Bihar - Economy

Economy

The economy of Bihar is largely service oriented, but it has a significant agricultural base. The state also has a small industrial sector. As of 2008, agriculture accounted for 35%, industry 9% and service 55% of the economy of the state. Among all the sectors, the manufacturing sector performed very poorly in the state between 2002–2006, with an average growth rate of 0.38% compared to India's 7.8%. Bihar was the lowest GDP per capita in India, although there are pockets of higher than average per capita income. Between 1999 and 2008, GDP grew by 5.1% a year, which was below the Indian average of 7.3%. More recently, Bihar's state GDP recorded a growth of 18% between 2006–2007, and stood at 94251 Crores Rupees ($21 billion nominal GDP). In the five-year period of 2004–2009, Bihar's GDP grew at a rate of 11.03%. This makes Bihar the fastest growing major state. In actual terms, Bihar state GDP was ranked second out of 28 states, next only to Gujarat.

Corruption is an import hurdle for the government to overcome according to Transparency International India, which highlighted Bihar as the union's most corrupt state in a 2005 report. Despite the recent economic gains, significant challenges remain and the government has also stated that combating corruption is now the biggest challenge the administration is faced with.

Bihar has emerged as brewery hub with major domestic and foreign firms setting up production units in the state. Three major firms — United Breweries Group, Danish Brewery Company Carlsberg Group and Cobra Beer — are to set up new units in Patna and Muzaffarpur in 2012.

Bihar has significant levels of production of mango, guava, litchi, pineapple, brinjal, cauliflower, bhindi, and cabbage. Despite the state's leading role in food production, investment in irrigation and other agriculture facilities has been inadequate. Historically, the sugar and vegetable oil industries were flourishing sectors of Bihar. Until the mid-1950s, 25% of India's sugar output was from Bihar. Dalmianagar was a large agro-industrial town. There were attempts to industrialize the state between 1950 and 1980: an oil refinery in Barauni, a motor scooter plant at Fatuha, and a power plant at Muzaffarpur. However, these were forced to shut down due to certain central government policies (like the Freight Settlement Policy) which neutralized the strategic advantages of Bihar. Hajipur, near Patna, remains a major industrial town in the state, linked to the capital city through the Ganges bridge and good road infrastructure.

The state's debt was estimated at 77% of GDP by 2007. The Finance Ministry has given top priority to create investment opportunities for big industrial houses like Reliance Industries. Further developments have taken place in the growth of small industries, improvements in IT infrastructure, the new software park in Patna, and the completion of the expressway from the Purvanchal border through Bihar to Jharkhand. In August 2008, a Patna registered company called the Security and Intelligence Services (SIS) India Limited took over the Australian guard and mobile patrol services business of American conglomerate, United Technologies Corporation (UTC). SIS is registered and taxed in Bihar. The capital city, Patna, is one of the better-off cities in India when measured by per capita income.^