10 November 2025 at 06:53 AM IST
First published on: 10 November 2025 at 06:53 AM IST
The election battle in Bihar is in full swing. Rival parties promised moon sightings to the state’s 130 million residents, which is the second most populous state in India. The main opposition bloc, Mahagathbandhan, has made the most promises. She promised “one job for each family within 20 days of the formation of the government, with the recruitment process starting within 20 months.” Bihar has 2.97 crore families. Even at Rs 15,000-20,000 per month, the total expenditure on the schemes would be Rs 5.35 to Rs 7.13 crore per annum. Bihar’s budget for 2025-26 is Rs 3.17 lakh crore. This simple arithmetic proves the hollowness of Mahajatbandhan’s thinking. The manifesto also promises Rs 5 lakh “interest-free cash transfers” for five years, crop purchase guarantees, and 200 units of free electricity. It is clear that the political market in Bihar does not have much room for fiscal wisdom or even a basic understanding of budget financing.
The NDA has been relatively conservative, although it also appears to have fallen for an optical illusion. Its promise of “1 crore jobs” and “1 crore Lakhpati Didis” sounds ambitious. The recent transfer of Rs 10,000 to 75 lakh women under the Mukhimmantri Mahila Rojar Yojana, just before the election season, appears to have been more of a dole (revdi) than a well-thought-out strategy. Having said that, one has to admit that Nitish Kumar deserves credit: restoring law and order in Bihar was no small feat, and stability is the foundation on which the investment is based. However, bureaucratic efficiency is no substitute for political vision. Bihar’s development story will depend on mobilizing private capital and driving structural transformation – something this government, despite its relative discipline, has yet to achieve.
A newcomer, Prashant Kishore’s Jaan Suraj, is perhaps the most sensible one – he has eschewed reverence. But the truth is that for nearly 35 years, regardless of who is in office, Bihar has remained at the bottom of India’s economic pyramid. In 1990-91, when Lalu Prasad came to power, according to MOSPI data, the state’s per capita income (PCI) was the lowest in the country at Rs 2,660 – 43 per cent of India’s average per capita income of Rs 6,126. By 2005-06, when Nitish Kumar took office, PCI income in Bihar had risen to Rs 8,223, but was only 28 per cent of the all-India average of Rs 29,169. Two decades later, the story remains largely unchanged. In 2024-25, Bihar’s PCI rate is just Rs 69,321, barely 34 per cent of the national average of Rs 2,05,324 and just 18 per cent of the average PCI rate in Telangana, the state with the highest PCI rate.
All this only confirms that the long history of subsidies has done little to lift Bihar out of the low-income trap. Naturally, the state today boasts near-universal electrification and greatly improved road connectivity. The deeper problem lies in how power and productivity are distributed. Agriculture, which still employs 54 percent of the workforce (PLFS, 2023-24), consumes barely 4 percent of the state’s total electricity (Agricultural Statistics, 2022-23). How can a sector that is expected to nourish the country and drive its growth with such little capacity? Add to this that the average holding size is only 0.39 hectares (Agricultural Census, 2015-16), and perhaps even smaller now, and the picture becomes even bleaker. Can a family of about five (NFHS, 2019-21) realistically feed themselves on such a small plot of land, especially when the population is growing faster than the national average – 1.43 percent versus 0.9 percent?
What are the potential strategic levers to change Bihar’s economic fortunes? There are three clear paths through which a country can transform its potential into real prosperity. First, bet big on textile parks. After agriculture, textiles are the second largest source of employment, and Bihar’s greatest strength is cheap labour. Textile parks are low-capital, high-labor projects – the best antidote to decades of sluggishness. Pearl Global, founded by Deepak Seth, has a garment factory in Bihar, which trains women to make clothes for export markets. It employs hundreds of women. At least 10 such factories are needed to move labor out of agriculture and into more productive and flexible occupations with guaranteed income. If the next government can help scale up such projects by offering incentives, such as contributions to pension funds or some capital support subsidies, it could pave the way for productive job creation in the organized sector.
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The second driver of Bihar’s growth lies in the livestock sector. The SUDHA cooperative is a quiet revolution: the share of milk in agricultural production has doubled from 14 per cent in the three-year period ending (TE) 2002-03 to 28 per cent in TE 2022-23, with 76 per cent of the consumer rupee reaching farmers, much higher than in crops. The poultry sector is also a growing sector: between 2005-06 and 2022-2023, egg and meat production grew by 10.2 percent and 4.7 percent, respectively. However, most of them come from limited-scale backyard units. Bihar must attract big players like Venkateshwara and Suguna Hatcheries to build integrated value chains linking feed suppliers, farms and processors, bringing in better breeds, technology and assured markets.
The third lever for Bihar’s rejuvenation lies in high-value crops such as sugarcane, makhana and litchi. The emerging bioethanol economy could boost farm and manufacturing profitability. The policy to boost ethanol production in Bihar is a good start, with 47 projects approved, but the state must expand beyond its 22 distilleries (8 molasses and 14 grain-based), revive defunct mills, and scale up to meet national ethanol blending targets. Geographically indicated makhana and shahi lychee need to be scaled up, and investment must be made in processing to move beyond artisanal value chains. The focus should be on attracting private investors in manufacturing and export, with farmers being given credit to subsidize interest on inputs, supported by proactive banking.
Whichever government takes charge, one hopes it will realize that Bihar does not need a reddi economy. It needs generous action based on appropriate development strategies.
Gulati is Distinguished Professor and Chanda is a Research Assistant at ICRIER. Personal views
(Tags for translation)Bihar Elections 2025
