There has been a slight misreporting in some sections of the media about 2008-09 real gross state domestic product (GSDP) growth rates. These reports suggest that at 11.4%, Bihar has shown the highest real growth after Gujarat. That?s not quite true, because 2008-09 data are still not available for many states, including Gujarat. Indeed, if one considers states for which 2008-09 data are available, Bihar has grown the fastest. At 10.78% and 10.39%, respectively, Pondicherry and Chandigarh come after Bihar. Out of 32 states and UTs, 2008-09 data are yet available only for 18, with many major states missing. Lest we forget, all-India GDP grew at 6.7% in 2008-09, considerably lower than 11.4%. A better comparison is for 2007-08, when data are available for all but Nagaland and Tripura. The all-India GDP growth in 2007-08 was 9.01%. Bihar registered 8.04%, far less spectacular than 11.4%. Several states and UTs were ahead of 8.04%?Andhra (10.62%), Goa (11.14%), Gujarat (12.79%), Haryana (9.35%), Himachal (8.59%), Chhattisgarh (8.63%), Maharashtra (9.18%), Uttarakhand (9.37%), Chandigarh (11.51%), Delhi (12.48%) and Pondicherry (24.85%). Therefore, one shouldn?t make too much of a year?s figures, which can be subject to annual fluctuations. More important is the trend over say, a five-year period. The trouble with picking only one year is better illustrated by 2006-07, when Bihar grew by 22.0%.
Let?s digress on all-India figures. As per trends, Indian growth rates broke away from earlier trajectories thrice?during the Fifth Plan (1974-79), Eighth Plan (1992-97) and Tenth Plan (2002-07). In the second half of 1970s we began to average 5.5%, in the 1990s we began to average 6.5% and since 2003 we average 8.5%. But if we grew at 6.1% in 1953-54, 9.1% in 1975-76 or 9.8% in 1988-89, those can hardly be described as trends. An event was recently organised at Ficci and the newly-appointed Chief Economic Advisor spoke there. This is what he reportedly said and it is best to put this within quotes. ?In 1975, India first achieved 9% gross domestic product (GDP) growth due to the nationalisation of banks and opening of a large number of branches in rural areas, which led to the highest rate of savings and investment that made up 13% of the GDP.? To set the record straight, that 9.1% in 1975-76 was preceded by 1.3% in 1974-75 and succeeded by 1.3% in 1976-77. The 9 or 9.1% wasn?t a trend. One can debate merits of bank nationalisation and even its impact on savings rate increases. However, 9.1% in 1975-76 can hardly be ascribed to bank nationalisation.
Thus, what is of note is not Bihar?s record in any specific year like 2006-07, 2007-08 or 2008-09. Nitish Kumar became CM in 2005 and political mileage is being made of the fact that in preceding year, 2003-04, Bihar declined by 5.15% under Rabri Devi. Ignoring such annual aberrations, between 1999 and 2004, real SDP in Bihar grew by 3.9%. Between 2004 and 2009, real SDP in Bihar grew by 11.3%. Bihar has been a metaphor for much that is wrong with India. The annual decadal (1991 to 2001) rate of population growth in Bihar was 2.8%, though it may be lower now. 3.9% growth means roughly 1.1% per capita income growth, while 11.3% growth means roughly 8.5% per capita income growth. That?s a huge difference. Regionally, one of the issues has been that states with higher rates of growth have also tended to have lower rates of population growth and states with lower rates of growth have tended to have higher rates of population growth. Therefore, in terms of inter-state disparities, per capita figures show greater divergences than non-per capita numbers. If a traditionally backward state like Bihar has broken away from past trends, we should be delighted.
Because we are talking about trends and not year-to-year fluctuations, there is no denying that Bihar has broken away from earlier growth trajectories. For instance, in earlier bad years (2001-02 and 2003-04), real SDP declined by around 5%. In a recent bad year (2005-06), SDP increased by 1.5%. Can one ascribe a state?s success to a CM? In this case, because the break with the historical trajectory is so sharp, the answer is in the affirmative. Anecdotally, one knows governance, administration and service delivery have improved in Bihar, partly facilitated by a World Bank lending programme between 2007 and 2009. Reacting to CSO figures, the CM has mentioned improvements in agriculture. However, that doesn?t seem to be the primary driving force. Between 1999 and 2004, real agricultural SDP growth was 2%, while between 2004 and 2009, it was 5.6%. That?s undeniably an improvement, as is the increase in manufacturing SDP growth from -1.9% in the first period to 8.0% in the second. But what is spectacular is the jacking up of construction from 8.4% to 35.8%, communication from 9.4% to 17.7% and trade, hotels & restaurants from 11.6% to 17.7%. Somewhat unexpectedly, services have been driving the growth in Bihar.
The author is a noted economist