Progressive Bihar - Finally the sleeping giant is waking up

Progressive Bihar - Finally the sleeping giant is waking up
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Monday, November 30, 2009

Future of India linked to the future of Bihar

An update to the below reproduced article: This is actually an article published by Mr. N. K. Singh , MP Rajya Sabha, from Bihar and only posted on the Life Boat Foundations Webpage. The original article was published on MoneyControl and the link to the article is as follows:

-------------------------Earlier Article-----------------------------

I came across a very interesting article on Bihar on a website that tracks high impact progresses. This website talks about the poverty in India, China and Brazil and then has a detailed focus on Bihar. This is a news service of a foundation called Life Boat Foundation and has provided a compelling view on Bihar. I was intrigued by this article and reasoned that it would be worthwhile for more people to read this article. This article published on 29th November 2009 is titled "Poverty in Brazil, China and India and in Particular Bihar, India"

I am reproducing a section from the above article verbatim, which is very relevant from Bihar's development perspective. It is a detailed assessment and worth reading.


Five factors leading to endemic economic backwardness of Bihar:

1. In the post-independence period, the policy of freight equalisation did not enable Bihar to derive the advantage of its rich mineral resources as well as a large growing market. This policy which remained effective from 1952 to 1993 had serious repercussions in neutralising Bihar’s comparative factor advantage.

2. Notwithstanding Bihar’s considerable clout in the Central Government, central investments, (except by Public Sector Undertakings in what is now Jharkhand), there was little investment North of the Ganges or in the drought-prone areas in the South of Bihar.

3. The failure to break away from the past in implementing tenurial land reform changes resulted in excessive social stratification which prevented both vertical and horizontal mobility. Excessive preoccupation with caste and even communal factors dominated political discourse. Successive Governments were not held accountable on indices of improvement in life quality and other developmental indicators either in the overall growth achievement or performance of Index of Human Resource Development.

4. The failure to transit from a feudal-based economy to a market-oriented economy emphasised value systems which did not facilitate rapid economic development. This coupled with poor quality of infrastructure, social indicators and governance quality did not enable the State to attract meaningful private investment even in areas of its comparative factor advantage. Poor governance also resulted in decline of education and health.

5. The political parties in the State failed to secure meaningful arrangements with Nepal for better harnessing its river and hydro electric potential. The Kosi and Gandak embankment, the result of international treaty with Nepal, did bring significant relief to a large population in North Bihar from the vulnerabilities of floods but could not convert these transitional arrangements to permanent solutions.

These temporary structures have long outlived their expected life span, and in any case they were designed to be transitional arrangement to be followed by taming these rivers upstream to harness the irrigation and hydel potential. These remained unimplemented. Durable infrastructure wasn’t created to withstand the destruction due to periodic floods and other vulnerabilities.

During the last four years, the initiatives taken by the Nitish Kumar Government have concentrated on six factors.

- Improved Governance
- Macro Management
- Human Resources Development
- Emphasis on factor endowments
- Enactment of key legislations to improve climate for private investments.
- Improvement of Infrastructure.

The future of Bihar would depend on five key variables.
1. To what extent fiscal federalism works in a manner which is in line with the spirit of the constitution? This concerns four components.

The compensatory additional central investment in a State considering that in the near future private investment will remain shy.

To what extent will the State be enabled to take fuller advantage of Central investments already made, namely a higher percentage of allocation from Central power projects? The present agreements are discriminatory and unequal. These agreements do not enable the State to secure a fair percentage of the energy produced in the State.

Permitting the development of downstream industries from existing Central investment, say from the Barauni refinery as well as other investments which may be in the offing.

A degree of fairness in access to raw material inputs like coal for new power generating companies necessary to meet the energy deficiency in the State.

2. The State has to succeed in harnessing its rich water potential through the optimum utilisation of resources and adoption of new technology. It’ll prove their comparative factor advantage in agriculture. The extent to which agricultural productivity can be enhanced by diversified agriculture practices, creating and implementing an enabling policy framework.

There is also a broader issue of mitigation and adaptation to Global Warming and Climate Change. Does it make sense for planners in India to pursue, say water intensive cultivation in other parts of India which are water deficient than say North Bihar, where water is abundant? What special assistance can be given for enabling Bihar to become the food granary of India?

In Punjab water aquifers have fallen significantly and rice production may become increasingly more expensive. This is an opportunity for Bihar to enhance both the production and productivity of its agriculture even as further research and development is needed to develop strains and cropping patterns which better factor the consequences of global warming.

3. To what extent can its very young population be harnessed and vocational skills imparted to create the “Missing Middle”. This entails increasing urbanization very significantly through many more satellite towns and skill inculcation programme which can provide gainful employment activities outside agriculture sector, even while agriculture can gain advantages of externalities in scale instead of an exclusive reliance on agricultural produces.

4. To what extent can Bihar leverage its political power to create an enabling international framework on sharing our river basins, particularly with Nepal for generating irrigation and hydel potential to optimise the resources of this region.

5. The issue of whether Bihar can rewrite its history, and foster new green shoots of investments, employment and diversification in its activity patterns?
All these, of course require continued good governance and stable policy framework and institutions which can incentivise private investment.

The restoration of Bihar’s lost glory will demonstrate the success of strategic initiatives and technology can do to one of the most backward and densely populated regions in India. Unless backward States become growth drivers, India would find it difficult to grow at 9 per cent. In some ways the future of India is linked with the future of Bihar.

The original article in its entirety can be found at
Poverty in Brazil, China and India and in Particular Bihar, India


  1. Update: This is actually an article published by Mr. N. K. Singh , MP Rajya Sabha, from Bihar and only posted on the Life Boat Foundations Webpage. The original article was published on MoneyControl and the link to the article is as follows:

  2. Ravi Verma, ChappraDecember 2, 2009 at 8:15 AM

    Dear Prashant Jee

    First of all hats off to you for your regular inputs on Bihar to all Biharis. But I want to focus on one point from your matter, i.e. Freight Equalization Policy.

    There was one worse thing that happened to Bihar, was Freight Equalization Policy. There are many persons from Bihar do not know about this policy. What actually this policy was?

    The Freight Equalization Policy (Slow Poison for Bihar & Biharis)
    The most ridiculous policy introduced in 1948 by the Govt. of India, (note down the time) the freight equalization policy, which meant that transport was not to be considered an input cost. This meant a factory could be set up anywhere in India and the transportation of minerals would be subsidized by the central government.
    This in turn simply destroyed Bihar's huge competitive advantage (of holding the minerals) and factories were set up everywhere else but not in Bihar. Now the freight equalization policy has been removed, but now Bihar simply lacks the infrastructure to compete with other states.

    Ek muhawara hai “MAAL MAHARAJ KA AUR MIRZA KHELE HOLI” Matlab samajh gaye honge aap log . Lekin is policy ka Matlab ye tha ki Aapko Bokaro me plant lagana ho ya Bombay me, isse koi matlab nahin tha, agar aap Bokaro me plant lagayenge ya phir Bombay aapko Khanij ya phir kachche maal, jo ki sifr Bihar me hi uplabdh tha uski dhulai ka kharch plant lagane wale ko nahin dena tha, wo kharch sarkar ki taraf se maaf thi. Ab jyada udyogpati Bihar ke bahar ke the tho swabhawik tha ki wo apne ilake ko prefer karte. Ab ye bataiye ki koi kyon Bihar me Udyog lagata.

    Tata ne Jamshedpur me aur Dalmiya ne Dalmiyanagar me Industry isiliye lagaya Kyon ki wo isi baat (Yaha uplabdh kachche maal) ka fayda uthana chahte the. Wo koi Bihar ka bhala karne nahin aye the wo business karne aaye the aur apna fayda dekh rahe the. Aur ye dono factoriyan Azadi ke pahle lagi thi, us samay ye policy implement nahin hui thi.

    Ab ye Bataiye ki jimmewar kaun hai.

    Ravi Verma

  3. On Tue, Dec 1, 2009 at 2:52 AM, K K Jha - wrote:

    Dear Prashantjee,
    Thanks for posting excellent material on Bihar

    K K Jha


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