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Hari Om Gupta

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2 Attracting investments in Bihar

Introduction:

Bihar is the 12th largest state in terms of geographical size at 99,200km² and 3rd largest by
population. Close to 85% of the population lives in villages. Almost 58% of Biharis are below the
age of 25. This is the highest proportion in India.

Bihar lies mid-way between the humid West Bengal in the east and the sub humid Uttar
Pradesh in the west which provides it with a transitional position in respect of climate, economy
and culture. It is bounded by the country of Nepal to the north and by Jharkhand to the south.
The Bihar plain is divided into two parts by the riverGanges which flows through the middle
from west to east. Bihar has notified forest area of 6,764.14km²,[4] which is 6.8% of its
geographical area. Hindi and Urdu are the official languages of the state, whilst the majority of
the people speak one of the Bihari languages ³ Angika, Bhojpuri, Magadhi, Maithili, and Bajjika.

Ancient Bihar (which consisted of Anga (East Bihar and some parts of
Bengal), Videha/Mithila (north-eastern Bihar and some parts of northern
Bengal),Magadha (South Bihar) and Vaishali (Bihar)) was a centre of power, learning and culture
in ancient and classical India.From Magadha arose India's first great empire, theMaurya

Hari Om Gupta, 3rd Semester, Real Estate Management, SPA, New Delhi November
2010
    
3


 

 

 

+ ,
& re ' (ell ' )*e ) e ()rld's )st ( dely  dhered-to religions, -ddhism. M gadha
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empires, notably nder the Maurya and upta dynasties, unified large parts of outh sia under
0 1 0 3 0 1
a entral rule. ts apital 2atna, earlier nown as 2ataliputra, was an important entre of ndian
0ivilization. 4alanda was a 0entre of learning established by the 5th 0entury 6 & in -ihar.
7 1
oday, -ihar lags behind the other ndian states in human, economic development
terms, &conomists and social scientists claim that this is a direct result of the skewed policies
of the central government, such as the freight equalisation policy, its apathy towards
8 7
-ihar,and lack of -ihari sub-nationalism resulting in no spokesperson for the state). he
current state government has however made significant strides in improving governance.
7 1 
he mproved overnance has led to an economic revival in the state through increased
investment in infrastructure, better health care facilities, greater emphasis on education, and a
1
reduction in crime and corruption. ndian and global business and economic leaders feel that
-ihar now has good opportunity to sustain its growth in economic development, and as such
/ 7
have shown interest in investing in the state. recent 4ew York imes article talks about vastly
5
improved law and order situation in the state and the economic growth shown in past years.
/ 6 1
nother -- article titled "Where 'backward' -ihar leads ndia" talked about how the state has
9
made strides in the areas of women empowerment, udiciary reforms, tax reforms, and public
1 :;; :;;<
safety. n period of 3 to , the inflow of foreign tourists has seen a near-six fold rise from
=
>,000 to 346,000.
7
he &conomy of -ihar is largely service oriented, but it also has a significant agricultural base.
7 / :
he state also has a small industrial sector. s of 008, agriculture accounts for 35%, industry
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% and service 55% of the economy of the state. Manufacturing sector performed very poorly in
: 1 @
the state between 002²2006, with an average growth rate of 0.38% compared to ndia's .8%.
6
owever, due to efforts of hief Minister 4itish Kumar, -ihar has become the second best
1  1
manufacturing state in ndia. -ihar was the lowest A2 per capita in ndia, although there are
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pockets of higher than the average per capita income. -etween > and 2008, A2 grew by
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5.1% a year, which was below the ndian average of .3%. More recently, -ihar's state A2
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recorded a growth of 18% between 2006²2007, and stood at 42510 rores Bupees $21 billion
 7 1
nominal A2). his makes -ihar the fastest growing major state. n actual terms, -ihar state
 6
A2 is ranked 2nd out of 28 states. orruption is an import hurdle for the government to
7 1 1 C
overcome according to ransparency nternational ndia, which highlighted -ihar as the nion's
most corrupt state in a 2005 report. Aespite many recent economic gains, significant challenges
remain to do business in the state and the government has also stated that combating
       
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4 Attracting investments in Bihar

corruption is now the biggest challenge facing theadministration. In Nitish Dumar's governance
there has been an immediate change in Bihar. Life expectancy in Bihar (61 years) which is
almost on par with the national life expectancy of 62.7 years.

Bihar has significant levels of production

for mango, guava, litchi, pineapple, brinjal, cauliflower, bhindi, and cabbage in India. Despite the
state·s leading role in food production, investment inirrigation and other agriculture facilities

Hari Om Gupta, 3rd Semester, Real Estate Management, SPA, New Delhi November
2010
5 Attracting investments in Bihar

has been inadequate in the past. Historically, the sugar and vegetable oil industries were
flourishing sectors of Bihar. Until the mid fifties, 25% of India's sugar output was from
Bihar. Dalmianagar was a large agro - industrial town. There have been 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 central
government 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. 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 Corp
(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.

Hari Om Gupta, 3rd Semester, Real Estate Management, SPA, New Delhi November
2010
 F
6 Ettracting investments in ihar

Pducation: Gistorically, Qihar has been a major centre of learning, home to the ancient
S T U S V
universities of Ralanda established in 450 P) and ikramshila established in 783 W).
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nfortunately, that tradition of learning which had its origin from the time of Qu ddha or perhaps
earlier, was lost during the medieval period when it is believed that marauding armies of the
invaders destroyed these centres of learning.

Qihar saw a revival of its education system during the later part of the Qritish rule when they
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established Yatna niversity established in 1917) which is the seventh oldest university of the
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ndian subcontinent. ome other centres of high learning established by the Qritish rule
T S [ S
are Yatna ollege established in 1839), Qihar chool of Pngineering established in 1900; now
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known as Rational nstitute of echnology, Yatna), Yrince of Wales Medical ollege established
T [ T S
in 1925; now Yatna Medical ollege and Gospital), cience ollege, Yatna established in 1928)
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among others. fter independence Qihar lost the pace in terms of establishing a centre of
education. Modern Qihar has a grossly inadequate educational infrastructure creating a huge
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mismatch between demand and supply. his problem further gets compounded by the growing
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aspirations of the people and an increase in population. he craving for higher education
among the general population of Qihar has led to a massive migration of the student community
from the state.
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Qihar being a comparatively less literate state in ndia, with women's literacy being only 33.57%,
V
is striving to climb as the government has established various educational institutions. t the
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time of independence, women's literacy in Qihar was 4.22%. t is a pleasant surprise to find that
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in spite of the meagre investment on education in Qihar, specially compared to other ndian
states, the students have done very well. ]amed national institutes of learning such
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as s, Ms, R s and M have always have had a good representation from Qihar which is
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usually higher than their proportion of the population. Qihar has a Rational nstitute of
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echnology R ) in Yatna and an ndian nstitute of echnology )in Yatna. ther institutions
of higher learning and coveted positions in the government also show a greater share than the
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percentage of their population. recent survey by Yratham rated the absorption of their
teaching by the Qihar children better than those in other states.
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Qihar established several new education institutes between 2006-2008. Q Mesra started its
[ H V ZZ\ Z
Yatna extension centre in eptember 2006. n 8 ugust 2008, of ndia was inaugurated
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in Yatna with students from all over ndia. Rational nstitute of Yharmaceutical Pducation and
S Z H V Z
^esearch R YP^) is being set up in Gajipur. n 4 ugust 2008, Rational nstitute of ]ashion

H I K N N
Gari m upta, 3rd Jemester, eal Lstate Management, JME, ew Oelhi ovember
2010
 `
7 _ttracting investments in ihar

j m j m o q
echnology, katna was established as 9th l n of ndia. hanakya lational paw niversity a law
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university and handragupt nstitute of Management, a management institute was established
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in later half of 2008.Steps to revive the ancient lalanda niversity as lalanda nternational
q r o
niversity is being taken for which countries like apan, Korea and hina have also taken
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initiatives. he ryabhatt Knowledge niversity is almost framed to start in katna this year to
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deal with technical & medical studies & research. he .N. Sinha nstitute of Social Studies is a
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premier research institute in the state. he plan is to create the world·s best university in the
place which introduced the concept of university to the world. tihar is pioneer in the field
of yoga with its internationally renowned institute tihar School of Yoga in Munger.
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tihar e-Governance Services & echnologies teST) along with the Government of tihar has
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initiated a unique program to establish a centre of excellence called entre, a finishing school
to equip students with the latest skills and customized short term training programs at an
affordable cost. The centre aims to attract every youth of the state to hone up their technical,
professional and soft skills and prepare them for the present industry requirement/job market.
u
http://en.wikipedia.org/wiki/Bihar)
m
nvestments in the state has suffered in past because of various reasons. pet·s look at them in
time phases:

1. Past ² Troublesome.
2. Present ² Positive.
b
3. Future ² ptimistic.

m
Past ² Troublesome: Post ndependence Bihar has suffered heavily due to political neglect,
anti industrial policies, etc all other reasons may be summed up as given below and are
discussed under separate heads.

POLITICAL NEGLECT: Bihar was an important part of India's struggle for

independence. Gandhiji became the mass leader only after the Champaran Satyagraha. After
Independence, the congress came into power and Bihar was judged as best administered state
at that time. After that for two decades, the Congress ruled the state with the help of puppet
chief ministries hand in glove with the central government ignoring the welfare of the people of
the state. Since then all successive governments have been marred by corruption charges, law
and order got worsened, unemployment increased, industrial units were closed down. This led
to large scale migration of labour to other industrialised states.
b c e h h
aari m upta, 3rd demester, eal fstate Management, dg_, ew ielhi ovember
2010
8 Attracting investments in Bihar

NEGLECT TO INDUSTRIES: The state has a small industrial sector. As of 2008, agriculture
accounts for 35%, industry 9% and service 55% of the economy of the state. Manufacturing
sector performed very poorly in the state between 2002²2006, with an average growth rate of
0.38% compared to India's 7.8%. vistorically, the sugar and vegetable oil industries were
flourishing sectors of Bihar. Until the mid fifties, 25% of India's sugar output was from
Bihar. Dalmianagar was a large agro - industrial town. There have been 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. vowever, these were forced to shut down due to central
government policy which neutralized the strategic advantages of Bihar.

POOR INFRASTRUCTURE: Thanks to British Raj, An excellent rail network exists in Bihar,
through which any part in India can be accessed. Good quality ground water is available across
Bihar. Problem areas are rural road connectivity and electricity. Many industrialists are
discouraged to invest because of absence of electricity, which is the basic necessity for all
industries. This has worsened due to inaction of successive state governments.

LOW vUMAN DEVELOPMENT INDICES: Bihar ranks much lower than other states in human
development index. With score of 0.449, It ranked 35th in the list of Indian states and union
territories for human development index in the year 2005. The literacy rate stands at 52% in
which male component is 59.7% and female component at 33.1%. vealthcare facilities were
absent or minimal this had led to high infant mortality rate.

w
vari Om Gupta, 3rd Semester, eal Estate Management, SPA, New xelhi November
2010
9 Attracting investments in Bihar

y
LAW ORDER PROBLEM: with absence of industries, employment and lack of a strong social
setup anti social elements developed. Illegal activities were on the rise, crime became an
indispensable part of caste based politics. All major political parties provided tickets to
criminals for contesting polls and now these criminals decorate the Bihar legislature. Armed
with political protection the criminal setup further flourished. Businessmen and industrialists
had to pay protection money to criminals for the safety of businesses and their own life. zillings
and kidnappings became part of everyday life. This affected Businesses, traders and
businessmen had no other choice but to migrate. This Resulted in closure of industrial and
business establishments which were already limited.

POLARIZATION OF INDUSTRIES IN SOUTH BIHAR (NOW JHAR zHAND): South Bihar had vast
resources coal and minerals due to which it was home to heavy industries in automobile, steel,
power, railway, manufacturing etc. but in year 2000, Bihar was divided into 2
states, Jharkhand and Bihar in 2000 on cultural and linguistic grounds, by the then BJP-led
union government as mentioned in the BJP manifesto. This caused a huge loss to Bihar in
terms of revenue generation, industries, natural resources and education.

Hari Om Gupta, 3rd Semester, Real Estate Management, SPA, New Delhi November
2010
10 Attracting investments in Bihar

{ari Om Gupta, 3rd Semester, Real Estate Management, SPA, New Delhi November
2010
11 Attracting investments in Bihar

Present ² Positive:

After year 2005 Bihar has shown tremendous growth in all sectors be it industrial growth,
healthcare, education, governance, infrastructure etc. this has led to an image makeover of
Bihar, now people are optimistic about Bihar which was written off till recently. New
investments are coming up by private and public sector alike. |uge untapped potential is set to
unleash. Following section covers all probable factors which have led to the turnaround of the
image.

CHANGE IN LEADERSHIP. NEW GOVERNMENT, SINCE 2004 -05: the biggest change is in
leadership that is change in government, Lalu Prasad Yadav let RJD had ruled the state for past
15 years and was defeated by Nitish Kumar led NDA in 2005 elections. The new government
took major initiative in infrastructure. New roads were built, existing repaired and upgraded.
Rural connectivity improved. Law and order problem was dealt with. Major industrial houses
were invited for identify potential investments. Social initiatives were taken to strengthen
society and for women empowerment. Some popular initiatives to strengthen system and
society include:

1. 50% reservation for women in village panchayats.

2. Jaankari service for RTI act.

3. Free bicycles for girl students.

4. Recruitment for govt jobs which were lying vacant for years.

5. New Industrial policy.

6. Opening of educational institutions.

INVEST IN INFRASTRUCTURE : Basic infrastructure like Bijli, Paani, Sadak was looked after and
strengthened, which had suffered heavily due to years of neglect. New Roads are being
constructed, Rural electrification is on rise. Two thermal power plants which were non ²
functional have been restored and production has restarted this year. Educational Infrastructure
Is Strengthened, New institutes are being established. One each of IIT, IIM and NIFT are coming
up in Patna. Construction of Nalanda World University, which was a premier seat of education in
ancient India, is being done with assistance from oriental countries like Japan and China.

|ari Om Gupta, 3rd Semester, Real Estate Management, SPA, New Delhi November
2010
12 Attracting investments in Bihar

INDUSTRIAL REFORMS INTRODUCED: Heavy Public and Private sector participation in

Industrialization. SAIL, BPCL, NTPC etc investing in small and medium size production units.
Bihar has attracted private investments worth Rs.1032 core in the last four years; The Bihar
State Investment Promotion Board has cleared 220 investment proposals in the past four years.
}
An International Finance Commission IFC) report titled, "Doing Business in India 2009," has
}
given Patna a number-two rank in the category of starting a business. New Delhi is number
one.) "Business start-up is least expensive in Patna," according to the IFC report.

Most of the investments are in the food processing, power, sugar, cement and agriculture
sectors.

LAW & ORDER PROBLEM: There is visible improvement in law & order situation following
statistics prove the same:

x  There were 14,664 murders in Bihar between 2006 -Augu2010, down from 22,040 in the five
years from 2000.

x  There were 484 kidnappings between 2006-10, down from 2,196 kidnappings from 2000 to
2005.

x  Roughly 53,600 criminals were convicted between Jan 2006-Sept 2010; 9,280 were
sentenced to life imprisonment and 132 sent to the gallows.

This has helped in resurrection of businesses and tourism. In period of 2003 to 2008, the inflow
of foreign tourists has seen a near-six fold rise from 61,000 to 346,000.

Hari Om Gupta, 3 rd Semester, Real Estate Management, SPA, New Delhi November
2010
13 Attracting investments in Bihar

Future ² Optimistic:

At the moment the future of Bihar looks great. The growth is tremendous but the size or scale is
small and hence a lot remains to be achieved. To sustain the development following steps
should be taken:

CREATE LAND POOL: land is the basic necessity for any kind of development. Bihar has very
fertile land hence agriculture is in predominance. Thus creating land pool is the biggest
challenge which the govt. is facing. All industrial houses look for ready availability of land
parcels for investment. Among other strategic advantages land pool is the biggest advantage
which other states enjoys over Bihar. Bihar govt. has only 3387.08 Acres of land, such short
supply can severely affect Bihar's growth story. The manin reason for such a short availability
is that the land here is very fertile and costly. Hence land is not available cheaply. The state
govt. should make efforts to create a land pool to make land readily available for future
investments. if it actually wants to compete with other states for driving home investment
projects. Also the land should be made available at reasonable rates and should be competitive
with other developed states.

ESTABLISH QUALITY INSTITUTIONS: Creation of Manpower pool very important for sustaining
the growth and attracting investments. Good quality employable workforce at various levels
~
shall be made available for ready absorption. For this Quality technical colleges engineering,
pharmacy and management) shall be established to attract ITES and manufacturing industries.
Training institutes for creation of skilled and semi skilled labor is a must for manufacturing
~
industry. Along these lines central institute of plastic engineering and technology CIPET) is set
to establish three branches in Purnia, Bhagalpur and Chapra.

PRODUCE POWER: Bihar generates only about 5% of its power needs. This is an area where the
state govt. needs to focus most as it is the single largest deterrent to organizations considering
investment opportunities. Now since the coal reserves are transferred to Jharkhand, the state
govt. shall have to establish non coal based power generation facilities like, hydro power,
nuclear power and solar farms. Another potential source of power generation could be Gas
based power plants. Bio fuels are another interesting area. With the availability of large
reserve areas, bio-fuel production can be taken up to meet the requirements of Ethanol for
blending purpose with petrol and for Bio -Diesel.

Hari Om Gupta, 3 rd Semester, Real Estate Management, SPA, New Delhi November
2010
14 Attracting investments in Bihar

INFRASTRUCTURE: Strengthen power grid structure to avoid tripping of power and to ensure
continuous availability. Rural electrification should be taken up aggressively to bridge rural
urban divide. This shall also help in development of small scale industries in food processing
and animal husbandry. Bihar has good railway network, this should be used more effectively for
industrial mobilization. MG lines shall be converted into BG. Linkages to raw material centers
shall be created. Long delayed project of river trade linkages shall be implemented immediately.

ORGANIZE INVESTMENT MEETS: Organizing investment meets are a good way of attracting
investments to the state. This has been very effectively demonstrated by developed states like
Gujarat, Maharashtra and Karnataka. Recently investment meet organized by the state of
Madhya Pradesh was a huge success. They were able to attract large investments in
manufacturing and education. Bihar can adopt similar ways of attracting investments by
showcasing the growth and opportunities available. Prefaerably such meets shall be organized
in major cities to ensure greater participation.

Hari Om Gupta, 3 rd Semester, Real Estate Management, SPA, New Delhi November
2010
15 Attracting investments in Bihar

References:

www.wikipedia.org

http://www.bihartimes.in/articles/sajjad/lackofvision.html

http://indianeconomy.org/2005/11/22/development-development-what-development/

http://www.hotneus.com/bihar-shows-the-way-sonia-gandhi.html

http://books.google.com

The Times of India.

The Newyork Times.

Where Backward Bihar Leads India, BBC.

Hari Om Gupta, 3 rd Semester, Real Estate Management, SPA, New Delhi November
2010