Q. What are the main constraints in the rapid economic development of Bihar? How can these constraints be removed? [65th BPSC/2020]

Q. What are the main constraints in the rapid economic development of Bihar? How can these constraints be removed? [65th BPSC/2020]
Ans:

Since independence Bihar is among the most economically backward state of India. Even though remarkable growth rate has been recorded in recent years (e.g. In 2020-21, GSDP of Bihar grew by 2.5% even when the Indian economy shrank by 7.2% because of covid-19 associated lockdown. In 2019-20, Bihar recorded a double digit growth rate of 10.5 per cent which is higher than the growth rate of Indian economy at 4.2 per cent in the same fiscal), Bihar still remains the poorest state with per capita income being less than third of the national average.

The main constraints in the rapid economic development of Bihar:

• Historical:
  • British exploitation to this area started right after battle of Plassey in 1757. Thus, Bihar had comparatively larger period of exploitation than other parts of India.
  • The economic marginalization that started during the colonial period continued even after independence.
• High population and low skill:
  • As per the 2011 Census, Bihar was also India’s most densely populated state, with 1,106 persons per square kilometre (compared to 382 per square kilometre in India). Bihar has third largest population while 13th largest state area-wise.
  • While skilled human resources are a driving force for economic growth, a balance between population and economic growth is essential for the manpower to be absorbed by the productive sector.
  • People are an asset when they are skilled enough to take the existing opportunities or create new opportunities through innovation and entrepreneurship. However, a large section of the population in Bihar has remained unskilled and poorly educated.
• Weak agrarian structure:
  • The contribution of agricultural and allied sectors to the Bihar’s GSVA is around 20 percent.
    • But, as per 2011 census, of the total population of Bihar state, around 88.71 percent live in the villages of rural areas, depending on agriculture directly or indirectly.
    • More than 70 percent of the population is engaged in agricultural operations. (Economic survey of Bihar 2019-2020)
  • Land fragmentation: Land, the primary basis of agriculture, and social and political power have remained in the hands of the elite class.
    • According to Bihar economic survey 2020-2021, The small and marginal landholdings which are less than two hectares, account for nearly 97 percent of the landholdings in Bihar, operating about 76 percent of the total area of operational holdings in the state.
  • Agriculture sector employs more than required number of people. It results disguised unemployment.
  • Low productivity: Bihar’s food grain yield is lower than the national average and less than half of Punjab’s.
  • Backwardness of agricultural technology, Low investment in private sector, problem with marketability of agri products etc.
• Poor physical infrastructure:
  • The road length per lakh of population in Bihar is second lowest in India after Jammu & Kashmir. [Although road density in terms of geographical area in Bihar is 3086 kms per 1000 sq. kms and ranks third in all India.]
  • Only around 63% of the cropped area in Bihar is under irrigation. 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. This has resulted in over-exploitation of ground water.
  • Other sectors like Civil Aviation, Construction, warehouse, ICT infrastructure etc are lagging behind the other states.
• Poor social infrastructure:
  • Deep rooted caste system, widely prevalent patriarchy and high prevalence of child marriage etc.
    • The caste system caused lacking of innovativeness among a vast section of population.
  • Bihar is the least literate state in India with literacy rate of 63.82% ac to 2011 data.
  • With one hospital bed per 8,645 people, Bihar has the lowest bed-population ratio.
    • According to WHO, there should be one doctor for 1,000 people. However, in Bihar, one allopathic doctor serves 43,788 people. [according to National Health Profile 2019]
  • The states’ vast human population has remained as a liability with poverty, illiteracy, malnutrition and low skill.
  • Social conflict:
    • Caste conflicts e.g. Bara massacre, Senari massacre etc.
    • Communal riots.
  • The exploitative landlord class established during British rule, which constantly resisted economic and social development even after independence in 1947.
    • Despite several attempts, land, which is the main productive asset in rural areas, has remained in the hands of a few absentee landlords, who have little interest to invest in land to increase productivity.
  • The canvas of social-movement was limited here. There were only two identity: Caste and national.
    • Sub-nationalism was al-together absent. =>Lack of emotional attachment to this area => no interest in it’s development.
• Other economic constraints:
  • Low capital resulting from low savings rate due to low productivity and high propensity to consumption reinforces the ‘vicious circle’ of poverty and the ‘low level equilibrium trap’.
  • The overall poverty ratio of Bihar was 33.7 percent (2011 census) compare to 21.9% at national level.
  • Jobless growth: The growth of secondary sector which is labour intensive has been slow. The share of Secondary sector was 18.8 percent in 2011-12 and marginally higher at 19.1 percent in 2018-19.
  • Poor financial inclusion:
    • Bihar was ranked 32nd in the CRISIL Inclusix index of financial inclusion and 29th in the financial education survey conducted by NCFE (February 2018).
    • People struggle to effectively use their bank accounts due to low financial awareness and inadequate penetration of banking channels, especially in rural Bihar.
• Political constraints:
  • Bihar is among the most poorly governed states of India.
  • The alignment of political forces on the basis of caste and ethnic identity.
    • Post 1970s, several parties emerged in Bihar to represent caste and ethnic interests of less powerful groups. Although this has changed the political landscape of Bihar and the parties representing discriminated caste and ethnic groups have won elections, sectarian caste-based politics have failed to improve government performance in terms of economic growth.
    • Caste-based politics in Bihar promoted an electoral culture that locks in votes for candidates based on caste, regardless of their competence or performance.
    • The conflict between the so-called ‘backward’ and ‘forward’ castes has been an ongoing phenomenon in Bihar since the independence of the country.
  • Political instability:
    • More than 20 governments were in power in Bihar from 1961 to 1990, of which none was able to complete its term of office.
      • Bihar had 40 change of hands in just 70 years. On average Chief Ministers of Bihar had a tenure of 1.5 years. In fact many stayed in office for just a few months.
      • Bihar has had 23 different Chief Ministers in its 70 years history. Punjab has had only 14.
      • As a result, most of the governments remained dysfunctional with a weak capacity to enforce law and order, regulate and guide the activities of the private sector, and design and implement programmes and projects effectively.
  • Input related corruption in development work:
    • Due to this, the expected development didn’t materialized.
    • In other states, corruption was turn over based -> so projects were first completed.
  • All these adversely affect the quality of governance, the rule of law, financial management, and implementation of developmental plans and programmes.
  • Due to poor governance, physical and economic infrastructures such as roads, transportation and electricity, essential for attracting investment and pursuing other development efforts, have remained inadequate in Bihar.
  • Weak administration also undermined government’s capacity to mobilize local resources effectively to fund development expenditure.
• Adverse impact of certain policies:
  • Transfer of resources from the centre to the states:
    • Bihar has been receiving less per capita allocation from the centre for development expenditure than any other of the states. Right from the beginning of planned developement, It has received less than half the all-India average.
      • Since resource allocation partly depends on resource utilization capacity, Bihar received relatively low per capita allocations.
    • Because Bihar has relatively undeveloped industry and services sectors, the fiscal resource base of both states is relatively small. Moreover, their low administrative capacity has weakened the ability of both states to collect revenue.
    • Bihar was not even able to manage the matching funds required for centrally sponsored development programmes.
    • Bihar has the lowest resource utilization rate in India. The unused funds in Bihar are transferred to more efficient states.
  • The policy of ‘freight equalization:
    • It was introduced in 1952 and remained in force until 1993. This policy further marginalized Bihar.
    • Under this policy, railway freight rates for industrial inputs like coal, iron ore, steel and cement were structured in a way that would ensure that they were available at the same price in all parts of the country through government subsidies.
    • The impact of this policy is distributed unevenly.
    • While this policy helped some states of the south and west to build industries with raw materials sourced from Bihar and UP at subsidized transport costs, it neutralized the benefits of proximity and comparative advantage of Bihar and UP in establishing locally available mineral resource-based industries.
      • While coal and other natural resources available in Bihar and other eastern states were made available inexpensively to other parts of India, other industrial inputs available in other parts of India were not included in the freight equalization scheme, such as petroleum products.
    • This policy negated the comparative advantages of Bihar’s mineral resources and affected industrial and economic growth through dynamic loss of forward and backward linkages.
      • Consequently, the economy of Bihar and UP has remained agricultural despite possessing huge mineral resources.
    • While the freight equalization policy was cancelled in 1992, Bihar had already fallen behind.
    • While Colonial India’s permanent settlement policy took away Bihar’s agricultural productivity, independent India’s freight equalization policy destroyed Bihar’s industrial ambitions.
• Natural disaster:
  • Flood:
    • Bihar makes up 16.5% of India’s flood affected area and 22.1% of India’s flood affected population.
    • About 73.06% of Bihar’s geographical area, ie 68,800 square kilometres (26,600 sq mi) out of 94,160 square kilometres (36,360 sq mi), is flood affected.
    • On an annual basis, they destroy thousands of human lives apart from livestock and assets worth millions.
  • Earthquake:
    • Bihar is located in high seismic zone. that falls on the boundary of the tectonic plate joining Himalayan tectonic plate near Nepal-Bihar border.
    • Of 38 district of Bihar, 8 districts fall in seismic zone V while 24 district fall in seismic zone IV and 6 district in seismic zone III with most district falling under multiple seismic zones.
    • The worst earthquake was the 1934 earthquake in which more than 10,000 people lost their lives and city of Munger was totally devastated, followed by 1988 earthquake and recent one include sikkim earthquake in 2011 and Nepal earthquake 2015.
  • Drought:
    • Irregularity and shortage of rainfall is the main cause behind the drought condition in Bihar.
    • It affect agriculture the most, on which more than 80% of Bihar population is dependent.
    • In 2019, Bihar experienced both drought and flood simultaneously.
      • A drought-like situation prevails in 22 districts, while 12 districts are affected by floods. North Bihar is engulfed in a flood, while south Bihar is experiencing severe drought with deficient rainfall.
  • Other disasters faced by Bihar are Heat wave, Cold wave, Thunderstorms and Cyclone.
• Climate change and Land degration:
  • Climate change threatens the sustainable development. It disturbs the monsoon pattern, affects agrarian productivity and leads to land degradation.
  • According to a recent report, more than 60% of the total land area of Bihar is affected by degradation, which results in 14% loss of the total value of its agricultural production.
• Other:
  • No proximity to any large Industrial city.
  • A landlock state lacking the international linkages.
  • Brian drain: Skilled and educated people migrate to other area looking for better life opportunity.
  • Pandemics like Covid-19: it severely impacted the Bihar economy since 2020.

There is need of a holistic approach to remove these constraints:

• Focus on human development to convert the huge population into assets for economic developement.
  • Proactively participating in the implementation and realization of goals of National- health policy (2017), and National education policy(2020).
  • Realizing the goals under seven resolve part 2.
• To transform the vicious circle into a virtuous circle, increased savings, capital formation and a big push in investment are needed.
• Creation of social infrastructure.
  • Promoting inter caste, Inter religion harmony.
  • Women empowerment and facilitating their participation in economy and decision making.
• Creating institutional and physical infrastructure:
• Land reform, Encouraging entrepreneurship, Commercial Farming, effective implementation of agriculture road-map.
• Bringing more people out of low paying agriculture sector and promoting the secondary sector.
• Attracting private investment to boost capital formation especially in labour intensive industries..
  • e.g. Bihar Agriculture Investment Policy 2020: To encourage investment in agriculture sector and attract investments in agro-based industries in the state.
  • Amendment 2020 in Bihar industrial Investment promotion policy 2016: Any unit investing > 25 lakh OR providing employment to 25 workers/persons will be eligible to apply under this policy.
• Promoting FDI and other external funding for capital investment.
• Boosting Financial inclusion through boosting the banking infrastructure in rural area. The schemes like JEEViKA will also help.
• Bihar Industrial Area Development Authority (BIADA) has facilitated industrialisation in Bihar through several reforms. The impact of major reforms was visible, as the level of investment has increased in recent years.
• Moving towards E-governance to bring more transparency and effective delivery of services. e.g. The ICT infrastructure in the state has been strengthened through implementation of BSWAN, SecLAN, State Data Centre, Common Service Centres, Wi-Fi Projects, Aadhar, Bharat Net, etc.
• Achieving targets under sendai framework by collaborating with other government and civil societies.
  • Rejuvenating wetlands and other water bodies will help us deal with problem of floods and drought.
• Addressing the issue of climate change and land degradation:
  • Increasing the forest and tree cover. e.g. The Bihar State Agroforestry Policy, 2018 seeks to protect and stabilize ecosystems, promote resilient cropping systems, and enhance employment of rural households through expansion of agroforestry.
  • Jal-Jeevan-Hariyali is a flagship programme of the State Government which is intended to tackle issues relating to climate change and environmental degradation.

The state government has been taking numerous measures in these directions. These measures has also yielded positive outcomes making Bihar among the highest growing state in India. Over the last two decades, the economy of Bihar has undergone a structural change, as evident in the shift in the sectoral composition of Gross State Domestic Product (GSDP) from agriculture to service sector. Experts has pointed out that there is need of more faster growth of secondary sector while maintaining the strength of service sector.