Saturday, March 17, 2012

Pitfalls in catching-up drive

Kumari Chitra/ Patana

Bihar should first ensure sustainable development and other facilities
before it aims for big-ticket global investments

Dhamdaha JD(U) MLA and former Bihar State Woman Commission chairperson Lessi Singh went a little overboard in praise of Chief Minister Nitish Kumar as she said the Centre should confer Bharat Ratna on Bihar CM for the state turnaround.
Call it sycophancy of the worst order or just plain and innocuous praise for a leader privately nursing ambition of becoming prime minister, it is all coming from much-hyped Bihar turnaround and growth rate story – touching 14.8 per cent in 2010-11. But the likes of Lessi Singh perhaps do not read between lines of speech of experts like economist Lord Meghnad Desai, Aditya Birla Group chairman Kumar Mangalam Birla and even Planning Commission member Abhijit Sen. She perhaps does not know the difference between inspiring growth and inspired growth.
The message from Global Bihar Summit 2012 was loud and clear: First get sustainable development, electricity and good roads before asking big investors to come to Bihar.
Lessi Singh should also know, just for her reference before she demands Bharat Ratna for Nitish again, of the state government receiving over 50,000 investment proposals since 2006. State Investment Promotion Board cleared 603 proposals worth over Rs 2,48,000 crores. So far so good. But here is the reality: So far, only 55 units, mostly medium and small scale, have come bringing investment of just Rs 3,712 crore, this despite all the camera-mounted image and front-paged publicity for Nitish Kumar in last six years. It is time Nitish started comparing himself with himself but he would still bring Lalu Raj in picture to get better comparison and dupe gullible and not-so-daring media.
Two jokes have been doing the rounds in Bihar media circles and even on social networking sites. First one is – “We had resurgent Bihar (topic of 2007 global summit) to Changing Bihar (topic of just-concluded 2012 summit). But when will have a summit on Changed Bihar? The second one can be crude --- Nitish wants to imbibe entire Gujarat growth minus the man instrumental behind it.
But then, Nitish is neither good at telling jokes nor does he like crude ones. He may go down in history as best Bihar CM but also as one with not such large heart for criticism. In plain words, he wants to know and read what he already knows and better, what his babus meticulously drafted. This is where media misses the point and tells half-truths, conventionally always dangerous.
Nitish Kumar, who succeeds in using large section of media as extension of his PR department (Rs 130 crore advertisement to newspapers in one year), seldom likes hard-talk. Ask Planning omission member Abhijit Sen, who had to face barrage of nuanced and even direct attacks by Nitish Kumar, who had successfully put Bihar being case of historic and historical neglect – right from British to Dr Manmohan Singh rule.
Nitish asked Abhijit Sen if it was also not an economist’s duty to suggest ways out of problem and not just criticize growth pattern. CM had perhaps taken great offence to Sen terming Bihar growth rate as “a catch-up and nursery growth”, which cannot be sustained for a long time. Sen’s contention, like any well-meaning economist, was need for having thrust on primary sector growth and not harping too much about second and tertiary sectors growth. Nitish did have last word during the summit after having asked plan panel to open its offers and re-consider the state’s demand of special category status. But political rhetoric aside, here are some facts and figures which may put Bihar growth story into right perspective. Anyone seeking immediate readymade reference to Bihar truth may well open page number 24 of Economic Survey 2011-12, tabled on Tuesday in Bihar Legislative Assembly.
As one opens the page telling one about “Yearly growth rates of GSDP in Bihar at constant (2004-05) prices”, the first thing catching attention is mercurial annual growth of agriculture/ animal husbandry since 2005-06. The key primary sector recorded -9.1 per cent growth in 2005-06 and then phenomenally climbed to 30.2 per cent in 2006-07. It again dropped to -7.3 per cent in subsequent year but took it to 12.3 per cent in 2008-09. In Year 2009-10, it was again hit negative at -9.1 and recorded 7.7 per cent in 2010-11. The gross of primary sector (agriculture/ animal husbandry/ forestry/ logging, fishing/ mining/ quarrying) also makes an interesting average. It averaged -7.5 per cent in 2005-06, 24.3 in 2006-07, -6.2 in 2007-08, 11 in 2008-09, -8.2 in 2009-10 and 6.3 per cent in 2010-11. So how does one get 11.33 per cent annual growth and 14.8 per cent in 2010-11 with this kind of performance in mainstay of your economy? Bigger question: For how long can you get it?
A look at secondary and tertiary sectors growth tells the complete truth about growth jump. Construction recorded 26.1 per cent growth in 2010-11. Thanks to law and order improvement and people restoring faith in Bihar to invest, construction sector went up since 2005-o6 with 24.1 per cent growth, kept up the momentum in 2006-07 with 25 per cent. Even in 2009-10 when agriculture recorded negative growth, construction still had 16.8 per cent growth. Year 2010-11, it touched 26.1. But this sector growth is mostly Patna-centric. Last six years has seen construction of over 10,000 apartments. The construction has reached almost saturation point with no residential plots being available in livable area. The secondary sector averaged 19.2 per cent as compared to primary sector’s 6.3 per cent in 2010-11. Tele-communication revolution caught Bihar’s imagination. Bihar, which had over 44 lakh telephone connections in 2005 has grown 10-fold by 2011 with 4.4 Cr connections. The growth rate suggests as much – 24.4 per cent in 2005-06, 17.9 in 2006-07. Year 2009-10 was watershed in communication boom with 68.7 per cent growth. But the point experts have been driving at home about such growth being unsustainable can be seen with growth rate coming down to 39.3 per cent in 2010-11. The positive sign amidst skepticism is however banking/ insurance sector picking up in last two years (28.2 per cent in 2009-10 and 25.2 per cent in 2010-11). Finally, the year-wise break of growth rate can also be a curious reading for economists. It started with 0.9 per cent of GSDP in 2005-06 to 17.7 per cent in 2006-07, 7.6 per cent in 2007-08 and 14.6 in 2008-09. But it went downhill to 10.4 per cent in 2009-10 and recorded 14.8 in 2010-11.
Against backdrop of such statistics, an economist like Abhijit Sen had valid reasons to give his prescription to Bihar’s economy. He did it threadbare asking what the state government would do after saturation in construction and communication sector in a couple of years. Even Kumar Mangalam Birla suggested that it was a nice idea to first get investment in power sectors.
Economist Lord Meghnad Desai gave a stern warning against power subsidy. “Power subsidy is a free lunch and destruction of resources. A state government has to discontinue it to make economy sound and robust,” said Desai.
Just because Bihar government had improved roads and law and order cannot bring big investments. The Economic Survey 2011-12 seems to make a defensive beginning while dealing with investment: “The investment climate of a state is determined by a mix of factors, resources availability, regulatory framework, physical infrastructure and incentives to industries.”
The investment pattern in Bihar, says Economic Survey, shows only 11 per cent investment has come in service sector. The share of food and beverages is also substantial. The government claims to have sanctioned 161 investment proposals in 2010-11 and 142 in 2011-12. But only 55 small and medium scale enterprises have started operation. Power, as outlined by experts, is the biggest hurdle before investment. The state that needs 2500 MW power in summer season has central allocation of only Rs 1700 Cr. Of it, the state only gets 800-900 MW. The state can hope to get 700 MW on its own in coming four-five years after a Barh NTPC units starts and Aurangabad’s Navinagar power plant starts functioning.
Nitish privately knows that prospective investors know the growth rate story. “We are willing to purchase power for investing companies and have started incentives for farmers to part with their land”, said Nitish.
It was the same Nitish Kumar, who used to say a year ago that land acquisition had been the real problem. Protest in land acquisition for Navinagar power plant resulting in a death was a case in point. Bihar Industrial Area Development Authority (BIADA), has little over 200 acre land left in vicinity of Patna. BIADA’s liberal policy got land to investors like Prakash Jha for a Cineplex at throw-away rate in midst of Patna. The government defends it by calling it in full consonance with its industrial policy. BIADA also converted education and entertainment into industry.
The agency has still over 2,000 acre land left at different industrial areas. But power situation being even more dismal in districts can be yet another de-motivating factor for prospective investors. The Opposition, though almost decimated and demoralized, still has some valid points. RJD president Lalu Prasad Yadav said: “Global summit does not bring investments. Even, I attended one such meet wearing sola hat”. RJD leader of Opposition Abdul Bari Siddiqui followed his boss up with calling it “just impression building development”. Siddiqui went further: “You media people have not been showing Nitish Kumar the mirror but treating him like US President”.
This said, Nitish government still has created sound defence in form of Asian Development Research Institute member secretary Shaibal Gupta, “fact gathering” Deputy CM Sushil Kumar Modi and one-in-all man, economist, bureaucrat and JD-U Rajya Sabha MP NK Singh. Singh, former Planning Commission member who moderated key session of Global summit having Planning Commission deputy chairman Montek Singh Ahluwalia, stressed on need of Bihar getting Rs 2500 per capita by way of central transfers as against about Rs 3,500 at present. Singh has examples of Canada and Germany to show how all states should be treated equally.
Nitish Kumar himself has gone a step ahead by laying out an agriculture roadmap of Rs 1.5 lakh Cr for 1 years. He asked plan panel: “Will the rainbow revolution come through with your Rs 400 Cr agriculture help?”
Fence sitters have a sense of fatigue with growth story and national and even international media going gung-ho over Nitish factor. Patna University economist NK Choudhary said: “Can we have sustained agriculture growth? Unless we achieve this, rest is cock and bull story”. Editor of, an online news-portal, Ajay Kumar said nobody in the government had been willing to digest hard facts.
“Nitish Kumar is unchallenged now. But he feels the heat on investment count. Even he knows the truth of catch-up growth. But as long as selective magical figures are played to his benefit, he will love every bit of it”.

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