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Bihar has long been India’s poorest, most backward state, riddled with misgovernance, caste wars, gangsterism, Maoism and hopelessness. There was an old joke that when British India was being partitioned in 1947, Indian PM Nehru told his Pakistani counterpart that he could have the disputed state of Kashmir provided he took Bihar and UP too. These two states, with a combined population today of over 300 million, were seen as a terrible drag on the rest of India, having some of the lowest growth rates and social indicators among Indian states.
Yet Bihar has undergone a veritable revolution since a new dynamic chief minister, Nitish Kumar, came to power in 2005 (and was re-elected in 2010 with a landslide majority). If we look at data available from 2006-07 to 2011-12, Bihar averaged GDP growth rate of a whopping 10.87%. This was the highest among major states, and well above the national average of 8.29%. Bihar has started pulling up the rest of India. This merits international attention because Bihar has a population of 100 million, more than that of all except a handful of countries. Unlike some other developmental successes, Bihar’s is not a boutique success: it is success on a grand scale. However, despite this sharp improvement, consumption (measured by per capita monthly rural spending) remains close to the lowest among all states.
Fast growth has driven down the headcount poverty ratio in Bihar, which used to be India’s poorest state. The ratio was as high as 56% in 2004-05 (a drought year), and has crashed to just 33.74% in 2011-12. This is a dramatic decline. So, although its consumption levels remain among the lowest, Bihar has ceased to be India’s poorest state—five other states now have a higher poverty headcount ratio (although three of these are tiny mini-states and so not strictly comparable). The all-India poverty ratio declined sharply in the same period from 37% to 22%, but this decline was not as fast as in Bihar. The all-India performance as well as Bihar’s performance showed that, contrary to much leftist theorising, faster growth is indeed a major force in reducing poverty.
Many of the state’s social indicators have improved dramatically too. This helps falsify the supposed trade-off between growth and equity. The plain fact is that growth is vital for improving not only incomes but government revenues required for providing public goods (essential infrastructure and social services). Of course, fast