Bihar needs a State-specific stimulus

Most Hindi heartland States are not likely to benefit from the announced welfare measures

Jawaharlal Nehru is seen in this photograph as addressing a gathering on the occasion of the opening of the National Fuel Research Institute at Digwadih, then in Bihar, in 1950.

The massive stimulus given to the economy in the wake of COVID-19 is largely a supply side management measure, expecting the outcome that growth will resurface. Even if it is real, and not a hollow promise, it may not create adequate demand, strengthening the economy.

Here we ought to ask what is the difference between Nehru’s clarion call for ‘self-sufficiency’ and Modi’s ‘atmanirbharta’ agenda. Nehru’s agenda was the culmination of economic empowerment from below, as envisioned during the freedom struggle. In contrast, Modi’s agenda is more individualistic, covering select industrialists and ‘start-ups’. Thus, the advantage of the present stimulus, if any, will accrue only to the southern and western Indian States which are industrially advanced. This obviously raises the question: Why are other regions of India, particularly the Hindi heartland States, likely to miss the advantage of the stimulus.

Rent-seeking tendency

A couple of years ago, during my chance meeting with the then Finance Secretary of Jharkhand, he had confided that Ministers in the State are generally eager to quickly transfer the entire allotment of their respective departments into their personal account. This is essentially a ‘rent-seeking’ behaviour and it is not limited to Bihar and Jharkhand alone; it is widespread in other Hindi heartland States too.

Such ‘rent-seeking’ behaviour is mainly limited to States where the East India Company had introduced the agrarian system of ‘permanent settlement’ (intermediaries between the state and the tenant), mainly in eastern India. These States have generally failed to register adequate development after Independence. In contrast, the States with ‘ryotwari’ agrarian system, where there were no intermediaries between the tenant and the state, mainly in southern and western India, have leapfrogged in the realm of economic development. The feudal grip was relatively weaker in those States, allowing for substantial social movement (for example, the anti-Brahmin movement) which acted as a lubricant to develop a law-enforcing civil society and sub-national identity.

Thus, accumulation in those States, either through agriculture or trade, led to productive investment. For example, in Andhra Pradesh, the Kammas used their agricultural surplus to invest first in tobacco, then in films, and still later in the knowledge industry. This was initially limited to the Kammas, but later began including other castes like the Reddys and the Kappus, many of them displaying enormous entrepreneurial skills.

Similarly, the Chettiars, the Nadars and others in Tamil Nadu accumulated wealth through productive investment in trade, commerce and industry. The same story was repeated in Karnataka, Maharashtra and Gujarat. Iconic in this realm were the Maharaja of Mysore in Karnataka, Laxmanrao Kirloskar in Maharashtra, and Ambalal Sarabhai in Gujarat.

Development in ryotwari States

The ryotwari States contributed in their own manner, promoting development and creating their own organisational vision. For example, Five Year Plan of 1925, crafted by M. Visvesvaraya, was patronised by the Wodeyar Dynasty of Mysore. Apart from creating a vision, the States also identified experts to guide their social agenda. To give examples, the Wodeyar promoted M. Visvesvaraya, and Sayajirao Gaekwad III groomed B.R. Ambedkar to become his Finance Minister, by sending him to Columbia University for higher studies. Further, they also promoted financial institutions to ensure success for their projects, like Andhra Bank promoted by B.P. Sitaramayya, Bank of Baroda by Maharaja of Baroda, Syndicate Bank by T.M.A. Pai and others. Their organisational promoters were the regional chambers of commerce which powerfully articulated their class interests. Their lobby was so powerful that they had many Finance Ministers in the Union Cabinet in post-Independence India.

Poor governance in Bihar

In contrast, the eastern region of the country recorded poor governance. In spite of giving birth to the ‘Swadeshi’ movement, the civil society there was devoid of a vision or a development strategy. De-industrialisation by the East India Company had ruined the indigenous entrepreneurs in the region. Even when some people attempted entrepreneurship, they usually failed, because nearly all avenues of investment in the region had already been captured by the Britishers. In the post-Independence period, the policy of freight equalisation killed whatever possibility was there for industrial growth of this mineral resource-rich region.

Bihar was lying in the backwaters of the Bengal Presidency during the colonial period. The canvas of social movement was limited here. As such, there were only two identities in the State — caste and national, a sub-national identity being altogether absent. Unlike the social movement in the southern and western parts of India, the peasant movement in Bihar was directed to unsettle the permanent settlement.

Bihar also never experienced any meaningful land reforms. Most of the economically successful States had undertaken land reforms immediately after Independence. They followed the British path of ‘enclosure’ or French path of ‘peasant’ entrepreneurship, or German model of ‘Junker’ capitalism, or a combination of all the three. In the absence of a multi-caste social movement and sub-nationalism, rent-seeking was the only agenda of the traditional elite in Bihar. Most of the development work in Bihar was engulfed in input-related corruption, implying that the expected development did not materialise at all.

In other States also, there was corruption, but it was turnover-based, where the development work was duly completed and then the state functionaries extracted direct or indirect payments from the direct beneficiaries of the development. The elite formation was also skewed in Bihar, and a development-oriented civil society could not emerge here. When zamindari was abolished, the rent-seeking tendency of the Bihari elite could be continued only by way of becoming a civil servant.

In Bihar, only those civil servants are referred with reverence, who have either accumulated massively or those who have been able to successfully co-opt as many members of their caste group or of their area into the bureaucracy. During the last one-and-a-half decade, efforts have been made to streamline the governance system in Bihar. This in itself is a gigantic task, and Bihar needs a massive State-specific financial and social stimulus to complete the task.

Shaibal Gupta is Member Secretary, Asian Development Research Institute (ADRI), Patna