66th Mains: Bihar Economy Introduction

Bihar Economy Overview:

• Bihar has experienced consistent socio-economic development over the last decade, despite limited availability of financial resources.
• The growth rate in Bihar in 2019-20 fiscal has been recorded at 10.5 per cent while it was 4.2 at the national level during the period. i.e. the growth was more than double the rate of growth at the national level.
  • The varying growth rates of different sectors has also resulted in structural changes in the economy— the share of the primary sector in GSDP has decreased and the share of tertiary has increased.
  • The growth is primarily led by the tertiary sector (growing at around 13%).
• In the recent years, the overall inflation rate and rural inflation rate have been much lower in Bihar than the national inflation rates.
• This growth performance of the Bihar economy was possible because of high development expenditure by the State Government in the recent past.
  • To supplement the growth process, the State Government is working on the ‘Seven Resolves’ (Saat Nishchay) which includes:
    • Welfare of youth,
    • women employment,
    • supply of electricity to all households,
    • clean drinking water,
    • road connectivity,
    • toilet facility, and
    • provision of higher technical education.
  • In addition to the efforts to achieve higher economic growth, the State Government has also focused on addressing challenges to the environment through its ambitious programme ‘Jal Jeevan Hariyali Abhiyan’, started in 2019-20.
    • This programme is an initiative of the State Government that brings focus of the policy making to the issues consistent with sustainable development.
    • An amount of Rs. 24,524 crore is budgeted to be spent on this scheme in Bihar over the next three years starting from the FY 2019-2020.
• According to economic survey 2019-20, the per capita GSDP (Gross State Domestic Product) of Bihar was ₹47,541 at current prices and ₹33,629 at constant prices. Currently, the state GDP per capita is nearly one-third of national average.
  • Note: When India got independence, Bihar’s GDP per capita was 80% of national average.
• The growth rate of the current fiscal 2020-21 will be issued separately later as it is difficult to tell about the growth rate of the current fiscal due to the state witnessing a ‘V-shaped’ growth.
• The varying growth rates of different sectors has also resulted in structural changes in the economy— the share of the primary sector in GSDP has decreased and the share of tertiary has increased.
  • The share of Primary sector has come down from 25.8 percent to 19.7 percent during 2011-12 to 2018-19, whereas the share of Tertiary sector has increased from 55.5 percent to 61.2 percent during the same period. The share of Secondary sector was 18.8 percent in 2011-12 and marginally higher at 19.1 percent in 2018-19.
    • Within the tertiary sector, two sub-sectors which had noticeably increased their share in Gross State Value Added (GSVA) between 2013-14 and 2019-20 are – Road transport (from 4.4 to 5.9 per cent) and other services (from 10.5 to 13.8 per cent)
  • Broadly, the current share of Primary, Secondary and Tertiary sectors in the GSVA is 19%, 21% and 60%, respectively.
  • The contribution of the overall Secondary sector has remained between 19 and 20 percent during 2013-14 to 2018-19.
    • Within the Secondary sector, Construction and Manufacturing are major contributors to the GSVA and their shares were 9.5 and 8.2 percent respectively in 2018-19 and these shares have remained almost unchanged in the last five years.
  • The share of overall Tertiary sector in GSVA has increased between 2012-13 to 2018-19.
    • In the Tertiary sector, major contributors to GSVA were — Trade & Repair services (18.2 percent), and Real Estate, Ownership of Dwelling and Professional Services (9.1 percent).
• The state has managed its finances prudently and has adhered to the resolutions of the Bihar Fiscal Responsibility and Budget Management (FRBM) Act, 2006.
  • The State’s finances are in good shape as:
    • The fiscal deficit was 2% during 2019-20 that is under the prescribed limit of 3 % and
    • the interest payment was 8.85% of total revenue receipt during 2019-20, which is under the limit of 10% as recommended by the 14th Finance Commission
  • Despite the limitations in improving revenue generation from own sources, the state could generate substantial revenue surplus during the last decade which provided some useful fiscal space for public investment.
• According to Economy survey 20-21, 57.6 per cent of male workers in Bihar were self-employed while the proportion of regular wage/salaried male workers in Bihar was just 9.7 per cent, the lowest among all the states in India.
• Credit Deposit (CD) ratio of banks are quite low in Bihar. According to economic survey 2020-2021, CD ratio of scheduled commercial banks in Bihar has increased from 34 per cent in 2018-19 to 36.1 in 2019-20 which is lower than the national average of 76.5 per cent.
  • The low ratio indicates that banks are not making full use of their resources for promoting economic activity in the region from where it has mobilised deposits..
• There is a considerable disparity across the districts within the state in terms of socioeconomic development.
  • The three relatively most prosperous districts based on Petrol consumption per thousand persons are — Patna, Muzaffarpur, Gopalganj.
  • The three most prosperous districts in terms of per capita small savings are — Patna, Saran and Buxar.