Infrastructure

Bihar’s brilliant growth performance after economic reforms in 2006

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 For Bihar, growth in the agriculture sector is crucial for socio-economic development since it employs about 70 % of rural workforce contributing to 23 % of the State GDP. Among the economic reforms in Bihar in 2006 included strengthening input supply, extension, farm mechanization, irrigation and market reforms of which liberalization of regulated markets by removing Agricultural Produce Market Committees (APMC) was discernible. 

Impact of reforms on State Domestic Product (SDP)

The growth rate of SDP at constant prices, for Bihar reached double-digit figures in 2006, 2008, 2010, 2011, 2012 with an average of around 10%, much above the all-India figures. Considering the growth experience of comparable States such as Madhya Pradesh, Odisha, Uttar Pradesh, the growth rate of SDP for Bihar was higher than that in MP, Odisha, UP, and All India in six out of nine (i.e., 67% of) years (Table 1, Fig 1). 

Table 1:  Growth Rate of SDP at 2004-05 (constant) prices

Year Bihar MP Odisha UP All India
2005-06 -1.69 5.31 5.68 6.51 9.48
2006-07 16.18 9.23 12.85 8.07 9.57
2007-08 5.55 4.69 10.94 7.32 9.32
2008-09 14.54 12.47 7.75 6.99 6.72
2009-10 5.35 9.56 4.55 6.58 8.59
2010-11 15.03 6.31 8.01 7.86 8.91
2011-12 10.29 9.69 3.78 5.57 6.69
2012-13 10.73 9.89 8.09 5.92 4.47
2013-14(p) 9.92 11.08 5.60 5.14 4.74

Source: NITI Aayog 

Impact of reforms on SDP in Agriculture and allied sectors

Considering the impact of reforms on the growth rate of agriculture and allied sectors (Table 2), in 5 / 9 (or 55% of) years after reforms, the growth rate in agriculture and allied sector at 2004-05 (constant) prices surpassed that of all India including the All-India average growth rate of 9.92%. In 3/9 (or 33% of) years, Bihar performance was above that of Madhya Pradesh. In 4/9 (or 44% of) years Bihar performance was above that of Odisha. In 5/9 (or 55% of) years Bihar performance was above that of UP including overall average growth rate in India (Table 2, Fig 2). 

Table 2: Growth rate of SDP in Agriculture and allied sectors at 2004-05 (constant) prices

 

Year Bihar MP Odisha UP India
2005-06 -11.42 7.04 3.34 2.34 5.14
2006-07 24.52 2.35 1.94 2.42 4.16
2007-08 -7.47 -1.49 4.66 3.51 5.8
2008-09 18.9 8.85 1.87 3.80 0.09
2009-10 -13.63 8.92 7.74 -0.40 0.81
2010-11 16.7 0.24 1.90 4.71 8.6
2011-12 12.51 18.17 -4.46 5.59 5.02
2012-13 8.75 18.63 11.01 4.73 1.42
2013-14 -10.06 23.28 -3.25 2.59 4.71
Average 4.31 9.56 2.75 3.26 3.97

Source: NITI Aayog 

Impact of Reforms on response to Irrigation

Due to reforms, the response to irrigation in Bihar measured in terms of irrigation elasticity has been impressive. The irrigation elasticity before reforms being -0.16 %, implying that for a one % increase in growth in gross irrigated area, there was 0.16 % reduction in growth in value of crop output, increased to 1.38, in the post reforms, implying that for a one % increase in growth in gross irrigated area, there was 1.38% increase in the growth in value of crop output.

Impact of Reforms on output

Considering the impact of reforms on crop output, in the pre reforms (2000 to 2007) and post reforms (2008 to 2015) period, the growth rate of output of field crops was (1.53%, 4.29%) was higher than that of Horticulture crops (-3.51%, 2.85%), with an impressive growth rate of overall output of agriculture and allied sectors (2.57%, 4.66 %). 

Impact of Reforms on Cropped area

Considering the impact of reforms on cropped area, in post reforms (2016), about 43 % of total cropped area was under rice contributing to 21 % of the value of agricultural output and 27 % was under wheat contributing to 13 % of the value of agricultural output. Thus, the area under rice and wheat forming 70% of the area contributed to 34% of the value of agricultural output. The area under sugarcane formed 3.2 % of the total, while contributing merely to 3.4 % of the value of agricultural output. However, the area under fruits and vegetables formed 6 % of total cropped area, while contributing to 42 % of the value of agricultural output. The gradual shift to horticulture crops indicates the response of farmers to market forces.

Impact on Market prices

Between the pre and post reform period, average wholesale price of paddy increased by 126% , Maize by 81% and wheat by 66%, resulting in better prices. The gradual shift towards cultivation of commercial crops is the reflection of operation of market forces

Overall performance

The impact of reforms in Bihar undertaken in 2006, has been impressive in real terms not only on overall State Domestic Product but also on the SDP in agriculture and allied sectors. The impact on crop area, crop output, and market prices have not only been impressive that Bihar has outperformed that overall India as also over States such as Madhya Pradesh, Odisha and Uttar Pradesh. This implies that the competitive environment created after the economic reforms of 2006 is largely responsible for the growth of agriculture. 

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