Sunday, February 07, 2010

Transforming One of the Poorest State in India The Bihari enlightment; Bihar's remarkable recovery At 11.03 per cent, Bihar growth rate only a step behind Gujarat; Bihar shows good regulations can speed up growth: Moody's Nitish asks India Inc to invest in Bihar; assures them safety

"Bihar has never been the case of bad governance. It was actually the case of absence of governance. Now governance is visible," said chief minister Nitish Kumar in Bihar, the India's third largest state by population (over 90 million people). Last month, Mr. Kumar received the business reformer of the year award at the Economic Times Awards. There, he asked Indian corporate leaders to invest in Bihar, saying that there would not be inclusive growth unless Bihar catches up with the rest of the nation.

Before Mr. Kumar became chief minister in November 2005, Bihar was the most depressed and disorderly state for 15 years under Mr. Kumar's predecessor, Lalu Prasad Yadav. It used be a "Jungle Raj of corruption, crime and caste vengeance." Bihar's growth rate was negative 5.15% during 2003-04. However, over the last four fiscal years, its economy grew by 10.5%. Now people feel safe to drive nice cars on the road and walking around at night.

Such transformation in Bihar began by imposing law and order. Mr. Kumar demanded speedy trials so that defendants could not threaten witnesses and delay proceedings. He made sure that convicted criminals would not be allowed to get licenses for liquor stores and rations shops (selling subsidized food and fuel). Requiring gun-owners to conceal their weapons made the state safer as well. Also, with the help of the funds from the central government, Bihar built over 2,400 km of roads in 2009. Its spending on planned development priorities rose up to 160 billion rupees ($3.5 billion) in the most recent fiscal year from 12 billion rupees in 2002.

However, challenges remain in transforming Bihar according to the Economist. For example, while the state has focused on development programs such as building roads, it needs institutional reforms (e.g., land reform). Also, it needs more private investment. In order to implement further reform, Mr. Kumar needs to win re-election this year.

Discussion: What lessons can other underdeveloped states in India and other countries learn from Bihar?

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