Bihar Economic Survey 2010: Balance-Sheet of Growth Hype

The mystery shrouding the 11% growth miracle claimed by the Nitish Kumar government of Bihar is getting deeper and deeper. When the government of Bihar first claimed to have averaged more than 11% annual economic growth over the period 2004-2009, observers of the Bihar economic scene had valid reasons to take the government’s claim with a pinch of salt. For one, based on figures cited in the 2008-09 Economic Survey presented by the Government of Bihar in February 2009, the average annual growth rate for the same period (at 1999-00 constant prices) stood at 7.34%. The 11% claim surpassed the 2008-09 survey figures by as much as 3.7%! The claim also exceeded Bihar government’s own 2006 vision of achieving a growth rate of 8.5% for the 11th Plan period, and that too when actual private investment inflow in Bihar remains abysmally low.

It was hoped that the 2009-10 economic survey would throw some light on the growth riddle. But far from resolving the growth riddle, the survey has only added a few more layers to it. Ironically enough, in an unprecedented departure from the convention of pre-budget presentation of economic survey, the 2009-10 economic survey was tabled after the 2010-11 budget had already been presented, and the word “March” was clearly pasted on the cover in place of “February”. In another significant departure, the 2009-10 survey restricts itself to figures for only 2008-09, without providing any statistical assessment of the performance of the economy and the government for the period 2009-10! And the most revealing thing is of course large-scale retrospective revision of figures so much so that the average growth rate for the period 2004-2009 which stood at 7.34% on the basis of figures cited in last year’s economic survey now stands upgraded to suit the government claim of 11%!

The discrepancy between the two survey figures is quite high as can be seen from the following table:

Annual growth rate of GSDP at constant prices (1999-00)

2008-09 Economic Survey--- 2004-05 : 11.31 *** 2005-06 : 2.79 *** 2006-07 : 20.27 *** 2007-08 : (-)0.07 *** 2008-09 : 2.41

2009-10 Economic Survey-- 2004-05 : 12.17 *** 2005-06 : 1.49 *** 2006-07 : 22.00 *** 2007-08 : 8.04 *** 2008-09 : 11.44

Clearly, it is the retrospective increase in the figures for last two years that has been instrumental in pushing the annual growth rate from 7.34% to 11.03%. The contrast is particularly striking in the matter of agricultural growth rate. Going by last year’s economic survey, the agricultural growth rate figures for the years 2006-07, 2007-08 and 2008-09 were 27.94%, -12.18% and -6.70% respectively. In the latest survey, the figures for the same years show a huge upward mobility: 34.23%, -10.17% and 13.33% respectively!

The figures cited in the last survey for these years of course carried tags like “provisional”, “quick estimates” and “advance estimates” – but 27.94% jumping after three years to 34.23%, or -6.70% turning into 13.33% are nothing short of a stunning statistical surgery for which the government of Bihar owes an explanation to the people of Bihar as well as the academic world studying the Bihar economy.

The survey of course admits that the main growth sectors have been construction, communication and trade/hotels/restaurants. The annual growth rate for these high-growth sectors was 35.80%, 17.68% and 17.71% respectively, way above the overall average rate of 11%. By contrast, the growth rates in agriculture (5.58%) and manufacturing (7.98%) were significantly below the overall rate. No wonder, the share of construction and trade/hotels/restaurants in Bihar’s GSDP has gone up remarkably, from 3.31% and 14.94% respectively in 2000-01 to 12.15% and 25.24% respectively in 2008-09. By contrast, the share of agriculture went down during the same period from 35.83% to 23.58%. The contribution of manufacturing too recorded a further drop, declining from 5.67% in 2001-02 to 4.69% in 2008-09.

The main reason behind the steady decline of agriculture lies in chronic lack of investment and the preponderance of archaic and unregulated agrarian relations with real producers having little security or access to input subsidies or necessary farm credit. To take one key example, the figure of total irrigated area remains virtually stagnant – increasing from 44.6 lakh hectares in 2000-01 to 49.1 lakh hectares in 2008-09. Actually, the figure had reached 48.9 lakh hectares in 2003-04 itself, recording an additional increase of only 0.2 lakh hectares over the next six years! Even this modest increase is supported increasingly by the peasants’ own initiative – private tubewells run primarily on diesel (functional state tubewells are a rarity in Bihar) account for 55.40% of total irrigated area while the share of canal irrigation has gone down to 33.77%.

The issue of irrigation also gives us a glimpse of how agriculture continues to suffer from Bihar’s undemocratic agrarian relations. In the name of easing the escalating agricultural cost burden, the government of Bihar had announced a ‘diesel subsidy’ for farmers. The latest economic survey even showed a figure of more than Rs. 400 crore on this account. When CPI(ML)-led panchayats started extending this benefit to tenant-farmers who lease in land for cultivation, there was a furore in the Assembly and the opposition RJD and the Congress joined the ruling BJP and JD(U) to insist that subsidy be restricted only to landowners, and the government succumbed to this chorus. A special note was issued by the state agriculture department restricting subsidy to only landowners.

This not only runs counter to any sense of logic and natural justice, it also specifically violates the government’s own “Road Map for Agriculture” released two years ago amidst a lot of fanfare. The Road Map had bravely declared: “The focus of this road map is on farmers rather than farms. A farmer is defined on the same lines as National Commission on Farmers, that is “Farmers will refer to both men and women and include landless agricultural labourers, sharecroppers, tenants, small, marginal and sub-marginal cultivators, farmers with larger holdings…”” Yet tenant farmers are being denied diesel subsidy to appease the feudal lobby.

Manufacturing, we have already noted, accounts for less than 5% of Bihar’s GSDP. The growth rate has fallen to 4.69%, with registered units growing by only 0.71% and unregistered units accounting for 3.98%. Large and medium enterprises are of course known to be very few in post-Jharkhand Bihar, but the survey this year reveals a serious decline in the SSI sector as well as tiny/micro enterprises and artisan sector. The combined growth rate of these sectors has fallen from 4.41% in 2007-08 to 3.61% in 2008-09 and only 1.14% up to October 2009. Sugar is the largest agro-based industry in the state and only 9 out of the state’s 28 mills are functional. All the 15 closed mills of Bihar Sugar Corporation are yet to be revived and reopened. The State Investment Promotion Board claims to have approved 245 proposals till November 2009 involving investment worth Rs. 133841 crore, but actual investment till Nov 2009 remained a trifle Rs. 1044.37 crore, which is less than 1% of the approved investment quantum! This is the real picture of the World Bank ‘certified’ business-friendly environment in Bihar.

Power is one of the most key requirements for industrial investment and per capita power consumption remains the lowest in Bihar (76 units compared to 612 units for all-India (2005 figure)). Only 10.3% houses are electrified in Bihar as against the national proportion of 55.8%.

For an assessment of the situation on the social sector front, let us just take two examples: NREGS and the PDS. The government claims to have issued job cards to 118.5 lakh households till October 2009, but only 20.9% got employment and only 1.22% of those who got work got 100 days employment. These figures of course cover only seven months of 2009-10, but even if we look at the corresponding figures for the whole of the previous year (2008-09), the figures stand at only 37.3% and 2.62% respectively. The government of course claims that only as many families demanded employment. This is perhaps partly explained by the continuing phenomenon of large-scale outmigration from Bihar and exposes the utter inefficacy of NREGS in stopping migration. But more than that, there is clearly the basic issue of an unresponsive and corruption-ridden panchayat system resisting and killing the very demand for work by diverse means. And whatever is happening to the provision for paying unemployment allowance?

On the PDS front, the survey tells us that in 2008-09, the Bihar government too made significant allocations for all the three PDS schemes – BPL, Antyodaya and Annapurna. But then the survey admits that the percentage of grains lifted by PDS dealers fell far short of the allocations. The survey gives us percentage figures for PDS lifting only in relation to allocation by the Centre. If the allocation made by the state government is also factored in, the percentage figures will be as under – Annapurna (the scheme that provides for 6 kgs of wheat and 4 kgs of rice free of cost for homeless senior citizens): rice 42.44%, wheat 43.54%; Antyodaya (the scheme that provides 21 kgs of rice at Rs. 2.00 per kg and 14 kgs of wheat at Rs. 3.00 per kg to extremely poor households): rice 37.44%, wheat 39.23%; BPL (25 kgs of rice and 10 kgs of wheat per month for BPL families): rice 16.77%, wheat 20.47%!

When the issue came up for a heated debate in the Assembly during this year’s budget session, the state agriculture minister had this explanation for the pathetically poor percentage of lifting by PDS dealers: she attributed it to heightened road construction activity in the state! Apparently, because of the ongoing road building spree, “no entry” signs have been put up near foodgrains godowns which in turn has adversely affected the movement of trucks for PDS supply!

As the Nitish Government continues to bank on statistical cosmetic surgery to sustain tall claims of growth, people's struggles in Bihar will resolutely expose these myths and demand substantial growth, based on land reforms, increased public investment in agriculture, real industrial revival and generation of jobs that alone can check outmigration and provide a better deal for the poor.

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