With Double-Engine Government, Bihar Poised For Rapid Progress | Opinion

Bihar represents one of the most telling unfinished economic stories in India. A state with deep civilizational roots, fertile geography, and a large young population, Bihar should have been a natural beneficiary of India’s post-liberalisation economic rise. Instead, it remains caught in a paradox: among the faster-growing state economies in recent years, yet still among the lowest in per capita income, industrial depth, and human development outcomes.

This divergence between growth and prosperity is not merely statistical. It reflects the difference between aggregate output growth and genuine structural transformation. Since the mid-2000s, Bihar has consistently outperformed the national GDP growth rate. In 2022-23, its growth was 17.9%, and in 23-24, it was 14.9%.

But the high growth rates have not translated into significant increases in per capita income; it has been at too low a base, and the population has been growing faster than the national average. And so, its GDP per capita is just Rs 76,490 (2024-25), about 35.7% of the national average.

The long-term picture is more revealing. Average GDP per capita as compared to the national average has been declining steadily from 68% in 1950, to 54.7% in 1960-61, to 35.7% in 2025- 26 (Est.). A state that once stood closer to the national average has been relegated to the lowest per capita income.

Internal disparities are equally pronounced, with districts around Patna far more significantly outperforming poorer regions in northern and eastern Bihar. The result is persistent out-migration: labour leaves in search of wages, talent in search of opportunity, and capital in search of returns.

This was not inevitable. Bihar entered the post-independence era with substantial strengths. Its alluvial plains made it one of India’s natural agricultural centres, producing nearly 25% of the country's sugar and a significant share of its horticultural output. Towns such as Dalmia Nagar symbolised early industrial promise.

From the 1970s to the late 90s, Bihar’s ruling political leadership showed a singular lack of vision, planning, and wisdom. The breakdown of law and order and of governance institutions instilled fear and uncertainty across the industry, prompting businesses to shut down or relocate. This resulted in underinvestment and underperformance in health, education, and infrastructure, all of which could have been the gunpowder for future growth.

While Karnataka and Tamil Nadu were busy transforming Bangalore and Chennai, respectively, into IT powerhouses, Bihar was building charwaha vidyalayas. And fell behind.

Today, the structure of Bihar’s economy reveals both progress and imbalance. Services account for the largest share of output (60%), while industry remains modest (20%), and agriculture’s share in output has declined substantially (20%). Agriculture remains constrained by fragmented holdings, inadequate irrigation, weak extension services, limited storage capacity, and recurring climate shocks, including floods and droughts.

Despite Bihar’s natural advantages, productivity gains are therefore episodic rather than systemic. Yet 50% of the workforce continues to depend on agriculture.

The policy challenge, therefore, is not merely to grow more crops, but to raise farm incomes through diversification, aggregation, logistics, food processing, and market access. Industry presents an even larger gap. Bihar’s share of manufacturing remains much below its potential because industrialisation is driven not solely by incentives.

It requires reliable electricity, transport connectivity, contract enforcement, access to finance, serviced land, skilled labour, and administrative predictability. Investors compare the states, not aspirations. Capital flows to destinations with stronger ecosystems.

The services sector has expanded, but much of it remains concentrated in trade, transport, construction-linked activity, and public administration. High-productivity services like technology, finance, design, analytics, healthcare systems, and advanced education remain underrepresented. This matters because states that leapfrog successfully often do so by combining manufacturing scale-up with knowledge-intensive services.

Yet all is not gloom and doom. Macroeconomic parameters are within control. The fiscal deficit is within FRBM limits, and the debt-to-GDP ratio of 35-40% is effectively under control. Significant improvements have been made in rural connectivity, rural electrification, and digital infrastructure.

However, gaps remain in creating an industrial ecosystem, urban infrastructure, and logistics and warehousing. But Bihar’s constraints should not obscure its opportunities.

Few Indian states possess such a large youthful population at a time when much of the country is gradually ageing. Few states have equally fertile land and water-linked agricultural potential. Few are as strategically positioned between eastern India, Nepal, and the broader Gangetic market. Bihar could still move from being labour-exporting to enterprise-attracting.

A new BJP Government headed by Samrat Choudhury has since assumed office following Nitish Kumar's decision to move to Delhi. Many BJP-led state governments, upon assumption, have charted new paths to the state's prosperity with the proverbial double-engine ki sarkaar.

The results of those endeavours are vividly visible even in large states like UP. Now it is the turn of Bihar to benefit. Bihar’s next chapter has to be one of convergence rather than lag. Its citizens deserve better. But that requires moving beyond the politics of identity and grievance toward the efficacious approaches and economics of execution. In the next articles, we propose to outline a set of ideas for consideration of weaving into policy prescriptions.

(G N Bajpai is the former Chairman of SEBI and LIC, and Ritesh Pandey is a public policy analyst.)