Blighted Indian state of Bihar transforms its image

Credit for changing the fortunes of the eastern Indian state goes to its chief minister. But Nitish Kumar is not without his critics as widespread poverty remains a troublesome problem.

About 80 per cent of Bihar's population lives off agriculture.The state, which a few years ago seemed beyond rescue, is now regarded as a miracle economy, with the second-highest pace of growth among Indian states.Show less

For many decades, Bihar was the quintessence of all that is woeful about India.

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The eastern state was rife with endemic corruption, anarchic crime and a depressed economy.

The state was damned by the country's highest child mortality and lowest literacy rate. Kidnapping for ransom was its only growing industry.

Travelling to the countryside after sundown elicited dire warnings: you could get waylaid by highway bandits notorious for making you che inch chota, a colloquial Hindi expression meaning shorter by six inches from the neck - as a result of bring decapitated.

Amid the growing lawlessness, factoriesclosed and investors fled. Impoverished Bihari migrants, the unwanted flotsam of its sinking economy, were frequently beaten up for swamping other states and "stealing" jobs from locals.

The rest of post-liberalisation India galloped ahead with the national economy opening up to the world, but Bihar was in terminal decline. India's brightest minds labelled Bihar an ailing state that seemed beyond rescue.

But rescued it was - and how.

Bihar, the 12th largest and third most populous state, is now lauded as a miracle economy. Its GDP grew by about 11 per cent between 2005 and 2009, according to the government's statistics agency. Bihar has the second highest pace of growth among Indian states.

With its remarkable turnaround, it is now viewed as a trendsetter, an inspiring example for other laggard states of how good governance and smart economic policies can transform India's darkest corners.

Nitish Kumar, the state's 60-year-old reformist chief minister who was returned to power last year for a second term, is credited with this transformation. "Before Nitish Kumar, Bihar was never a functioning state," says Shaibal Gupta, the head of the Asian Development Research Institute in the state capital Patna. "For the first time in decades, there is some semblance of governance in the state."

Mr Kumar in his first term, from 2005 to last year, initiated a trenchant reform of the criminal justice system. Many gangs were eliminated, with criminals killed in police operations, arrested or rehabilitated under new surrender schemes. Across most of the state, it is no longer considered unsafe to venture out after dark.

Mr Kumar is labelled the "development man of Bihar". He ordered the building of 23,500km of roads, 1,600km of national highways and about 2,000 bridges and underpasses, substantially improving connectivity between various parts of the state.

"Everyone is talking about Bihar these days - not for notorious bandits - but because of development," Mr Kumar said during his re-election campaign last year.

Bihar is one of the few states that uses mobile technology to prevent corruption in development schemes. Government officials keep tabs on how infrastructure projects are progressing by using smartphones rom their offices.

In June, Mr Kumar approved a new industrial promotion policy applicable for the next five years to woo private investment. The policy offers a slew of incentives such as subsidies, exemption from registration and stamp duty, tax concessions and government grants for buying machinery for setting up industrial units.

Infosys, the information technology giant, is one of the few high-tech companies to express interest in recent months in setting up shop in the state. Mr Kumar assured the company of assistance in procuring land if it decides to invest in Bihar.

The chief minister is also credited for his prudent fiscal management. The state's revenue collection jumped 200 per cent in the past nine years, according to government figures, enabling Bihar to rely on tax collections rather than financial aid from New Delhi. Tax revenues rose from 24.42 billion rupees (Dh1.97bn) in 2002 to 73.36bn rupees last year.

In November, the Associated Chambers of Commerce and Industry of India proposed a tie-up with Bihar's government to develop 14 industrial clusters at an estimated cost of 4.5bn rupees. The clusters will have a capacity of up to 28,000 industrial units, each providing jobs for about 10 people.

Bihar is also lauded for being one of the few states that has adopted the direct cash transfer model to distribute subsidy aid to its poor. The model, less prone to corruption than transferring subsidies through middlemen, is now being emulated by other states.

According to a World Bank study, a similar cash transfer scheme in Brazil, called the Bolsa Familia Programme, helped to lift 20 million people out of poverty between 2003 and 2009. Through the programme, 19 million bank accounts were opened in the first four years.

But all these efforts have not resulted in a widespread banishment of poverty and unemployment. About 90 per cent of Bihar's population is rural - 80 per cent lives off agriculture and animal husbandry. But little investment has been made in these sectors.

The National Rural Employment Guarantee Scheme - the government's flagship anti-poverty scheme, which promises 100 days of employment to one person in every rural household - is fraught with corruption, observers say. The scheme is sorely needed in Bihar and elsewhere to mitigate the rising tide of rural migration to the cities. But only 10 days of employment on average is provided around the state, says Jean Dreze, a development economist based in New Delhi.

Mr Kumar is criticised also for refusing to carry out crucial land reforms. Political observers say the chief minister fears that land reforms could anger the state's powerful landed gentry, an upper caste group that is a crucial vote bank.

Bihar's hospitals have doctors and schools have teachers, but institutions such as these are accused of not stamping down on truancy and of hiring too many poorly qualified staff.

In March, the US-based Cato Institute along with Indicus Analytics in a study ranked Bihar the lowest among 20 of India's big states in terms of economic freedom and regulatory environment.

But observers agree the state has come a long way.

"Recent gains in Bihar, traditionally one of India's poorest states, show how improved economic policy can boost growth," Nikhilesh Bhattacharyya, an economist at the research arm of the rating agency Moody's said last year. "Notorious for corruption, conflict and poverty, Bihar is undergoing a transformation."