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| How real is Bihar's stunning growth |
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| Money Control | |
| Monday, 11 January 2010 10:37 | |
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Bihar has shown an average gross domestic product (GDP) growth of 11% in the last five years.
This state along with much of the Hindi heartland has been dumped as eternal laggards by analysts. As of march 2009, it had shown an average growth of 11% for the five years starting 2004. Its GDP has nearly doubled in real terms from Rs 58,000 crore in 2004 to nearly Rs one lakh crore in 2009. Source: CNBC How real is this growth? What triggered it and is it sustainable? What can it mean for the larger Indian economy? In an interview with CNBC-TV18, Shaibal Gupta, Director at the Asian development research institute--A veteran Bihar expert and Laveesh Bhandrai, Chief Executive Officer of Indicus Analytics, discus this. Here is a verbatim transcript of an exclusive interview with Shaibal Gupta and Laveesh Bhandai on CNBC-TV18. Also watch the accompanying video. Q: Is this growth real or are the numbers fudged? Gupta: This is the data of Central Statistical Organisation (CSO). It is brought out by the national organization so the data cannot be fudged. This dramatic change in Bihar is primarily because of quite a substantial change in the quality of governance. This has to be taken into consideration while we are discussing about the growth pattern. Apart from that, if we see in the last five years there is a substantial public investment. Earlier the planned investment was about Rs 2,000 crore. It is increased substantially and now in the last five years Rs 50,000 crore has been invested. Q: What really do you mean by good governance in the last five years something that Nitish Kumar has got right? Do you think elements like National Rural Employment Guarantee Act (NREGA) are making a big difference? Gupta: As far as NREGA is concerned in Bihar, the expenditure is still not very high. Hence, it has not really impacted. However, good governance has created a substantial debt in the development pattern because with the improved law, order situation and convictions of the convicts, in Bihar if one is involved with a crime then nobody would get convicted. Now there has been a change so the functioning of the state has been improved dramatically. Bihar had a non-functioning state historically and with a functioning state. With an improved law and order situation there is quite a substantial private investment which is coming and not a mega private investment. However, small scale investments in the private sector have come. The CII has brought out a report which they are going to formally release on 15th. It reports that Rs 20,000 crore has been invested in Bihar thorough the private networks. This is a direct result of the law, order situation and good governance. Secondly this government is also developmental driven because in Bihar there is quite a substantial change as far as democratization of politics is concerned. There is a complete paradigm shift in the power structure. Q: A state which is able to implement law and order, the elementally function of the state and simply putting in more money on the problem and that really the scarcity of the investment was Bihar’s problem which is getting solved. Are these the two fundamental factors that have worked in Bihar? Do you really think that the stage is set for a take off in Bihar? Bhandari: Certain elements must take into consideration–– first it’s not just Bihar. All of Eastern India is essentially increasing its growth rates over the last five-ten years. So there are some forces that are wider, from which Bihar has been able to benefit. There has been a remarkable difference on the way Bihar has been functioning. There have been minor improvements in law and orders have created a major difference in the way that investors both within Bihar and those from the rest of the country are seeing conditions out there. The second is that we should not see this as a very long term trend. This has happened over the last four-five years. From all other states you do have times when for four-six years, one sector suddenly shoots up and it just takes the whole state with it. Whether it will be able to sustain or not that is an open question and out here. The Bihar story is primarily that of the construction sector. It is not agriculture or manufacturing so much. It is construction sector dominated. Q: Is that construction sector government investment driven which means infrastructure in roads or is it real estate? Bhandari: It is both. There is no doubt that there has been greater devolution of funds. The Pradhan Mantri Gram Sadak Yojana is succeeding in building our roads into the interiors of Bihar which some of them are withstanding the floods as well. That is a very major change over the past. There are improvements that will hopefully stand over the next few years. However, there are certain other issues that we do need to consider. Will this government be able to sustain these forces that have shown up over the last few years? Second, if other government comes will they follow the same track? These are the key questions. Q: What is your sense? Is this according to the data that Laveesh has it is one sector driven it is construction driven that is one cause of worry that is terribly broad based and two whether good governance has been sufficiently institutionalized? Can it vanish just like that? Gupta: A place like Bihar has not been a functioning state. This was not the case only during the post independence period but even in the pre-independence period. For the first time there is effort to build a state structure. If it gets institutionalized and consolidated, then the development will be state driven. This is the case in many other parts of the country whether in Tamil Nadu and Andhra Pradesh or in Maharashtra. It is not CM centric. Even with the chance in the government the growth rate does not alter. In Bihar what Laveesh has rightly pointed out that the construction, it is a construction driven growth story. In both the cases the law and order plays are very important role. Even earlier the prime ministers Sadak Yojana was not taking off primarily because of the law and order situation. Q: Would you say that the laggard states in general have shown a better improvement in the last five years? The Indian economy is perhaps safer for sustainable growth trajectory? Bhandari: The laggard states have improved more than what they were in the past. The trends what they are showing seems to suggest that thing will continue over a period of time. However, this has happened in the past as well. Two-four years trends are something that you need to build upon. You cannot take them as something that will happen by itself. Hence, the government in these states has a good thing going. They do not to improve upon it. Q: What are your thoughts on the entire Hindi Heartland or the poorer states? Gupta: As far as the Hindi Heartland states are concerned, much will depend on the central revolution. The quality of governance will differ from state to state. It will depend to what extent devolution was witnessed in the first period of UPA whether that is sustained the second tenure as well.
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