The State of Bihar is now part of the economically emerging states of the Hindi speaking northern India. Despite recent economic gains it still has a per capita income of $148 a year against India's average of $2,538 and 30.6% of the population live below the poverty line against India's average of 22.15%. The blame for this stems from many factors: the freight equalisation scheme, poor political vision until Nitish Kumar became Chief Minister in November 2005, under-investments in the key sectors of agriculture, infrastructure and education.
Cultural and political factors have also been blamed for the economic deline in the 1980s and 1990's. Many observers believe that a lethal combination of poor governance, caste based politics, caste based society, and rampant corruption by politicians & bureaucrats(and also, an conducive atmosphere of social tolerance and acceptance for corruption) were the main causes for the lack of development. However, Saibal Gupta of Asian Development Research Institute, has also blamed the complete absence of a sub-national identity which allowed the Union Government to ignore the state's interests. This has changed since the attacks on Bihari migrant workers.
The new NDA Government has made 'development with justice' an aim of the state. The Bihari Finance Ministry has given top priority to create investment opportunities for big industrial houses. The current economy is based on agricultural (90% of the current GSDP). Despite this, investment in irrigation and other agriculture facilities has been grossly inadequate in the past. There have been attempts to industrialize the state between 1950 and 1980: an oil refinery in Barauni, a motor scooter plant at Fatuha, and a power plant at Muzaffarpur. However, no sustained effort had been made in this direction. Historically, sugar and vegetable oil were flourishing industries of Bihar. Until the mid fifties, 25% of India's sugar output was from Bihar. Dalmianagar was a large agro - industrial town. However, these were forced to shut down due to faulty central government policy which neutralized the strategic advantages of Bihar. Hajipur, near Patna, remains a major industrial town in the state, linked to the capital city through the Ganga bridge and good road insfrastructure.
Since 2005, the Dairy Industry has has become a high performing sector. Likewise, the Sugar Industry is another sector which has grown; 25 new sugar factories committed in Bihar between 2006 and 2007. Since 2005, the NDA state government has created business friendly environment for investment opportunities and leverage the resources there for all big and small industrial houses.
The division of Bihar in 2000, when the industrially advanced and mineral-rich southern-half of the state was carved out to form the separate state of Jharkhand, had a strong impact on development in the north mainly through a loss of revenue. The new State of Bihar produces 60% of the output of the Undivied Bihar. The GSDP of the new Bihar has grown by 18% in the year 2006-2007 according to the government of India's statistics making it one of the key growing states of Hindi speaking northern India. Bihar's gross state domestic product for 2004 was estimated at $19 billion in current prices. Further developments have taken place in the growth of small industries, improvements in IT infrastructure, the new software park in Patna, and the completion of the expressway from the Purvanchal border through Bihar to Jharkhand. The government has also decided to expand the state highway from Patna to Muzaffarpur from its current poor one lane to a four lane expressway. The central government funded north-east corridor expressway will run through the northern part of the state making the north better connected with the rest of India.
In addition, the Financial Express newspsper reported on April 7th 2008 that Patna, Munger and Begusarai in Bihar were the three best-off districts out of a total of 38 districts in the state, recording the highest per capita gross district domestic product of Rs 31,441, Rs 10,087 and Rs 9,312, respectively in 2004-05.
Average Per Capita Income for all India Rs 22,946
Average Per Capita Income for Patna Rs 31,441
GSDP at Current Prices 2000-2007 from the Ministry of Statistics and Programme Implementation (Feb 2008 Data)
Rupee value in Crores
1999-2000 GSDP 50200
2000-2001 GSDP 57279 Growth 14.10%
2001-2002 GSDP 57804, Growth 0.92%
2002-2003 GSDP 65117 Growth 12.65%
2003-2004, GSDP 66961 Growth 2.83%
2004-2005 GSDP 73791 Growth 10.20%
2005-2006, GSDP 79682, Growth 7.98%
2006-2007, GSDP 94251 Growth 18.28%
(Not including Jharkhand)
The average economic growth rate under the RJD government (2000-2004) was 7.03%, whilst under Presidents rule (Feb to Nov 2005)and the current NDA government (Nov 2005 till date) the state is growing on average by 12%. Even more significant is that the state's GSDP grew by 22% between 2004 and 2007. The growth has resulted in visits by Indian business leaders to Patna making commitments to invest in the state's fast growing economy. The Indian governments data for 1980 to 1990 (below) also show that the GSDP of the undivided Bihar grew by 72%. The below data also shows that the state GSDP grew by 49% between 1980-1985, which means that the economy was one of the fastest growing in the country during the early 1980s.
However, the data also shows that the GSDP shrank between 1990-1995 resulting in an employment-development-crime crisis between 1995-2004. Furthermore, the breakup of the state in 2000 compounded the dismal economic activity during this period and created the mass migration of Bihari's seeking work in other states.