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Business News/ Opinion / Online Views/  Bihar vs Gujarat: Comparing development models

Bihar vs Gujarat: Comparing development models

Both Modi and Kumar have lost few opportunities to highlight the growth trajectories of their respective states

A file photo of Narendra Modi (left) and Nitish Kumar. Photo: AFP (AFP)Premium
A file photo of Narendra Modi (left) and Nitish Kumar. Photo: AFP

Gujarat chief minister Narendra Modi and Bihar chief minister and Janata Dal (United), or JD(U), leader Nitish Kumar have been running a long battle to capture the national imagination with their respective “governance models". The dramatic break-up between the JD (U) and the Bharatiya Janata Party (BJP) last week—after the BJP virtually nominated Modi as its prime ministerial candidate for the 2014 general election—has only sharpened the battle lines.

Both Modi and Kumar have lost few opportunities to highlight the growth trajectories of their respective states, and their key role in transforming the destinies of Gujarat and Bihar, respectively. Both have also attracted global attention for their respective “growth models". Kumar has not only positioned himself as a secular alternative to Modi but has also sought to stress the inclusiveness of Bihar’s growth model. In his intervention during the trust vote in Bihar’s assembly last week, Kumar dismissed Modi’s appeal as hype generated by corporations.

Modi as the market-friendly growth messiah and Kumar as the poster boy of the welfare state may have made for an extremely absorbing contest in 2014 but for the sobering fact that their actual performance belies such characterizations. In a two-part series, we compare growth and development indicators of the two states over 20 years following the liberalization of India’s economy in 1991, when the entire nation grew at its fastest pace in history. In the first part, we examine growth indicators to find that Kumar outscores Modi when it comes to delivering on growth. In the second part, we examine a broader range of indicators, which indicate that Gujarat’s growth under Modi has been far more inclusive than Bihar’s under Kumar.

In stark contrast, Bihar’s economy limped along at an average annual growth rate of 2.7%, 3.4 percentage points slower than the national average, in 1991-2001. Over the next decade though, Bihar’s growth rate trebled to 8.2%, beating the national average for the first time in independent India’s history, even though the improvement over the national average was by a small margin. Bihar’s turnaround is among the exceptional stories unfolding in India. Kumar can stake claim to this reversal of Bihar’s fortunes because Bihar’s growth during the precise duration of his term has been even higher. Between 2005—when Kumar took charge of Bihar’s government—and 2011, the state grew at an annual pace of 10.9%, beating both the national average and Gujarat’s growth rate of 9.6% during this period.

There are those who would like to ascribe the entire turnaround of Bihar’s economy to the effect of a low base. But there is little empirical evidence to support the theory that growth rates across Indian states automatically converge. As economists Chetan Ghate (of the Indian Council for Research in International Economic Relations) and Stephen Wright (of the University of London) ably demonstrated in a recent Economic and Political Weekly article, there is no evidence of either convergence or of divergence among Indian states over the course of independent India’s history.

The growth acceleration in Gujarat seems to owe more to the opening up of the Indian economy than to Modi’s rule. To be sure, Modi ensured that the economy did not lose steam by choosing wise economic policies but his performance in driving growth pales in comparison to Kumar.

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Published: 26 Jun 2013, 02:25 PM IST
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