Journey of India to current economic abyss, in a rerun of 1991, has been quite regressive to say the least. In this process, India blew a great opportunity to lead the world on development path. Shining India of 2004 has now become a whining India of 2013. I can argue the same based on all acceptable parameters/ indices of economic performance.  For those who blame loss of NDA on India shinning campaign, it is only a convenient interpretation. Empirical studies show no such corollary as NDA did exceedingly well in some of the poorest states like Madhya Pradesh, Rajsthan, Odisha and Chhatishgarh. Performance was not that bad in Bihar either (worse could have been two or four MPs like RJD is having now instead of 12-13 odd it has won then as NDA). Attributing 2004 debacle of NDA on the shape and direction of economy would be too simplistic an interpretation. Also, welfare schemes like MNREGA didn’t play much role in election outcome of 2009, as can be seen from outcome of Bihar, Jharkhand and Odisha which were the main intended beneficiary. However, empirical analysis of amount of loan waived and number of constituencies won across states shows that loan waiver being a direct impact scheme certainly benefitted UPA at the hustings in 2009. Yet, I shudder at the thought of moral hazard such loan waiver schemes do have. For I would have rather suggested highly subsidised loan for farm sector and artisans, may be at as low a rate as .25 percent with no processing charges. The perverse interpretation of mandate of 2004 and 2009 has led to this downfall of Indian economy. Good economic policies were given a good bye for sake of reckless populist expenditures. Indian economy is now paying the price for the same.

I have no doubt that this economic downturn is going to scar Bihar very badly, as state is even now largely dependent on its share in consolidated tax revenue of India. Regardless of what Mr Vijay Prakash, Principle Secretary – Planning Department of Bihar would like us to believe, its impact is going to be severely felt on economic growth of Bihar in coming years.  Unlike some other states that have greater leeway in mopping up resources on their own, and also by way of private investments due to the inherent strength of their economy, Bihar would be largely at the mercy of federal resources for its development. Thus, if Federal economy falters, Bihar economy will outright collapse. It must be recognized that Bihar was blooming when Indian economy was booming.  Buoyancy in consolidated tax revenue of India saw Bihar benefitting the most. This helped propel accelerated economic growth of state. Alas! Economic story is not going to be the same again anytime soon. A state which is not having its own resources to meet its expenses (if we rationalize disproportionate 11% share in the consolidated tax revenue of India against its population of about 8.5%, as available courtesy Finance Commission formula), how on earth it can even boast of weathering out this bad spell of economy unscathed.  I know that there is no charge levied on such empty boasting as we observed over years in the UPA regimes.

Like Indian government, Bihar government is soon going to proffer excuses attributing its failings to worsening external economic scenario (read economic scenario of India). However, federal government itself is wrong in offering such alibis as world has been looking to India to pull them out of economic morass and become a driver for world economy, as has been China doing for last two decades. India has the largest insatiate demand in world as also the largest working age population which could make it ideal growth engine for the world economy. However, same has not happened. Instead of making India as the economic growth engine of the world, apologists of this UPA government have started blaming other countries for economic woes of our own creation. As per their rationale if world economy does well then Indian economy suffers as capital flies out. On the other hand, if world economy is in doldrums, Indian economy suffers as the world demand slows down dragging down our exports. I simply do not understand how anyone can offer such excuses, knowing very well that India has a huge unfulfilled domestic demand and also offers an unmatched economy of scale promising better return on capital compared to any developed country. Even the wage level in India is quite lower compared to other developed economies. India as such has an immense economic potential which just need to be harnessed appropriately. The double speak which has been going on for a number of years now should stop forthwith. Also, what is true for India in context of world, same is true for Bihar in context of India. Both would not have any one else to blame than themselves for their economic mess.

In economic recession it is the poor who suffer the most, so would Bihar as a state.  State economy will be doomed if this gloom in Indian economy persists for a longer period. Funding for railway projects is already down to a trickle now.  Infrastructure projects on anvil, which are quite few and far by, would also suffer adversely, barring perhaps the ones which are going to be externally funded. Anyway, state government has effectively sabotaged relocation and redevelopment of Patna airport which has pushed the state back by a few years. Even setting up of technical education has not kept pace, with exception of those sponsored by central government. As a matter of fact, even the number of central institutes in Bihar is below par. Yet, there has not been pressure put on central government for more such institutes. With reduction in central expenditure to manage fiscal deficit, even the projects which were planned during 11th plan may not see the light of day any time soon. This includes proposal for IIIT and Innovation University. Bihar should have been making the hay when the condition was favourable. However, a recalcitrant administration has been not paying enough attention to stalled railway projects launched by the political adversaries of the government of the day.  Every bit counts in development of Bihar. If one ignores these opportunities when going is good, in adverse times one is bound to land in a bigger trouble. Bihar should not be made to pay the price for petty politicking.

Instead of empty boasting, Bihar can take a number of actions to safeguard its economic interest in such a period of economic distress. It should quickly focus its available resources on economic activities, having higher multiplier impact than on pure consumption expenditures. MNREGA schemes should be implemented in such a way that it starts creating economic assets by structuring it in a way as suggested in my numerous articles earlier. State should use its own resources strategically as enabler of private investments. My numerous articles previously have made some suggestions on how state can channelize the huge financial outflow happening towards higher education, technical education and towards healthcare. If Bihar can create an enabling framework and make strategic financial interventions to spawn a number of institutes in education and healthcare, economy of Bihar can weather out the upcoming storms. However, I find that even loftiest of policies are being converted in unmitigated disaster through bad structuring, as I do observe in case of policy related to Unaided Educational Institutions. How on earth, a policy linked to performance can degenerate so much when there is a clear way of structuring it to get the performance certified by board/ university conducting the exam before releasing performance grant.  It would be a good idea if state administration presents a marginal socio-economic utility assessment report on expenditure made on various schemes, justifying that every penny being spent is resulting in the best possible outcome for people of Bihar.

Also, rather than asking for special treatment, Bihar would be better off asking for parity linked to population even if it is based on 1971 figures. Parity in centrally sponsored infrastructures, parity in number of central institutes, parity in locating strategic national assets, parity in locating head offices of PSUs and PSBs and parity in plan and non plan expenditures. Paradoxically though, I am an ardent supporter of even the demand for special state status for whatever benefit it does offer, even if this policy may not automatically translate into any great benefit for state as pointed out by some.  However, I believe that it would be quite difficult to get such a status given the geopolitical reality of this country. Many other states will put a spoke in such demand starting from Uttar Pradesh, to West Bengal, to Jharkhand, to Odisha, to Rajsthan to Madhya Pradesh and so on.... It is quite like demand for ‘Reservation’ which never seems to stop and has become an exclusivity policy now from being an inclusivity policy (reservation policy now focused on depriving some specific segment of people than bringing deprived ones in mainstream) .  Anyway, Mandal politicians of Bihar cannot think beyond agendas like Special Status regardless of its overall implication for society and the nation. No one can oppose demand for parity in treatment, but there would be a large scale opposition when one asks a favourable treatment. That’s why I believe asking for parity is better than asking for special status.  Current demand for special status is at best appears to be a ploy to hoodwink people of the state as it is not being cogently argued also.

Thus, it would be not correct to state that Bihar will remain unaffected by economic maelstrom without taking appropriate corrective steps. It would be rather prudent to take appropriate offsetting and remedial actions in time. Still, Bihar can somewhat moderate the adverse impact of economic slowdown by i. Focusing its meagre resources based on higher marginal utility of investments, ii. Structuring schemes and programs to meet highest standard of good governance, iii. Ensuring efficient and timely project execution so that investment becomes productive in shortest time, iv.  Strategically leveraging public investment to attract private investment, v. Arguing rationally for parity on various central sponsored infrastructures and assets (including compensatory investment in lieu of infrastructure like ports etc to which Bihar is not entitled). Hope better senses would prevail on the dispensation in state and it would be able to avert meltdown of ongoing developments even if federal government squeezes its financial support.