Bihar is trapped in a fiscal cycle where debt sustains expenditure but rarely builds assets. Here is a state which behind electoral fervour and populist promises struggling to balance ambition with capacity.
For every hundred rupees the state produces, nearly forty are owed in debt. It is a burden pointing not to financial weakness but structural stagnation.
The state’s fiscal numbers tells a story of imbalance. It is a consistent narrative.
The state’s revenue receipts are dominated by central transfers. Its tax and non-tax revenues account for barely a third of Bihar’s total income.
Its fiscal deficit is more than double the prudential benchmark. On the other hand, its fiscal liability underscore how little autonomy the state enjoys over its economic destiny.
Borrowing is neither developing infrastructure nor productive investment. It is merely paying salaries, pensions and interest.
The situation is an ideal treadmill economics. The state economy is moving fast to stay in the same place.
But the greater concern is that this dependence has become systemic. The tax base of the state remains shallow.
For its industries are underdeveloped. Its economy is predominantly informal.
The state’s revenue model is not a generator on its own. It is more like a conduit for central resources.
When the central funds slow down or conditions tighten, Bihar’s economy reflects it. The state’s welfare commitments and policy flexibility both shrink.
In sum, Bihar is left balancing compliance with survival. There is growth sans transformation.
The dependence on Centre has political implications. Undeniable social dividend has been yielded particularly from welfare programmes for women.
Female voter turnout now surpasses male participation. It signals a quiet but powerful shift at Bihar’s electoral arithmetic.
But one cannot look away from the fact that empowerment anchored on borrowed money is inherently unstable. There has to be durable economic expansion to support such programmes.
Otherwise the social progress achieved till date risks reversal. Such a state of affairs will visit Bihar in the event of an fiscal shock or a change of political realignment in Delhi.
Bihar’s challenge is not merely financial. It is foundational too.
The state must build fiscal muscles which allows political promises to rest on productive ground. Otherwise, it would be founded on borrowed time.
The Assembly election is over in Bihar. But the real contest lies beneath the slogan.
One and all are looking forward to see if Bihar can break away from a consumption-led economy to one driven by creation. Some of the essential steps to a strong economic foundation are raising capital expenditure above 20 per cent of total spending, rationalising subsidies, broadening tax base through compliance and economic diversification.
But these require political courage to resist the lure of short term populism. It calls for investment in slow and far less visible work of institution building.
Bihar’s economic scenario is s reminder of the fact that democracy sans fiscal discipline moves on crutches. Promises of development are built on debt.
The state has to redefine it’s productivity in terms of productivity and not central funds transfer. Otherwise it’s economy will remain one which redistributes but does not renew.
It would continue on a cycle of borrowed prosperity and not progress.
