Bihar growth history after 1947 can be devided in three parts.

1947 - 1979

The sugar and vegetable oil industries were flourishing sectors of undivided Bihar. Until the mid fifties(1950), 25% of India's sugar output was from Bihar. Dalmianagar was a large agro - industrial town. There have been attempts to industrialize the northern half of the state between 1950 and 1980: an oil refinery in Barauni, a motor scooter plant at Fatuha, and a power plant at Muzaffarpur. There are many factors behind the economic decline of Bihar. Many in Bihar blame the freight equalisation scheme, poor political vision, under-investments in the key sectors of agriculture, infrastructure and education. Others view cultural and political factors as reasons behind economic decline, especially in the 1980s and 1990s. The government, between 1947–2000, supported the industrialisation of the southern half of the state rather than the north was the major cause of the lack of industrialisation in north Bihar. The undivided Bihar government developed important industrial cities like Bokaro, Jamshedpur, Dhanbad, and Ranchi in the south. The north remained the agricultural heart of the undivided state. The two regions complimented each other.

1980 - 1989

Indian government data form 1980 to 1990 also show that the GSDP of the undivided Bihar grew by 72% in this period despite the socio-economic prooblems of the state. The 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 as well. In 1980 undivided Bihar had a population of 70 million. In the 1980s, the five-year plan called for $4 billion in investment in Bihar. By 1987, the $4 billion translated into $12 investment per person. Economists claimed that a huge budget deficit is spurring inflation, eroding the standard of living of the poorest sections of the people of Bihar. In agriculture, the largest sector, the government failed to invest in the production of agriculture and instead opted to import food grains from other parts of India. This decision helped facilitate problems faced by agricultural workers in the late 1980s and paved for the victory of Lalu Prasad in 1989.

Collapse 1990 - 2005

Caste and Criminalisation

The Rashtriya Janata Dal leader, Lalu Prasad's, support of social justice ensured that politics was dominated by Mandal politics and caste rather than development during this period. Also, the criminalisation of politics during this time created a business unfriendly climate and contributed to the economic collapse The biggest crisis business faced was with organised kidnapping, which the local BJP leaders claimed was linked to the ruling RJD. The resulting crisis led to a flight of capital, middle class professionals, and business leaders to other parts of India. The flight of business and capital increased unemployment and this led to the mass migration of Bihari farmers and unemployed youth to more developed states of India.


Extent of corruption in Indian states, as measured in a 2005 study by Transparency International India.

Non RJD Factors

Bihar's share of revenue from the Central pool declined by Rs.5,000 crores as the Centre's revenue collection had gone down. This, coupled with the fact that the government failed to get its plan allocation released because it could not contribute the matching non-plan grant, aggravated the financial crisis.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. Divided Bihar produces 60% of the output of the undivided Bihar.

Economic Indicators under the RJD

In the non-agricultural sector, the growth rate in Bihar was 6.62% against 6.61% for India as a whole during the 1980s. During the 1990s when the growth rate in Bihar was 3.19%, while for India it rose to 7.25%. This change was reflected in the per capita income as well. Per capita income in Bihar grew by 2.45% during the 1980s, against 3.32% per cent in India as a whole. In the 1990s, per capita income grew by 0.12% per cent in Bihar, as against 4.08% per cent in India. The growth rate in agriculture was 2.21% during the 1980s against India's 3.38%, during the 1990s it was 2.35% in Bihar while at the all-India it stood at 3.14%.[ The economic indicators shows that there was a serious recession between 1990–1995, which resulted in an employment-development-crime crisis between 1995-2004.

Current
Nitish KumarThe NDA Government, and Chief Minister Nitish Kumar, has made 'development with justice' an aim of the state. The Finance Ministry has given priority to create investment opportunities for big industrial houses like Reliance. Improvements in law and order, with a more proactive bureaucracy has led to a gradual improvement in the economy of the state. NDTV dubbed this as the "Quiet Transformation". In January 2009, Nitish Kumar was awarded the CNN IBN Indian Politician of the Year award for helping put Bihar on the sustainable development and growth track.Despite global economic slowdown and sagging domestic demand, Bihar has managed to record 11.95% annual growth rate, the highest among all the states, during the 11th Plan period.

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