Bihar’s industry has only 0.5% of all outstanding bank credit; dull manufacturing drags state’s growth

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October 30, 2020 6:09 PM

Bihar remains the state with the lowest per capita Net State Domestic Product at around 35% of the national average.

bihar, bihar economy, bihar gdp, industry in bihar, outstanding credit to bihar's industry, infrastructureLow bank credit to the industrial sector is in parallel with the lower share of industry in the overall GVA of the state. (Bloomberg image)

While most of the Indian states are in a race to attract more foreign investments to open new doors of economic growth and employment, Bihar has yet not figured out the way to increase its manufacturing and other industrial capacities. Bihar remains the state with the lowest per capita Net State Domestic Product at around 35% of the national average. There has been a very marginal improvement in this share in the last 15 years, according to a report by Care Ratings. Bihar has a low share of factories in the country, which is a fallout of the lower share of manufacturing in GSDP. 

Outstanding bank credit to Bihar’s industry

The status of the industry in Bihar is evident from the data around the bank’s outstanding credit to industries in the state. The outstanding bank credit to the industry in Bihar accounts for only 0.5% of the outstanding bank credit at the all-India level. Low bank credit to the industrial sector is in parallel with the lower share of industry in the overall GVA of the state. Since manufacturing has the potential of attracting higher investment, which in turn generates more employment, the government needs to focus on providing the right incentives to enable the same, the report added. 

Compared to a low share (8.7 per cent) of the manufacturing sector in Bihar’s overall GVA, the state is more agrarian than the country and services also have a higher contribution to state GDP. Bihar is a leader in vegetables and jute and Mesta. However, the large scale employment opportunities that can be produced by industry, hardly match up with those from the agriculture sector.

The unemployment rate has gone up in the state with the differential becoming wider between the state and country in 2018-19. The problem is more in rural areas relative to the urban regions. Even the daily wages labour in Bihar gets significantly less remuneration than the all-India average. While a construction worker gets Rs 340 according to the all-India average, the same in Bihar falls to Rs 302 per day. 

Meanwhile, Bihar ranks 8th in the number of medium and small-scale industries. 5.4 per cent of the SMEs are in Bihar and they employ nearly 5 per cent of the total employed under this classification. However, the share of total investments under this classification is low at 1.3 per cenr and seen a decline from 1.8 per cent in 2006-07.

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