Page last updated at 00:34 GMT, Sunday, 17 January 2010

Has India's poorest state turned the corner?

By Amarnath Tewary
BBC News, Patna

A man and his buffalo in Darbhanga, Bihar
Bihar is a primarily agrarian economy

Has India's poorest and most lawless state turned the corner?

If you believe the government of the northern state of Bihar, the answer appears to be in the affirmative.

According to it, Bihar clocked up a giddy growth rate of 11.03% in 2008-2009.

This would make it India's second fastest growing state economy, just behind the industrially-developed western state of Gujarat.

Not so long ago, Bihar was written off as a basket case, trailing behind every other Indian state.

Its infrastructure was shambolic, jobs had disappeared, factories had shut down, lawlessness was rife and the government was in limbo.

Many believe that with a change of regime four years ago - regional leader Nitish Kumar's Janata Dal (United) leads a coalition government with the Hindu nationalist BJP - Bihar's fortunes have picked up.

Even if this is an exaggeration, there are definite signs of the economy turning the corner.

Revival signs

Consider this:

• The government plans to spend $3.5bn during 2009-2010, up from $327m in 2001-2002

• Revenue accruals have climbed to $1.1bn, up from $649m in 2003-2004

• Government spending on infrastructure and "social development" has been pegged at $444m every year

• Use of cement in the state has grown 28% in the last four years against the national average of 9%, pointing to increased construction work

• There has been a 78% growth in air traffic in and out of the state during the same period, the fourth-highest in India.

Bihar Road
A number of roads have been rebuilt Photo: Prashant Ravi

• Automobile sales in the state have recorded a whopping 700% growth.

• More than 6,800km (4,225 miles) of roads have been rebuilt and 1,600 bridges and culverts have been constructed

• The State Investment Promotion Board claims to have received proposals worth $20b from industrialists. But it is not clear how many of these proposals will be implemented

The government says it is working overtime to tame Bihar's runaway crime rate - nearly 40,000 criminals, it says, have been convicted in the last four years.

'Abysmally low'

"All this proves that there has been all round growth and development," says Deputy Chief Minister Sushil Kumar Modi.

"Bihar is back on track."

But many doubt these claims.

"These figures are too good to be true," says economist Nawal Kishore Chaudhury, who teaches at Patna University.

He wonders how the state could have recorded double digit growth when last year's economic survey - a federal government publication - showed that the growth rate was just 5%.

Nitish Kumar
Nitish Kumar's government has increased public spending Photo: Prashant Ravi

Also, last year's economic survey said that Bihar had recorded negative growth in the farm sector.

At $32, per capita social spending remains one of the lowest in the country.

Most economists do however agree that the Keynesian nature of growth in Bihar - most of it spurred by government - has led to increased spending in construction.

Also, the savings rate remains pretty high - Patna alone has $5.2bn in bank deposits, which is higher than many prosperous small cities in India.

"Since Bihar's development base is abysmally low, even a small investment here results in impressive growth in percentage terms," says social scientist Shaibal Gupta.

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