etc. These CFCs are sanctioned at five locations, with 3 locations situated
in West Bengal, 2 locations in Assam and 1 location in Bihar.
 Tourism: The Bihar government has identified total 900 spots, which are to be developed
as tourist places, map to attract tourists from across the world.

Bihar used to clock a growth rate of over 10 per cent in previous economic surveys. Explaining
the reason for the change, economist and member-secretary of Asian Development Research
Institute Shaibal Gupta, who plays a key role in bringing out the survey, said this year the
yardstick for measurement has changed. "Previously the base year was 2005-6. This time the
base year is 2011-12," Gupta said, stressing that economic parameters indicate that the economy
of the state was on track.

The survey points out that per capita income in Bihar was 35 per cent of the national average in
2015-16 compared to 33 per cent in 2011-12.

The survey points out that growth rate of manufacturing was increasing at more than 17 per cent;
electricity gas and water supply at 15 per cent; and trade, hotels and restaurants at 14.6 per cent.
Along with transport, storage and communication, these sectors are the drivers of growth of the
Bihar economy. It also claims an increase in revenue surplus to over Rs 12,500 crore, the highest
for the state so far. The survey states that the state's public debt was Rs 88,829 crore, which
means that the debt-GSDP ratio is well below 25 per cent specified by the 14th finance
commission. The tax revenue of the state has increased by about 19 per cent annually since
2011-12 and stood at Rs 25,449 crore in 2015-16.20

While claiming that Bihar produced total cereal of 140.9 tonnes in agriculture, the state claims a
growth of over 25 per cent in milk production from 2011-12 to 2015-16. Similarly, there has

20
http://indianexpress.com/article/india/bihar-growth-rate-10-3-in-2016-17-economic-survey-5079463/

22
been an increase of over 32 per cent in production of eggs and peak production of 5.07 tonnes of
fish.

Bihar, being an agriculture-dominated state, relies on farming and allied business to give a thrust
to the GDP.

In the industrial sector, the state claims there was a growth of 39.4 per cent between 2005 and
2013 and it had over 17 lakh economic enterprises.

The main thrust remains agro-based industries and the number of food processing units in Bihar
in 2013 was put at 399 which together employ more than 48,000 people. In the tourism sector the
number of foreign tourists has remained almost stagnant at around 9,23,000 annually. The survey
claims there has been a growth of 50 per cent in domestic tourism.

The state claims to have invested in a major way in infrastructure with funds spent on
construction of roads and bridges increasing by nearly three fold between 2007-08 and 2016-17.
It claimed that in 2015-16 around 16.4 per cent of its expenditure was on roads. It has put the
length of national highways at 4621km and state highways at 4235km. It has stressed that even
district roads are being converted into double-lane roads. The survey points out that the number
of registered vehicles in Bihar has been increasing annually at more than 15 per cent for the last
five years and in this regard Bihar was the second fastest growing state after West Bengal which
is increasing at the rate of around 24 per cent. Similarly in the telecom sector, the growth has
been phenomenal with telephone connections standing at around 7.5 million.

In the energy sector the survey points out that the availability of energy has grown by 120 per
cent from 2011-12 to 2016-17. "The generation and purchase of power in Bihar increased from
11,966 MW in 2011-12 to 221,677 MW in 2015-16. It also pointed out that over 23,000 villages
have been electrified. The survey claims that it has reduced poverty level by 20.7 points and
speaks elaborately about PDS, MNREGA and Self Help Groups.

In urban development the state has claimed an annual growth of around 22 per cent in housing.
Banking sector remains a dark spot of the Bihar economy. The survey points towards 41.7 per
cent C/D ratio.21

21
http://indianexpress.com/article/india/bihar-growth-rate-10-3-in-2016-17-economic-survey-5079463/

23
CONCLUSIONS

Bihar is classic examples of how a rich natural resource-based economy can be caught by a low-
level equilibrium trap. This study analysed the underlying causes of low levels of development
of Bihar and UP. The analysis revealed that a host of interacting factors ranging from social and
economic to historical and political directly or indirectly influenced the development path and
pace of Bihar.

the economy of Bihar has remained agricultural despite possessing huge mineral resources. This,
combined with continued minimal financial support from the centre, has undermined these
states’ capacity to invest in health, education, and other social and physical infrastructure. Hence,
the states’ vast human population has remained as a liability with poverty, illiteracy, malnutrition
and low skill. Low human capital, weak institutions and poor infrastructure, together with
political instability and social conflict, have put these two resource-rich states in the low-level
equilibrium trap. The social structure, particularly caste, class and ethnic division, has made the
development process more complicated and difficult. These, combined with unstable centre-state
power relations that determine the resource availability from the centre, have undermined the
capacity of the governments of Bihar and UP to plan, implement and support development
activities, and frustrated their attempts to create a conducive environment for investment, private
sector engagement, infrastructure development and establishment of the rule of law. Despite
recent changes in power structure, conditions favourable for investment, growth and social
development have yet be to put in place due to political turmoil, corruption, and poor law and
order conditions. As a result, Bihar and UP lagged behind in economic growth.The present
economic growth of Bihar supports the findings of this study that improvement in governance,
effective administration and large investments are major stimuli of economic growth. The
findings of this study offer some important insights into the economic literature that often
considers economic growth as a function of selected parameters. The present economic growth
of Bihar supports the findings of this study that improvement in governance, effective
administration and large investments are major stimuli of economic growth. The findings of this
study offer some important insights into the economic literature that often considers economic
growth as a function of selected parameters. economic growth to be a dynamic process that
depends on resource endowment, social structure, institutional arrangements, economic policies,

24
and environment and technological and human resource development. The result suggests that a
holistic analysis that focuses not only on individual choices but also on social structure, caste,
class, institutions and historical factors is necessary to understand the sources of economic
growth. Although not surprising, this finding emphasizes the complex interplay of multiple
factors for economic growth, which many scholars have so far failed to appreciate.

SUGGESTIONS

 Relax laws that permit setting up a school in the state. This will increase private
investment in the sector at the same time help improve literacy in the state.Re-evaluation
the skillset of teacher in government schools of the state. Give them training if
neededStart campaigns encouraging families to send their kids to school.Revise syllabus
of Bihar Board. Include topics that inculcate confidence amongst kids to call them a
Bihari proudly.

 Government should organize meeting of prominent Businessmens and Company

distributors frequent. It should educate them to change their approach and tell them to
clear their debts with companies on time. Strict measures can also be taken by the state
government against distributors who are caught involved in these practices.
 Investment in IT - A strong e-governance will reduce the corruption. High speed internet
availability will make life easier for people in Bihar. IT is the only sector which can
develop in Bihar, due to its little dependence on infrastructure. When it comes to solving
problems, Biharis are nowhere behind the rest of India. Success rate of Biharis in
competitive exams proves this. Keeping the industry to a city will make it easier to keep
it safe. The students from educational hub can find their job nearby, contributing to the
economy for Bihar. Investment in internet can revive Bihar as educational hub and attract
IT companies. Investment in IT will also help the world to help Bihar. Even if major
companies don’t come, work can be outsourced to Bihar due to cheap labor.
 Improve the agriculture - Agriculture in Bihar is still using ancient methods. Improving
agriculture will help to earn money. I observed multiple instances where people

25
 purchased land then moved outside, leaving the land unused. Even if they are not
involved in farming still they are buying lands, while the poor farmers are unable to have
their own land. This should be discouraged.
 Flood control - A flood can undo years of development. It can halt life of days causing
huge loss of not just money but life also. Until this is controlled, no development will be
fruitful for long term.

BIBLIOGRAPHY

BOOKS

 Rajesh Chakraborti, bihar break through

 Thomas Sowewll , Basic economics
 Bimal Jalam, The Indian economy
 Uma Narula, Indian economy
 K.R Gupta, Indian economy

WEBSITES

 https://www.ibef.org/states/Bihar.aspx
 http://indianexpress.com/article/india/bihar-growth-rate-10-3-in-2016-17-economic-
survey-5079463/
 http://www.financialexpress.com/economy/bihar-budget-2018-
 http://www.newindianexpress.com/nation/2017/feb/23/bihar-maintains-momentum-at-76-
percent-says-economic-survey-1573984.html
 https://www.hindustantimes.com/
 https://mpra.ub.uni-muenchen.de/53285/1/MPRA_paper_53285

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