On the onset of heated discussions over the quality of governance in Gujarat and Bihar, Assocham conducted a study which reveals that the state of Bihar is fast becoming the first choice for new investors in India. The study also indicates that Bihar is rapidly catching up in terms of fresh investment in crucial sectors like power, even though it has a huge disadvantage of the past baggage of laggard development.
The study also goes on to reveal that Bihar is growing at a faster speed than Gujarat. However, the base numbers, whether relating to investment or per capita income, remain much lower than those in the western state.
"Bihar logged in a compounded average growth rate (CAGR) of 20 per cent in public investment between March 2003 and March 2013, while this was 14.1 per cent in case of Gujarat. However, CAGR of private investment in the same period was 104.5 per cent in Bihar as compared to 31.9 per cent in Gujarat," the Assocham study highlighted.
The outstanding investment in Gujarat, at Rs. 13,74,244 crore, was more than four times that of Bihar’s Rs. 3,11,527 crore, thanks to the legacy of the western state being among the forward ones and Bihar being clubbed in the past among the so-called 'Bimaru' states.
All the same, Bihar is doing a fast catching-up, even if its per capita income, again because of historical reasons, is much lower than that of Gujarat. Traditionally considered backward states, Uttarakhand, Bihar and Andhra Pradesh have joined the league of established progressive states like Maharashtra, Gujarat, Haryana and Tamil Nadu in the last few years.
The study strongly highlighted that Bihar has come into the forefront of new India’s growth path.
“Things have undoubtedly changed over the last few years in India. The biggest driver for local entrepreneurs is a sense of security. This factor was lacking some years back. Also, the implementation of entrepreneur-friendly policies has also acted as a catalyst for Bihar’s development,” the study says.
KPS Keshri, President, Bihar Industries Association, says, “The policy framework is positive for entrepreneurs, but we need to put adequate efforts to generate quality power in adequate quantum. We are working with the state government on formulating a rational procurement policy to restore justice to the local industrial and ITES units. Local industries from Bihar state are requested to participate in the deliberations, as per their choice. We, as an association, are trying hard to bring in the expertise of various subject-matter experts. Sharing experiences by mentoring a group of companies can add great value to these businesses.”
The share of public investment in Bihar as of March 2013 was 50.3 per cent, while it was 27 per cent in Gujarat. On the other hand, the share of the private sector in Gujarat was way ahead at 72.3 per cent, while it was just 49.7 per cent in Bihar. Bihar is catching up fast in terms of growth, but only on a low absolute base. Public investment is the most critical element in bringing in growth in Bihar.
Certainly, in absolute numbers, Bihar is almost at the stage where Gujarat was about a decade ago. For instance, Gujarat's per capita investment in March 2003 was Rs. 31,890, which has now gone up to a huge Rs. 2, 27,586. On the other hand, the per capita investment in Bihar in March 2013 was Rs. 30,011, considerably up from a measly Rs. 3,074 ten years ago.
Bihar’s CAGR per capita grew by 25.6 per cent during the 2003-2013 decade, as against 23.9 per cent in case of Gujarat. While Gujarat is almost self-sufficient in terms of electricity, Bihar is only now investing in electricity and irrigation. Presently, over 70 per cent of Bihar's total investment goes towards electricity.
“If the issue of power availability gets solved, it will offer a great boost to the state’s industrial output,” Keshri stated.
Things have drastically changed, on the positive side, in Bihar over the last decade. This momentum must not stop here.