Bihar struggles against an image problem that is deeply damaging to its growth prospects. However, the situation has changed in recent years. This section presents an objective assessment of the socio-economic progress made by the state particularly in the last five years. Two critical questions have been dealt with in depth – (a) what has changed in the state during 2005-10? , and (b) what implications does this change hold for the future?
A state-level comparative analysis is done under the following heads.
i) Economic Indicators
• State GDP Growth Rate
• Sectoral Growth
• Consumer Markets
• Investment Scenario
• Central Grants and Social Sector Expenditure
ii) Social and Development Indicators
• Law and Order
• Infrastructure and Communication
The overall analysis gives positive signals, Bihar is gradually treading on the path of development.
A. Economic Indicators
a) GDP Growth Rate in Bihar (2004-05 to 2008-09)
The state's economy has never grown so fast and so consistently as it has since 2004-2005. The Central Statistical Organization (CSO), in a report released recently, placed Bihar in the second place in terms of growth in the Gross Domestic Product (GDP) between the years 2004 and 2009. On an average, Bihar registered a double digit GDP growth rate of about 11 percent over the period 2004-09 (Figure 2.1 and Table 2.1). According to Swaminathan S. Anklesaria Aiyar , ‘this economic boom in Bihar is real and not a statistical fudge’.
Figure 3.1: GDP Growth Rate Trend
Source: CENTRAL STATISTICAL ORGANIZATION (CSO)
Table 3.1: GDP Growth Rate (2004-05 to 2008-09)
Year GDP Growth Rate (in % per annum)
Average growth (2004-09) 11.03
Source: Central Statistical Organization (CSO)
Arguably, Bihar had been performing so badly for so long that it may just be enjoying catch-up gains. In other words, this high growth is coming on a very low base. In fact, four of the poorest states — Bihar (with 11.0 percent GDP growth), Orissa (8.7 percent), Jharkhand (8.5 percent) and Chhattisgarh (7.4 percent) — qualified as miracle economies, going by the international norm of 7 percent growth. This is indeed a remarkable achievement. However, sustainable growth would only be ensured in the State when the economy is well-diversified and the volatility in year on year growth is robustly tackled.
According to the Bihar Economic Survey 2009-10, the main growth sectors have been construction, communication and trade/hotels/restaurants. The annual growth rate for these high-growth sectors was 35.8, 17.7 and 17.7 percent respectively, way above the overall average rate of 11.0 percent. Further, according to the Associated Chambers of Commerce and Industry of India (ASSOCHAM), Bihar GDP is estimated to reach Rs 2,64,781 crore from the current level of Rs 1,05,148 crore, mainly due to the positive boost from good governance.
b) Sectoral growth:
With the process of growth and development, there is a structural change in the sectoral share of income, the main focus of an economy's activity shifts from the primary, through the secondary and finally to the tertiary sector. Further, this is accompanied by a shift in employment from the primary sector to the other sectors as surplus labour moves to more productive avenues of employment.
Bihar’s economy is witnessing a shift towards services, much before industrialization, mostly driven by a buoyant urban economy. This is growth induced by the government. The share of the tertiary sector in GSDP grew in Bihar from 51 percent in 2001 to about 60 percent in 2007-08, while the secondary sector showed a marginal increase in share from about 11 percent to about 16 percent (Figure 2.2). The primary sector has witnessed a decrease of 13 percentage points in its contribution to the state income.
Table 3.2: Sectoral shares in GSDP (