economic backwardness of Bihar

Economic backwardness of Bihar

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1. Introduction: Understanding the Economic Backwardness of Bihar

The economic backwardness of Bihar is reflected clearly in key development indicators. Bihar’s per capita income remains among the lowest in India, significantly below the national average. A large share of its workforce is still dependent on agriculture, while the contribution of manufacturing to the state economy remains limited.

According to recent economic surveys, poverty levels and unemployment rates have historically been higher than many other Indian states. Despite improvements in road connectivity, electricity supply and school enrolment, structural challenges continue to slow income growth. These realities make the economic backwardness of Bihar an important issue for policy and governance debate.

2. Historical Reasons Behind the Economic Backwardness of Bihar

Colonial Economic Policies and Neglect

During British rule, Bihar was largely treated as a supplier of raw materials such as indigo, opium and agricultural produce. Industrial investment was concentrated in port cities like Bombay and Calcutta. The Permanent Settlement of 1793 strengthened zamindari (landlord) control, reducing incentives for agricultural improvement. As a result, Bihar entered independence in 1947 with a weak industrial base and limited infrastructure, laying the foundation for the economic backwardness of Bihar.

Zamindari System and Agrarian Stagnation

The zamindari system created unequal land ownership patterns. Large landlords controlled vast areas, while peasants had little security or incentive to invest in land improvement. Even after the abolition of zamindari in the 1950s, fragmented landholdings continued. According to agricultural census trends, a majority of farmers in Bihar today fall under small and marginal categories, reflecting a long history of structural agrarian inequality that contributed to persistent low productivity.

Freight Equalisation Policy of 1952

The Freight Equalisation Policy introduced in 1952 aimed to ensure uniform pricing of minerals and raw materials across India. While intended to promote balanced development, it reduced the natural advantage of mineral-rich eastern states. Industries were no longer compelled to locate near raw material sources. This policy indirectly discouraged industrial concentration in eastern India, affecting Bihar’s industrial prospects and reinforcing the economic backwardness of Bihar during the early decades after independence.

Bifurcation and Loss of Mineral Resources (2000)

In 2000, Jharkhand was carved out of Bihar. Most mineral-rich districts, including coal and iron ore reserves, became part of the new state. Bihar retained largely agrarian regions with limited heavy industries. Before bifurcation, the undivided state had major industrial assets linked to mining. After separation, Bihar’s industrial share reduced significantly, narrowing its revenue base and slowing industrial expansion, which further deepened the economic backwardness of Bihar.

3. Structural Causes: Agriculture, Industry and Infrastructure

Agricultural Dependence and Low Productivity

Around 45–50 percent of Bihar’s workforce is engaged in agriculture, yet the sector contributes a much smaller share to the Gross State Domestic Product. According to agricultural census trends, more than 85 percent of farmers are small and marginal, owning less than two hectares of land. Irrigation coverage, though improving, remains uneven, and North Bihar faces annual floods affecting lakhs of hectares. Low mechanisation and fragmented holdings continue to sustain the economic backwardness of Bihar.

Limited Industrial Base

Manufacturing contributes a relatively small share to Bihar’s Gross State Domestic Product compared to industrialised states where it forms a much larger component. After the 2000 bifurcation, most mineral-based industries remained in Jharkhand. Bihar’s per capita income remains among the lowest in India, reflecting limited industrial value addition. The state has fewer large industrial clusters, and MSMEs dominate the sector, restricting large-scale employment generation and reinforcing the economic backwardness of Bihar.

Infrastructure Deficit

Infrastructure indicators highlight persistent gaps. Although road density per 1,000 sq km has improved, per capita road availability remains lower compared to more developed states. Freight movement and logistics networks are still evolving. While near-universal village electrification has been achieved, industrial-quality power supply and urban infrastructure require strengthening. Limited warehousing, cold storage capacity and industrial corridors increase transaction costs, making infrastructure constraints a structural driver of the economic backwardness of Bihar.

4. Social Factors

Social indicators strongly influence the economic backwardness of Bihar. The state has historically recorded lower literacy rates compared to the national average, though improvements have occurred in recent years. Female literacy, while rising, still lags behind male literacy, affecting workforce participation. Bihar also has one of the highest population densities in India, increasing pressure on land and public services. High dependency ratios mean a larger share of non-working population depends on limited earners. Health indicators such as malnutrition and maternal health challenges further reduce productivity, thereby reinforcing the economic backwardness of Bihar through social constraints.

5. Governance Issues

Weak governance has played a significant role in shaping the economic backwardness of Bihar. Historically, Bihar’s per capita income has remained far below the national average — for example, in 2022-23 it was around ₹59,637 compared with India’s nearly ₹1,96,983, reflecting slower economic development and investment outcomes.

Per capita development expenditure in Bihar has also been lower than many states historically, limiting investments in health, education and infrastructure that are essential for growth. Studies point to low human capital and weak institutions as major constraints on development outcomes.

Administrative inefficiencies and delays in programme implementation reduced investor confidence and slowed project completion for many years. While governance quality has improved recently, the long-standing impact of earlier administrative challenges continues to influence Bihar’s economic performance.

6. Regional Imbalance Within Bihar

Regional imbalance is another factor behind the economic backwardness of Bihar. North Bihar, located close to Nepal, is highly flood-prone. Every year, floods affect around 15–20 districts and damage lakhs of hectares of agricultural land. In contrast, South Bihar faces relatively lower flood intensity but experiences water scarcity and drought-like conditions in some districts.

District-level income variations are also visible. Urban districts like Patna show higher per capita income and better infrastructure compared to many rural districts. Uneven industrial concentration and infrastructure availability across regions create internal disparities, slowing balanced economic development within the state.

7. Link with Migration and Demographic Dividend

Migration from Bihar is large and long-standing, reflecting limited local employment opportunities. As per the 2011 Census, over 2.7 crore people from Bihar were recorded as migrants, one of the highest figures among Indian states. A majority of labourers from rural Bihar undertake long-distance migration to states like Delhi, Punjab and Haryana for work, with internal migration being far more common than movement within the state or abroad.

This migration trend is a key part of the economic backwardness of Bihar because it shows local jobs are insufficient to absorb the working-age population. At the same time, Bihar is demographically young. Around 58–60% of its population was under 25 years of age according to the 2011 Census, giving it one of the youngest age structures in India. This large young population can become a demographic dividend — meaning a potential boost to economic growth if enough jobs and skills are created — but without quality education and local employment, the state risks missing this opportunity.

8. Current Reforms

Infrastructure expansion and capital investment

Bihar has raised capital outlay in recent budgets as part of an infrastructure push — the state’s budget documents show a proposed capital outlay of ₹29,416 crore for 2024–25, after a rise in revised estimates in 2023–24, signalling sustained asset-creation spending. Road works are extensive: the Rural Works Department reports ~68,591 km of rural roads built so far, including ~45,832 km under PMGSY, improving village connectivity and market access. Major Ganga-crossing projects and bridge works have reduced travel times between North and South Bihar, aiding regional integration.

Power sector improvements

Household and village electrification has progressed markedly under national schemes. The Centre reports that all inhabited un-electrified census villages were electrified by April 2018 and that millions of households were electrified under DDUGJY and Saubhagya; DDUGJY alone electrified 18,374 villages nationwide with ~2,906 villages in Bihar as part of that drive. Recent state measures (including free-units welfare announcements covering ~1.67 crore households) show active policy use to stabilise domestic power access — a key input for small industry and farm electrification. Still, industrial-grade supply needs further strengthening.

Industrial promotion policies and ease of doing business

Bihar has updated sectoral policies (textiles, leather, food processing, ethanol) to attract investment, offering capital subsidies, tax incentives and single-window clearances under the state’s Industrial Investment Promotion framework. The state has also engaged in BRAP reforms: in 2020 Bihar featured in national Ease of Doing Business rankings (BRAP) and continues to pursue administrative reforms to improve investor confidence. Policy documents and sectoral PDFs set targets for cluster development and MSME promotion to expand manufacturing and jobs.

Agricultural diversification and value-addition

State statistics show strong output in cereals and rising maize and horticulture figures (for 2024–25, rice ~99.3 lakh MT, wheat ~78.3 lakh MT, maize ~66.0 lakh MT), signalling scope for value chains. The government and universities are promoting high-value crops — for example, organized efforts to boost makhana (fox-nut) productivity in Mithila with new high-yield varieties and GI branding to raise farmer incomes. Pushes for food-processing units aim to retain value within the state rather than exporting raw produce.

Skill development and employment initiatives

Bihar has scaled skill efforts through the Bihar Skill Development Mission and recent MoUs linking traditional arts and local industry to markets; mega job fairs have produced employment offers (including international placements) and the state is integrating digital skilling into training curricula. These programs are explicitly linked to state industrial promotion and aim to place trainees in food processing, construction trades, healthcare assistance and IT-enabled services — a direct attempt to convert the state’s young labour force into employable human capital

9. Conclusion

The economic backwardness of Bihar is the outcome of historical neglect, structural weaknesses and social constraints, but it is not irreversible. Data shows that while per capita income remains among the lowest in India, recent increases in capital expenditure, near-universal electrification and expansion of rural roads indicate gradual structural correction. The state’s young population offers a demographic opportunity, provided education and skill systems align with industrial growth.

Sustained reforms in infrastructure, governance, agricultural diversification and private investment are essential for long-term transformation. If policy continuity, institutional efficiency and employment generation move together, Bihar can shift from a cycle of migration-driven survival to productivity-led growth and inclusive development.

BPSC Mains Practice Questions (Topic: Economic Backwardness of Bihar)

  1. Discuss the historical and structural causes behind the economic backwardness of Bihar. Analyse the role of colonial policies, bifurcation, agriculture, industry and infrastructure in shaping present economic conditions.
  2. Examine the relationship between migration, demographic dividend and economic backwardness of Bihar. Is migration a constraint or an opportunity for long-term development?
  3. Evaluate the effectiveness of recent reforms in reducing the economic backwardness of Bihar. Suggest a practical roadmap for sustainable and inclusive economic growth.

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