The road to Viksit Bharat runs through Bihar

A structural shift anchored in jobs, skilling, and governance reform can script the state’s elusive growth story

The NDA’s renewed mandate in Bihar coincides with a decisive phase in India’s long-term development. As the country aspires to become a high-income economy, Bihar’s economic trajectory cannot be treated as peripheral. With nearly 9 per cent of India’s population but only about 3 per cent of the national GDP, Bihar represents one of the most enduring structural asymmetries in India’s political economy. In 2005, Bihar’s per capita income was 30 per cent of India’s PCI; today, it is the same. Whether this gap narrows or persists will depend critically on how the state’s youthful demographic is integrated into productive economic activity.

Bihar’s development challenge is structural and historically rooted. The Freight Equalisation Policy (1952-1993) systematically disincentivised industrialisation by neutralising location advantages in natural resources, diverting private investment away from regions like Bihar. This legacy was compounded by the 2000 bifurcation, which transferred most mineral-rich and industrial districts to Jharkhand, resulting in the loss of nearly three-fourths of industrial units and a substantial erosion of the state’s revenue base. Even three decades after liberalisation, Bihar hosts just 1.3 per cent of India’s factories. The factory numbers are falling in a state desperately short of industrial jobs.

Despite episodes of high growth since the mid-2000s, this structural weakness has translated into chronically low incomes. On the revenue front, Bihar’s own tax collection is only about 5.8 per cent of its GSDP (2023-24), and transfer receipts from the Centre comprise 73 per cent of its total revenue. This leaves Bihar below the national average of about 7 per cent and behind peers such as Uttar Pradesh (9.8 per cent), reflecting limited internal resource mobilisation. Bihar’s per-capita income stood at Rs 66,828 in 2023-24, the lowest among major states and roughly one-third of the national average. Growth has not been employment-intensive nor productivity-enhancing enough to generate durable convergence.

This matters because Bihar is India’s youngest large state. Nearly 58 per cent of its population is below the age of 25, and about one-third falls in the 15-29 cohort. This generation is better educated, digitally connected, and aspirational, but also increasingly impatient with low-quality employment and governance failures. Their expectations from Viksit Bharat extend beyond welfare to stable jobs, skill-linked education, entrepreneurship opportunities, and institutional credibility.

Labour market indicators underscore the urgency. Bihar’s labour force participation rate is just 43.4 per cent, significantly below the national average of 56 per centwhile female participation remains an abysmal 15.6 per cent. Headline unemployment appears moderate at 3.9 per cent, but this masks acute distress among the educated: unemployment among graduates is 14.7 per cent.

The sectoral composition of employment explains much of this mismatch. Nearly half of the state’s workforce remains trapped in agriculture (46 per cent for India, 2023-24), characterised by low productivity and rising climate vulnerability. Manufacturing employs only 5.7 per cent of workers (11.5 per cent in India), while services and construction absorb labour largely in informal and low-wage activities. Bihar’s demographic advantage risks turning into a demographic burden.

Human development deficits further constrain productivity. Bihar ranks last on the Human Development Index, reflecting persistent shortfalls in health, education, and income. The state faces a 53 per cent shortage of doctors relative to WHO norms. Learning outcomes remain weak, and in higher education, Bihar’s gross enrolment ratio is 17.1 per cent when the national average is 27 per cent.

Migration has emerged as Bihar’s primary labour-market adjustment mechanism. More than seven million workers are employed outside the state, mostly in the informal sectors, with remittances accounting for 8-10 per cent of GSDP. While remittances sustain consumption, they also reflect local employment failure. The return of over 23 lakh migrants during the COVID-19 lockdown exposed the fragility of a development model reliant on outward mobility.

A wish list for 2047

First, employment must drive economic policy. Welfare expansion has helped reduce multidimensional poverty, from 51.9 per cent in 2015-16 to 33.8 per cent in 2019-21, but Bihar requires employment-intensive structural transformation, anchored in MSMEs, agro-processing, dairy, leather, textiles, logistics, healthcare, and knowledge services. Cluster-based industrialisation (Bihar has 112 existing organic clusters of labour-intensive manufacturing), rather than capital-heavy enclaves, offers the most viable path.

Second, skilling was nationally neglected for half a century, but even more so in Bihar. District-level skill hubs, upgraded ITIs and polytechnics, mandatory apprenticeships within higher education, and partnerships with private employers are essential. Without aligning education with labour market demand, rising educational attainment will only produce educated unemployment. Apprenticeship in such organised manufacturing/services is critical to avoid unfit students entering higher education.

Third, migration must shift from distress-driven to choice-based. Strengthening local urban economies, supporting returnee entrepreneurship in existing non-farm clusters, and expanding non-farm rural enterprises by improving infrastructure can gradually reverse Bihar’s excessive dependence on external labour markets.

Fourth, governance reforms matter as much as spending; police vacancies run into lakhs (as do education/health sector vacancies). Youth expectations now centre on transparent recruitment, exam integrity, digital service delivery and safe public spaces, particularly for women. Institutional credibility is a prerequisite for investment, entrepreneurship and social trust.

Finally, aspirations must confront fiscal reality. In 2024-25, Bihar recorded a fiscal deficit of 9.2 per cent of GSDP, with public debt at 38.9 per cent of GSDP, placing it among India’s most indebted states. With borrowing constrained by the FRBM framework, debt-led growth is neither feasible nor prudent. Expanding fiscal space will require better GST compliance, stronger municipal finances, higher credit flow to MSMEs, and leveraging private and multilateral funding rather than cutting development expenditure.

Bihar’s youth are neither asking for symbolism nor demanding miracles. They are asking for structural change: an economy where education leads to skills, skills to jobs, and jobs to dignity; where migration is voluntary rather than distress-driven; and where governance turns aspiration into resilience. If the government succeeds in converting its youth from welfare beneficiaries into drivers of structural transformation, Bihar will not only rewrite its own development trajectory but shape India’s journey to 2047. In no small measure, the future of India’s development project runs through Bihar.

(Baikunth is an assistant professor of Economics at Patliputra University; Santosh taught Economics at Jawaharlal Nehru University)

(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.)