Bihar’s Mirage of Growth: The State That Runs Fast but Stands Still

No matter who forms the next government in Bihar — Nitish Kumar’s coalition, the RJD-Congress alliance, or a fractured new front — the truth waiting in the Chief Minister’s chair will be brutal: Bihar’s growth story hides as much as it reveals.

Behind the numbers that politicians flaunt — double-digit GDP growth, record highway construction, a trillion-dollar dream — lies a state still battling the fundamentals of poverty, joblessness, and underdevelopment. Bihar may have shed its “Bimaru” tag in charts, but not in lived reality.

The state has one of India’s fastest-growing economies, yet its people remain among the poorest. It has more roads, more power plants, and more airports than ever before — yet fewer hospitals that function, fewer schools that retain teachers, and fewer jobs that pay enough to live on.

This is the paradox any incoming government will have to confront: Bihar runs fast, but stands still.

The Uneasy Arithmetic of Growth

As of 2025–26, Bihar’s Gross State Domestic Product (GSDP) is expected to reach ₹10.97 lakh crore (US$130 billion), growing at a compound annual rate of 11.4% over the past decade. In purely statistical terms, that makes Bihar one of India’s top performers.

But divide that by its 127 million residents, and the picture changes. Bihar’s per capita income, at ₹59,637 (US$720), remains just about one-third of India’s average — roughly where it stood a decade ago in relative terms.

The economy’s expansion is skewed: the services sector contributes 58.6% of GSDP, industry only 21.5%, and agriculture — which still employs nearly three-fourths of its people — about 19.9%. That means growth is being driven not by factories or fields, but by construction, trade, and public administration — a service-heavy model that produces GDP without producing durable jobs.

This is why the glitter of Bihar’s revival hides deep cracks.

The Social Reality: Poverty Amid Progress

Bihar’s Human Development Index (HDI) of 0.609 ranks it near the bottom among Indian states. The literacy rate, 61.8%, lags the national average by over 11 percentage points. One in three children is undernourished; one in four still drops out before finishing secondary school.

Public health infrastructure remains threadbare — one government doctor serves nearly 20,000 people. The female labour participation rate, at 22.4%, is barely half the national figure. For women and the poor, Bihar’s economic boom remains a distant rumour.

Inequality has also deepened. Patna’s per capita income is ₹1.14 lakh, while Sheohar’s is ₹18,980 — a sixfold gap between the capital and the countryside. The new Bihar is not one state but two: one urban, aspirational, and connected to India’s growth corridors; the other rural, agrarian, and locked in a poverty cycle that no highway can break.

The Ghost of the Past

Bihar’s current contradictions cannot be separated from its history. The 1990s, under Lalu Prasad Yadav and Rabri Devi, were years of economic torpor and administrative collapse. The state’s share in India’s GDP fell from 4.5% in 1990–91 to 2.8% by the early 2000s, and its per capita income dropped from 45% to 25% of the national average.

The so-called “jungle raj” years left Bihar with broken institutions, a hollowed-out bureaucracy, and a battered investment climate. The 2000 bifurcation that created Jharkhand stripped away its mineral backbone, leaving an economy almost entirely dependent on agriculture and remittances.

When Nitish Kumar came to power in 2005, Bihar’s GSDP was just ₹47,591 crore, and average annual income barely ₹3,524 per person. Between 2001 and 2005, growth averaged a dismal 2.9% a year — less than population growth.

That low base made the recovery after 2005 spectacular. Nitish’s early years saw economic expansion at 11% annually between 2005 and 2011, peaking at 17.7% in 2006–07. Better law and order, improved roads, and governance reforms made “Sushasan Babu” a national brand.

But 20 years later, Bihar’s story looks less like transformation and more like catch-up. The state has changed — yet not enough.

The Fragile Fiscal Spine

Bihar’s fiscal condition reveals another uncomfortable truth. The state is addicted to central funds. Nearly 75% of its revenues come from New Delhi via Finance Commission grants and tax devolution. Its own tax revenue — ₹59,520 crore in 2024–25 — cannot even cover committed expenditures like salaries, pensions, and interest payments.

Interest payments alone have ballooned to ₹23,838 crore in 2021, from just ₹3 crore in 1999. The debt-to-GSDP ratio, now around 40%, is one of the highest among Indian states.

The NCAER’s 2025 report on state finances warns that Bihar’s “debt sustainability remains weak,” and that “the burden of interest payments threatens to crowd out social expenditure.” In other words, Bihar is borrowing to stay afloat, not to move forward.

While infrastructure spending — highways, bridges, and power plants — has given visible results, the state’s Gross Fixed Capital Formation (investment share in GDP) is a mere 4.7%, among India’s lowest. The economy is running on consumption, not capital formation — an unsustainable model in the long run.

The Illusion of Infrastructure

To its credit, Bihar has made impressive strides in connectivity. Rural paved roads have exploded from 835 km in 2005 to 1.17 lakh km in 2025. There are 57 ongoing railway projects worth ₹15,987 crore, a ₹3,402 crore metro rail under construction in Patna, and 7,895 MW of installed power capacity.

Yet, this infrastructure boom coexists with institutional decay. Public investment is often misallocated, and corruption continues to drain efficiency. Despite digitalisation, Bihar remains near the bottom in India’s ease of doing business rankings.

Infrastructure alone cannot create prosperity if human capital and governance lag behind. Bihar has built roads to everywhere, but too often, they lead back to the same poverty.

The Migration Trap

Perhaps no statistic captures Bihar’s contradictions better than its migration numbers. Nearly 10 million Bihari workers live outside the state, powering Delhi’s construction sites, Punjab’s farms, and Gulf economies.

Remittances sustain rural consumption but hollow out local labour markets. Entire districts rely on money earned thousands of kilometres away. According to the IMF, global trade tensions and slower remittance growth could soon hit these inflows — a shock that would ripple across Bihar’s fragile consumption-driven economy.

Migration also distorts politics. Instead of creating jobs at home, successive governments have quietly accepted migration as an escape valve for unemployment. Bihar’s unemployment rate remains high, while over 75% of the workforce remains in low-productivity agriculture.

Schemes like the Student Credit Card Program — which sanctioned ₹763 crore in loans by September 2024 — and MGNREGA wage support may help, but they do not substitute for structural employment generation.

The Twin Threats: Nature and Neglect

Each year, floods from rivers like the Kosi and Bagmati submerge large parts of north Bihar. Despite ₹1,478 crore spent on flood control and bridges, the destruction continues. Crops vanish, roads wash away, and tens of thousands are displaced annually.

This is not just a natural crisis — it is an economic one. Agriculture contributes nearly one-fifth of GSDP, but remains perpetually vulnerable. Climate shocks compound poverty, pushing families into cycles of debt and migration.

Meanwhile, inflation erodes real wages. Consumer prices grew 5.5% in 2023–24, hurting low-income households. Energy consumption — diesel, petrol, LPG — continues to climb, but income growth does not match.

Politics of Complacency

Bihar’s 2025 election, like those before it, is being fought over identity rather than ideas — over caste arithmetic, not capital allocation. Parties promise free power, caste surveys, farm subsidies, and loan waivers, but few talk about fixing the structural bottlenecks that trap Bihar in low development.

Populism has replaced planning. Policy continuity — crucial for investment — depends more on coalition stability than economic vision. Nitish Kumar’s developmental legacy, Tejashwi Yadav’s welfare promises, or the BJP’s central-backed projects will all run into the same wall: Bihar’s fiscal, institutional, and human limits.

As the Bihar Economic Survey 2024–25 notes, the state’s growth “remains sensitive to external shocks” — from floods to remittance declines to global slowdowns. The IMF’s projected 6.2% growth for India in 2025–26 could further squeeze Bihar’s export earnings and central allocations.

The danger isn’t failure — it’s stagnation dressed up as success.

The Way Forward

Bihar’s dream of becoming a $1 trillion economy by 2047 will remain rhetoric unless growth becomes inclusive. Three steps are non-negotiable:

1.         Diversify the economy — Shift focus from consumption and construction to manufacturing, agro-processing, and logistics, leveraging the eastern freight corridor.

2.         Invest in human capital — Improve schools, health systems, and vocational training, especially in rural districts where dropout and disease remain endemic.

3.         Reform fiscal priorities — Cut wasteful expenditure, curb interest liabilities, and channel resources toward productive capital investment.

Bihar’s youth — half the population is under 25 — cannot live on statistics. They need skills, jobs, and dignity, not subsidies and slogans.

Beyond the Ballot

Whichever party takes power after the polls will inherit not a state in crisis, but one at a crossroads — a place that has learned to survive but not yet to thrive. Bihar’s problem is no longer economic backwardness; it is economic imbalance.

Growth without inclusion is a political illusion. Bihar may be running faster than ever, but unless it learns to lift its people with it, it will remain trapped in the same paradox: a booming economy with a broken foundation.

Whoever wins in Patna will have to confront the hardest truth of all — that Bihar’s real opposition is not in the assembly, but in arithmetic.