Bihar growth projection and reality: What lies in between

Updated: Oct 20, 2010, 18:59 PM IST

Rijo Jacob Abraham and Reema Sharma

When their state clocked an 11 percent growth in 2009, it would not have surprised an average Bihari. That things have changed since Nitish Kumar took over the reigns of the state in 2005 is a no-brainer. Shops remained open after dark, women could positively go out after dark and roads did not bear a deserted look. Ironically, at least there were roads.

When the Central Statistical Organisation (CSO) claimed an average growth rate of 11.03 percent during the five year period from 2004-05 to 2008-09, (with the last fiscal registering whooping growth rate of 11.44 percent), sceptics had their fingers crossed.

Divergent data

When the state Economic Survey 2009 came out with data, the confusion became more pronounced. The report prepared by the State Statistical Bureau contradicted the claims of CSO. The survey pitched the growth rate of the state for the same period at 7.34 percent. The difference between the two is an unacceptable 3.69 percent. Though data though remains constant for both the series for a period of three years from 2001-02, it begins to diverge considerably after 2004-05. Ideally the data should have remained the same because the State Statistical Bureau prepares both the data and the CSO merely compiles the data.

The yearly GSDP data goes through various revisions like “Advance”, Quick”, “Provisional” before it becomes “Final”. But even this, doesn’t account for the huge deviation. For instance, while the “quick” estimate in the survey for the year 2007-08 is 0.07 while the CSO data project the figures at 8.04 percent.

Roads and bridges – smooth as Hema Malini’s cheeks?

Besides ending the bahubali (strongman) rule and fixing the broken windows what has Nitish Kumar done specifically on the economic front? Is a nominal growth exaggerated by comparing it with relative inactivity of Lalu-Rabri regime?

Shady economic data prevent a clear-cut assessment. Perhaps, Bihar roads which became infamous for the allegory that Lalu Prasad drew with Hema Malini’s cheeks would a good place to begin with. In fact, Nitish Kumar’s Mission statement was nothing short of ‘Provision of a Road Infrastructure Equal to the Best in the Country by 2015’.

The latest economic survey claims that construction (mainly of roads and bridges) registered a growth rate of 35.80 percent contributing the most to GSDP compared to any other sector. According to estimates by Prof Nagaraj, of IGIDR(Indira Gadhi Institute of Development Research) construction boomed annually at 45 percent for three years from 2005-06 and 2007-08. The contribution of construction has increased steadily to reach 12.15 percent in 2009, the highest in a ten year period.

Specifically, road construction during the last four years (2005-06 to 2008-09) witnessed more than a ten-fold increase in expenditure and the total roads constructed during the same period is nearly 6,000 kms.

The bridge constructions are even more impressive, so much that many content that Bihar Rajya Pul Nirman Nigam(Bridge Construction Dept) head Pratyay Amit must be given Guinness World Record for overseeing around the largest number of bridge projects. In four and a half years there 2,100 bridges were constructed, giving one-and-half bridges a day for Nitish to inaugurate.

These construction data also correlates with RBI data on increasing cement off-take from the state.

But is the construction jump alone capable to propel the state to an 11 percent growth, when critical areas like manufacturing and agriculture (on which 80 percent of the population depends) continue to stagnate. Noted economist and Associate Professor at JNU, Praveen Jha, points out on one of his very recent studies:

“This (the false growth projection) becomes more evident if one keeps in perspective structural bottlenecks faced by the state’s economy in all its sectors. For example, while on the one hand the productivity in agricultural sector is fettered by a distorted set of production relations structured by a skewed distribution of ownership and operational land holdings in the state, on the other hand, there is hardly any significant increase by the state government in the provisioning of appropriate infrastructure such as irrigation, flood control etc..”

The score-card

If Bihar is entangled in the numerics of the 11 percent growth-hype where exactly in the economic front did the state perform? Maybe there is nothing comparable with the hoopla that it ensued, but no one can deny that nothing has happened.

“He (Nitish Kumar) deserves credit not for what he has achieved but what he has dared to initiate,” Shaibal Gupta, who heads Patna based Asian Development Research Institute (ADRI) writes in one of his recent articles.

The capital expenditure – the amount spent on new projects – witnessed a huge increase. The present government has spent more than Rs 60,000 crores while in a ten year period from 1990-2005 it was just Rs 25,000 crores. The central funds can be accessed only on the basis of its utilization by the state government. Funds which were earlier under-utilised found a release in Nithish regime.

The quintessential economic development of Bihar is that of its fiscal turnaround. The result, the government presented a budget with humongous fiscal surplus of 47,446 crores in 2009 and 53,927 crores in 2010. This may not sound like a massive increase from the fiscal deficit of 2004-05 which was Rs 1,240 crores, but this was a result of a very low public spending.

The Juggling Act

In 2006, the Bihar government committed itself to a precarious tightrope walk called FRBM(Fiscal Responsibility and Budget Management) Act. This involved a cut down on fiscal deficit, non-plan maintenance expenditure and increase capital expenditure. The capital expenditure was the only guaranteed way of attracting private investment to the state. But this at the same time should not be at a burgeoning fiscal deficit which will mortgage the future of the state.

The government spending on infrastructure is funded through its current revenue and borrowings from central funds. By trying not to stress FRBM Act, the thrust has been on the central and ADB funds for infrastructure rather than on spending from the state’s own revenue. More importantly, though the state has cut-down on revenue deficit, it has not matched by a proportionate social spending like health, education etc.

The result is a state where people live no better than in strife torn Congo, yet Nitish Kumar inaugurates more than one bridge or fly-over every day. Bihar, nevertheless, has undergone a fundamental change in basic economics.

Nitish Kumar government, as a philosopher asked, “Has worked in practice. But will it in theory?” Hopefully, if gets to consolidate the gains this time around.

A huge leap is required between the two sides of real and the ideal. Apparently, some steps have been effected by the Nitish government. Although one might argue that Nitish could do wonders for the masses of Bihar, he still has miles to go. A second inning might be the final run for the trailer he has shown during this tenure.