Bihar's Made Economic Progress But There's Still A Long Way To Go
Bihar's gross state domestic product grew by 11% in FY22, making it among the fastest growing states in the country.
The state of Bihar has for years been associated with a poor ranking on socio-economic indicators, low per capita income, crime and lawlessness. But slowly yet steadily, things are changing.
Bihar's gross state domestic product grew 11% in FY22, making it among the fastest growing states in the country, after Andhra Pradesh and alongside Rajasthan, according to data from the Reserve Bank of India. Within the state, change is palpable.
Bhanu Shikha, investment product specialist at JPMorgan, would sometimes take six hours to travel to her village of Madhubani, after landing at Patna. Today, the same journey takes her two hours. A lot is changing, Shikha said. "Recently, there was an instance when I reached home at 11:30 p.m. at night, unaccompanied. That was unthinkable earlier."
Alok Patel, joint managing director at microfinance company Arman Financial Services Ltd., said that the state today stands at the largest concentration of microfinance in India.
"Bihar has overtaken Tamil Nadu and frankly, by the numbers, it is one of the best places in India to do microfinance," said Patel at the Q1 analyst call after earnings. Going by the effect of demonetisation, Covid-19 and after the pandemic, the asset quality is "phenomenal", he said.
"But, any time something is too good to be true, you always want to make sure that you pay closer attention to it... While it is possible to open a lot more branches in Bihar, we are kind of waiting and watching at this stage," Patel said. "Bihar, as a market, has grown very quickly and very fast and so it is prudent for us to take a breather and wait to see what the reaction is going to be."
Commentary from other companies, too, is upbeat.
"We've got a factory coming up in Bihar because we have been running out of capacity, and that's coming up ... with incentives," said Varun Berry, managing director, Britannia Industries Ltd., commenting on the company's capex plans in an analyst call after Q1 FY24 results.
"Our experience in all the states, particularly Bihar, U.P., Odisha and Jharkhand, is quite good. And we are not seeing any weakness or difficulty in any geography there. All are performing very, very well," CreditAccess Grameen said, in its first quarter for fiscal 2024 earnings conference call.
Nearly two-thirds of Bihari households have at least one migrant member, with out-migration being higher from the relatively backward districts of north Bihar such as Purnia, Gopalganj, and Madhubani where Shikha hails from.
From an economic perspective, Bihar has not been on the national radar for many years, which created a low base that's now showing a sharp rise, according to Prann Sharma, president, Shree Baidyanath Ayurved Bhawan Pvt.
There is enough skilled manpower in Bihar, which has migrated back to the state and wants to work from home, he said. The banking industry has helped boost the local economy, making it easier to take small and large loans. Brands, too, want to enter the geography because of high disposable income, Sharma said.
What needs to be seen is if growth flattens with time or remains consistent, according to him.
Better roads and more entertainment options need to be accompanied with jobs, according to Shikha. "There is a boom in cafes and restaurants, but what about jobs?" she asked. "So far, development feels superficial."
