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Challenges and Opportunities Facing India's Poorest State

Jeffrey Witsoe
August 19, 2007

As India registers impressive growth rates and is increasingly seen as an emerging economic superpower, Bihar serves as a vivid reminder of the parts of India that are being left behind. Bihar, a populous state of over 90 million, is India's poorest state with one third the per capita income of India as a whole and one fifth that of India's most prosperous states. Bihar also has the lowest literacy levels and the lowest human development index ranking among Indian states.

In 2005 a National Democratic Alliance (NDA) state government, with Nitish Kumar as chief minister, came to power in an election that the Indian national media characterized as a groundbreaking referendum for development and good governance. Since then the state government has initiated an ambitious reforms agenda. The government's degree of success in implementing this agenda have significant implications for India as a whole, not least because of the sheer population of Bihar and its similarities with neighboring Uttar Pradesh (an even more populous state of 166 million). The future of Bihar will in no small part determine whether increasing inequality between regions and social groups in India can be reversed.

The Nitish Kumar government's development projects are highly ambitious, especially when compared to the performance of the previous government. The state government's approach paper for the 11th five-year plan aims to achieve "all inclusive growth at an accelerated pace" and includes the incredibly ambitious goal of "making Bihar a developed state by 2015" with targets such as halving the poverty ratio by 2015 (in line with the Millennium Development Goals), connecting every village with more than 500 people with all-weather roads, and generating nearly five million jobs. Administrative reforms have been initiated along with police reforms and fast track courts and corporations have submitted billions of dollars worth of investment proposals. A large number of these are for sugar processing plants, especially for ethanol production, that will significantly increase agricultural incomes within a fifty kilometer radius of the plants (sugarcane being a high value crop that requires processing within hours of being harvested).

In order to understand the socio-political context within which these projects are being initiated, it is important to recognize the profound social change that occurred in Bihar over the last two decades. Lalu Yadav, and later his wife Rabri Devi, who served as chief ministers of Bihar from 1990 to 2005, focused on the political empowerment of lower castes instead of development related issues. In the space of just a decade, from 1985 to 1995, the number of backward caste candidates elected to the assembly more than doubled to 50%, while the number of upper caste candidates more than halved to 17%, indicating a profound transformation of political representation in the state. During this period upper caste landlords experienced a general decline in their fortunes while peasant cultivator castes, especially Yadavs, Kurmis, and Koeris, gradually acquired a stronger role within the rural economy. This has been accompanied by a general breakdown in patron-client relations within the agrarian economy, contributing to labor mobility. For example, the number of bonded laborers in a resurvey of twelve villages in north Bihar conducted by the Institute for Human Development found that the percentage of laborers that were bonded decreased from 30% to 10% from the early 1980s to the end of the 1990s, and in many other villages, bonded labor has disappeared altogether.

Within this context, the poor faired better than we might expect considering the Bihar government's development record. From 1993-94 to 2004-05 the poverty ratio declined 14% (from 57.24% to 43.06%), compared to an 8% decline in India as a whole and a less than 2.5% decline in Orissa (which has now surpassed Bihar as the state with the highest headcount ratio of 47.76%). Even more surprising, the headcount ratio of the very poor halved in Bihar from 28.29% to 14.65% compared to a 5.74% decrease in India and an actual increase in Orissa (from S. Mahendra Dev and C. Ravi, 2007. These figures are from the 61st round of the NSS and are for united Bihar). While this improvement was from a very low base, it is still surprising given the dismal condition of public institutions and the lack of investment in the state during this period. A combination of higher wages for agricultural laborers and remittances from an increasing number of migrants, many of whom experienced increased labor mobility as traditional patron-client relations and bonded-labor ties broke down, explains this surprising decline in poverty.

There is, in fact, a fundamental tension between lower caste empowerment and state directed development. The key levels of the bureaucracy and the police have long been controlled by people from upper caste backgrounds in Bihar and this control served to reinforce the domination of upper caste landlords in the countryside. In 2002, for example, out of a total of 244 Bihar cadre officers of the elite Indian Admistrative Service, 135 were from upper caste groups, while only seven officers came from the three largest backward caste groups (based on my approximate data). The political assertion of lower castes from the early 1990s resulted in a deep-seated conflict between a new lower caste political leadership and a largely upper caste bureaucracy, police, and judiciary. This is why the politics of caste empowerment resulted in a general breakdown of public institutions in Bihar. Since upper caste control of these institutions had reinforced structural inequalities, however, this also explains why the poor did better than we might expect despite the RJDs government's dismal development record.

There is a danger, then, that the Bihar government's aggressive development projects could actually exacerbate inequalities if their capture by elites serves to once again strengthen the hand of dominant landowning castes. Popular slogans alleging that the current government's "good governance" (susasan) is actually upper caste "Bhumihar governance" (bhusasan) reflects this fear. In addition, proposed investments in Bihar are being stalled by land acquisition problems, an increasingly common problem in many areas of India but one which may pose particular problems in Bihar because of the state's politicized rural population. Initiation of all the proposed sugar processing plants, with one exception (being set up by a company owned by Bollywood director Prakash Jha who directly negotiated with village landowners) has been stalled by the government's inability to acquire land. Of even greater concern is the law and order situation, with a reported 4,849 kidnappings in the past year according to reports submitted by district judges (although it is unclear how many of these were for ransom), despite serious measures taken by the state government to tackle this problem. In the end, a modernized and reformed police force will have to be combined with governance that is responsive to the needs of all section of society in order for the law and order situation is to be rectified.

Of course the ideal scenario would combine the agenda of social justice and inclusion with development and growth and this is the promise that Nitish Kumar, a veteran politician from the backward Kurmi caste, represents to his lower caste supporters; not the displacement of caste politics in favor of development, as the national media often implies, but the combination of caste empowerment and development. Nitish himself has so far delivered with 20% reservations for the extremely backward castes and 50% reservations for women in local bodies and with his weekly janta darbar that allow people to voice complaints directly to the chief minister. It is unclear, however, how much of a priority social inclusion is for the rest of his government, especially at lower levels of governance.

While Bihar's political environment is extremely challenging, it is perhaps most important to recognize the immense economic challenges facing the state. Bihar is overwhelmingly rural (90%) and heavily dependant on agriculture, a sector that has not performed well in India over the last two decades. So even under the best of circumstances it is hard to imagine Bihar rapidly catching up with India's most prosperous states. In fact, preventing Bihar's position from sliding further in relation to more developed states would be a considerable accomplishment. There is a danger that expectations are being set too high. Expectation management will be essential in order to maintain political support for the government's reform agenda. It is also clear that greatly increased financial assistance from the center (and from multilateral development agencies) will have to be extended if Bihar is to meet its development goals.

Nitish Kumar is engaged in a very difficult balancing act of attempting to satisfy the demands of his lower caste supporters for empowerment, on which his government's continued political viability depends, while taking bold measures to jumpstart Bihar's stagnant economy. The extent to which he is able to deliver will have important implications for whether the slogan of "inclusive growth" can be actualized in India. While significant changes are occurring in Bihar, we should be careful to recognize the challenges that remain.

Jeffrey Witsoe is Senior Research Coordinator at the Center for the Advanced Study of India at the University of Pennsylvania.

India in Transition (IiT) is published by the Center for the Advanced Study of India (CASI) of the University of Pennsylvania. All viewpoints, positions, and conclusions expressed in IiT are solely those of the author(s) and not specifically those of CASI.

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