Bihar is a state brimming with potential, yet socio-economic challenges have long impeded its progress. Citing its economic backwardness, the state has long advocated for 'special category' status from the centre, which would ensure 90% funding for the union government schemes, compared to 60%-80% for other states, along with various tax concessions. Despite widespread anticipation, this demand was not met in the 2024 union budget. However, the budget placed significant focus on Bihar’s needs and provided substantial incentives. By addressing several critical issues, it offered renewed hope that Bihar will regain its status as one of India’s leading states.

Recent Growth Surge
In terms of growth, Bihar's economy has shown significant improvements over the last two decades, growing at an average rate of 7.25 percent since 2001. And more recently, in 2022-23, Bihar’s gross domestic product grew at 10.6% as against the national average of 7.2%. However, its per capita income remains one of the lowest in the country. With an annual per-capita income of less than USD 800, it is classified as a low-income economy according to the World Bank's income group thresholds. Several factors contribute to this, including a high population growth rate (1.5% annually against the national average of 0.9%), low levels of income before the growth spurt, low education levels (only 33% have secondary or higher education), and a paucity of educational institutions, a larger population dependent on agriculture (about 39%), low productivity sectors (about 18%), low female labour force participation (about 22%), and a lack of other employment opportunities.

The 2024 budget has allocated a substantial Rs 58,000 crore to Bihar for various projects, with a significant portion dedicated to infrastructure development. Though it has national and state highways, the state lacks expressways. Under this budget, two greenfield expressways have been announced: Patna-Purnea and Buxar-Bhagalpur, which will connect Bodhgaya, Rajgir, Vaishali, and Darbhanga. Additionally, a two-lane bridge over the Ganga river in Buxar has been announced. In line with the Kashi Vishwanath corridor, development projects for a Maha Bodhi corridor in Bodhgaya and a Vishnupad corridor in Gaya have also been unveiled. Plans are in place to develop Nalanda and Rajgir as international tourist destinations. These developments will not only improve connectivity and ease of commuting but also have the potential to attract tourists from around the world and boost the tourist influx in the future. Reviving Bihar's tourism industry could create numerous employment and earning opportunities for the residents.

Manufacturing is crucial for the development of any economy, whether it be that of a state or a nation. In Bihar, however, manufacturing currently employs only about 6% of the total population, significantly below the national level. This is primarily due to a substantial lack of industry in the state. The budget has addressed this issue by not only announcing support for existing projects, such as Rs 21,400 crore for the 2400 MW Pirpainti Thermal Power project – a joint venture between the Bihar government and Coal India – but also designating Gaya as an industrial hub and industrial node under the Amritsar Kolkata Industrial Corridor. This move is essential for boosting Bihar's industrial sector. The establishment of Gaya as an industrial hub will attract investments and facilitate the setting up of new factories and manufacturing units. This, in turn, can create numerous job opportunities for residents, ranging from skilled to unskilled labour. As industries grow, there will be a greater demand for workers in various capacities, leading to reduced unemployment rates and increased income levels.

Addressing floods and natural disasters
Bihar frequently faces problems of both droughts and floods. Frequent flooding has particularly plagued northern Bihar for ages. Nearly every year, these floods and flash floods cause significant damage to crops, homes, and daily activities, posing a substantial hindrance to the state's development. Meanwhile, other parts of Bihar struggle with issues related to water scarcity. The state is in dire need of a permanent solution to flood management, which requires collaboration with neighbouring Nepal and the central water agencies. The present budget has promised special assistance of Rs 11,500 crore for more than twenty ongoing and new projects, including the Kosi-Mechi intra-state link, barrages, river pollution reduction, and irrigation projects. This initiative is expected to play a significant role in resolving the flood woes of northern Bihar. Furthermore, these projects can not only mitigate flood risks but also enhance agricultural productivity and improve water management. By addressing both flood management and water scarcity, these efforts can contribute to the overall development and economic stability of the region.

Expansion of Human Resources
The last and most crucial aspect of development is human capital. Education empowers individuals regardless of caste, class or region. While infrastructure development is vital, human development is paramount. Despite an increase in schools and educational institutions in recent years, Bihar still lags behind most other states in education. The state's literacy rate is one of the lowest in the country at 61%, with only 33% of people attaining secondary or higher education, and the college density remains poor. Addressing this requires two key actions: increasing the number of institutions and incentivising education, and ensuring the quality of education. The budget has announced new medical colleges, higher degree institutes, and, for the first time, the development of sports infrastructure in the state. This initiative can prove to be highly beneficial, provided there are regular quality checks for these institutions.

The way Forward
The most interesting aspect of this budget session is the union government's approach to capital expenditure. Instead of handing over funds to the state government, the central government is allocating money for specific projects, ensuring better utilisation. It's akin to a parent saying, “Tell us your needs, and we’ll fulfil them, but no pocket money.” This strategy aims to develop infrastructure that benefits both economically and politically by addressing two important and crucial concerns: employment and income.

With the union budget addressing some of the state's most significant concerns, there is hope that Bihar will rise and shine. By focusing on infrastructure, manufacturing, flood management, and human capital, Bihar stands on the brink of unlocking its true potential and achieve substantial growth and development. The real challenge, however, is in the ‘efficient allocation’ and ‘effective implementation’ of these plans.

Dr Vaishnavi Sharma is an Economist with a PhD from IGIDR, Mumbai. Dr Barun Kumar Thakur is Associate Professor, Department of Economics, FLAME University, Pune. Views are personal.