{"id":256885,"date":"2015-10-23T17:11:00","date_gmt":"2015-10-23T11:41:00","guid":{"rendered":"http:\/\/www.tehelka.com\/?p=256885"},"modified":"2015-10-23T17:11:00","modified_gmt":"2015-10-23T11:41:00","slug":"luck-myth-or-governance","status":"publish","type":"post","link":"https:\/\/tehelka.com\/luck-myth-or-governance\/","title":{"rendered":"Luck, Myth or Governance?"},"content":{"rendered":"

\"Tall
Tall claims<\/strong> There is more to the Nitish Kumar success story in Patna than meets the eye, and it\u2019s not just about ending jungle raj and boosting infrastructure<\/figcaption><\/figure>
\nA few months ago, in the run-up to the Bihar Assembly election, Chief Minister Nitish Kumar claimed that the state clocked an average 10 percent growth under his decade-long stewardship. He hinted that one of the foremost reasons for the growth was the \u201cremarkable improvement in the law and order situation\u201d in the state.
\n\u201cWe have established the rule of law in Bihar. Fear has vanished from the minds of citizens\u2026they can go anywhere, anytime as per their needs,\u201d he added rather arrogantly. The implication of these statements: growth jumped as the business community felt confident to invest in the state.
\nThis socio-politico-economic connection between governance, safety, investment and growth was articulated by economists in 2010, soon after the end of Nitish\u2019s first tenure as the chief minister. The logic was simple \u2014 before 2005, there was a \u2018jungle raj\u2019 in Bihar, wealthy people were scared of kidnappings, extortions and murders and, therefore, either pulled out their money or put it in safe custody in banks. Resultantly, a negative investment climate pulled down growth.
\nIn February 2010, Swaminathan Aiyar wrote in one of his columns, \u201cThe old cloud of fear has been replaced by peace and confidence. Safety has allowed small businesses to burst into activity.\u201d In the same piece, he added, \u201cIn Lalu\u2019s time, anybody building a house or booking a car promptly got a ransom note. Today, home construction and car sales are booming. Traffic jams have replaced deserted streets.\u201d
\nHowever, is Nitish\u2019s assertion enough to explain the decade-long economic miracle in Bihar? Are there additional factors, as important as public safety, which propelled the boom in Bihar? Is there more to this phenomenal narrative than meets the eye?
\nStatistics: true or false<\/strong>
\nA few experts believe that there may be statistical massaging to show higher growth rates. After all, it is the states that provide the data to the Central Statistical Organisation, which collates and presents the final figures. Thus, some of the figures related to specific sectors may be fudged by the state\u2019s politicians, who wish to project Nitish\u2019s positive image. This allegation becomes important because Bihar\u2019s sector-wise numbers have wildly fluctuated over the past 15 years.
\nAs per Bihar\u2019s 2014-15 Economic Survey, the figures for the primary sector, which includes agriculture and mining, jumped from a negative 0.4 percent between 2000-01 and 2004-05 to 4.4 percent over the next five years (2005- 06 to 2009-10). But they slumped to 3.8 percent over the next four years (2010- 11 to 2013-14). This also happened with the secondary sector, which includes manufacturing, construction and public utilities. The growth, which stood at 5.8 percent in the pre-Nitish period, jumped to 16.7 percent during his first rule and fell to 4.7 percent during his second tenure.
\nThere were huge swings in the case of specific sectors too. The figures for railways were a negative 5.8 percent, 7.6 percent and 0.2 percent respectively, for the three periods. In communications, they were 13.8 percent, 24.7 percent and 16.4 percent respectively. Only a few sectors, such as banking and insurance and real estate and trade (hotels and restaurants) showed higher growth rates consistently over the three five-year periods.
\nWhat\u2019s more important is that several other states grew faster than Bihar over the past 10 years. An article on Statisticstimes, a data collection website, showed that the state ranked seventh in terms of average growth rates during the 2005-14 period. Some experts contend that Nitish Nitish was a lucky chief minister, like many others, as several states witnessed resurgence in growth over the past decade or so. During the 2004-15 period, 14 states and union territories showed an average growth rate of over 9 percent; another 18 grew by over 8 percent.
\nYet another factor that needs to be considered is that the original state of Bihar was bifurcated in November 2000, when a separate state of Jharkhand was carved out of it. Instantly, Bihar lost huge chunks of natural resources, especially in mining, to the new state. Obviously, its economy slumped as it lost out on a huge portion of income that contributed to its gdp. At the time, the local business community tried hard to seek other alternatives to raise their revenues.
\nThe construction conundrum<\/strong>
\nTwo of the biggest booms that followed after Nitish\u2019s handling of the \u2018law and order\u2019 situation were in construction and manufacturing. The logic was that heightened public safety and security instantly translated into huge investments in these two sectors. Contractors felt safe to work even in remote areas and businessmen felt comfortable to both show their wealth off and expand business. Automatically, this led to a consumption boom as people were not scared to flash their latest cars and other materialistic acquisitions.
\nA look at the figures proves that this was indeed true during the first five years of Nitish\u2019s rule. The growth rate in construction was 19.8 percent between 2005- 06 and 2009-10 and for manufacturing, the figure stood at 13.3 percent. However, the scenario changed dramatically over the next four years \u2014 construction grew by 6.6 percent and manufacturing dipped by 1.1 percent. If one links governance and safety with growth, this can mean two things: either the public felt less safe during Nitish\u2019s second term or other reasons were responsible for the booms in his first term.
\n
\n
\"Playing
Playing catch-up<\/strong> Development plays a hide-and-seek game in Bihar<\/figcaption><\/figure>
\nAs mentioned earlier, the manufacturing growth in Nitish\u2019s first five years was possibly led by the loss of revenues and opportunities when the state was carved up. Businessmen, who were entrenched in sectors related to natural resources such as mining, used their earlier profits to venture out into new areas. Manufacturing, which has similar traits to mining, was their first option. In a bid to shore up their finances, the policy makers supported entrepreneurship.
\nVarious studies have shown that the growth in construction between 2005-06 to 2009-10 was led by public expenditure and not private funds. This was aided by the Centre, which transferred a higher proportion of its revenues to the states. In 2014-15, Bihar showed a hike of almost Rs 13,000 crore in its annual tax revenues. Of this amount, Rs 7,000 crore was contributed by the state\u2019s share of the central kitty. In the same year, central grants were estimated to go up by nearly Rs 19,000 crore. In 2015-16, the state\u2019s revenue receipts were predicted to go up by just over one percent from the previous year, largely because the central grants shrunk by over Rs 13,000 crore.
\nMiracle behind boom<\/strong>
\nThe main factor that contributed to the decadal growth in Bihar was the unprecedented boom in the services sector, especially in areas such as communication, banking and insurance and trade (including hotels and restaurants). More importantly, of these three sectors, communication and trade witnessed high growths during the pre-Nitish days. A few researchers contend that these sectors got a fillip while Nitish was the chief minister, but the momentum was already there.
\nIn the 21st century, the country witnessed the telecom revolution; Bihar was no exception. This was truer after the former and now-bailed-out telecom minister, A Raja, doled out 122 mobile licences to private operators at ridiculously cheap prices in 2008. Similarly, the banking and insurance segments grew faster in the past 10 years due to the Centre\u2019s focus on financial inclusion. Both the previous UPA\u00a0regime and the current NDA-led government initiated measures to open bank accounts for the lower classes and poor, as well as give them access to cheap insurance policies.
\nReports suggest that the rise in the number of mobile users in the state is in contradiction to its status as one of the poorest states in the country. A recent newspaper article said that Bihar \u201cis the top market for several mobile phone companies\u201d. It added, \u201cBe it the sale and revenue generation by the cell phone firms or air-time uses, Bihar, in proportion to its population, is ahead of most other much developed states.\u201d The reason, as per the same piece, is that for the huge number of Bihari migrants who move outside the state in search of work, \u201cnothing connects them better to their homes than cheap phone calls.\u201d
\nThe same is true for the retail and trade sector. As the country witnessed high growth over the last 15 years, except for the past few ones, there was a huge increase in consumption. As consumers lined up to buy new products, even two of the same, trade benefitted. Although the individual trader was substituted by organised retail, largely in urban areas, household expenses went up. The largely low interest rate regime helped auto and home buyers.
\nHowever, one has to credit Nitish for the forward-looking and businessfriendly policies. He did improve the investment sentiment, which is critical for growth. Mere policies don\u2019t matter. The Narendra Modi regime has realised this over the past 17 months; its grandiose policies haven\u2019t really cajoled the business community to invest more. In fact, the latter has complained that several critical reforms such as land acquisition and Goods and Service Tax, have been derailed.
\nNon-inclusive growth<\/strong>
\nUnfortunately, despite the unprecedented growth in the state, the lower classes and poor haven\u2019t benefitted. The positives of growth haven\u2019t percolated down in the past decade. For example, of the 17 larger states, Bihar was ranked the last in terms of per capita net state domestic product (NSDP) in 2012-13. The next year, it was ranked 15 as per its 2014-15 Economic Survey. The reason the state had inched up two positions in a year was because the survey\u2019s table did not have the per capita NSDP\u00a0figures for two states, Gujarat and Kerala.
\nBihar\u2019s per capital NSDP\u00a0was \u00a0Rs 15,650 in 2013-14, merely 22.5 percent of the highest state, Maharashtra (Rs 69,584), as per the survey. The state\u2019s figure was 39 percent of the national average. Even young states like Jharkhand and Chhattisgarh had per capita NSDPs that were almost twice the NSDP\u00a0of Bihar. Even the laggards within the so-called \u2018BIMARU\u2019 states had a higher per capita. The figure for Uttar Pradesh was Rs 19,234 in 2013-14.
\nThe same is true when it comes to the poverty rates in Bihar. Although the figure fell dramatically by over 24 percent over the past decade, as per non-official reports, the percentage is still much higher than the national average. In addition to this, experts say that poverty rates have come down in all the states. The major reason is that the central planning commission had redefined the daily incomes of people below the poverty line. More importantly, the disparity in income levels between the poor and rich regions and districts within Bihar are still high.
\nA 2014 study suggests that \u201cthere has not been any significant influence of the agricultural development and poverty alleviation programmes on reducing poverty incidence. It reflects that strategies adopted under various rural development programmes seem to be inappropriate in the Bihar context. Most programmes aimed at improving the economic status of poor households, while only a few attempted at improving their human capital, i.e. education, health, housing and social participation. This might be the reason for ineffectiveness of programmes on alleviating poverty during the last three decades.\u201d
\nThe same study noted that agriculture continues to be an important sector in the state, although it contributes less than 20 percent to the nsdp. The reason is that it employs over 70 percent of the work force in rural areas. To add to the woes, the state is wracked by the number of small landholders. Over 90 percent of farm households belong to the marginal farm category, i.e. less than one hectare land, but own almost 45 percent of the cultivated land.
\nWhile it is true that Nitish made a huge difference over the past 10 years, he cannot claim that by merely enhancing public safety and announcing progressive policies, he managed to woo private investment in manufacturing, construction and communication that led to huge growth rates. While a safe environment helped people to invest more, other factors have contributed to the boom. In fact, swings in sector-wise growth indicate lack of consistency. If he wins again, Nitish has to aim for more sustainable growth.
\neditor@tehelka.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Voters are mulling whether credit for Bihar\u2019s economic growth goes to the Nitish Kumar regime\u2019s ability to improve security and boost the investment climate.<\/p>\n","protected":false},"author":78,"featured_media":256888,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[56],"tags":[9415,9215,9416,453,895,2684,3817,9417],"_links":{"self":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts\/256885"}],"collection":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/users\/78"}],"replies":[{"embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/comments?post=256885"}],"version-history":[{"count":0,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts\/256885\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/"}],"wp:attachment":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/media?parent=256885"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/categories?post=256885"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/tags?post=256885"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}