Bihar records 10.5% growth rate in 2019-20, says economic survey

Economic experts say that for a poor state like Bihar, which depends so heavily on central transfers and has low expenditure, showing revenue surplus could hurt, as it would lose revenue deficit grants

Bihar recorded a 10.5% growth rate (at constant prices) in 2019-20, higher than the growth rate of the Indian economy(estimated to be around 5%), according to the Bihar Economic Survey 2020-21.

Representational image. (Getty Images/iStockphoto)

Constant prices are a way of measuring economic change considering a year as base year. In this case, it is 2011-12. It gives the real Gross State Domestic Product (GSDP) growth.

Deputy chief minister Tarkishore Prasad, who also holds the finance portfolio, tabled the 15th Bihar Economic Survey on the floor of the Legislative Assembly on Friday, ahead of the Budget, for the first time. Later, industry minister Shahnawaz Hussain also tabled a report prepared by the Centre for Policy and Public Finance in the Legislative Council.

Prasad also tabled the Bihar Settlement of Taxation Disputes (Second) Ordinance, 2020, while Parliamentary Affairs minister Vijay Kumar Choudhary tabled the Bihar State Higher Education Council (2nd Amendment) Ordinance, 2020.

Among the three major sectors, says the Economic Survey report, the tertiary sector(the service sector including retail, financial services, hospitality, real estate, etc.) recorded a noticeable increase in its share—up from 57.3% in 2013-14 to 60.2% in 2019-20, largely due to growth in road transport and other services. The sectoral composition had started witnessing a change from 2011-12 with a shift from primary to tertiary sector.

The primary sector involves all economic activities that directly use natural resources, viz. mining, forestry, fishing, etc. The secondary sector involves manufacturing and processing to add value to natural resources, viz. cotton converted into cloth. The tertiary sector helps in developing the primary and secondary sectors, viz transportation or other services.

The report shows financial management in the state was within the prescribed limits of the Fiscal Responsibility and Budget Management Act (FRBMA), 2006, with the gross fiscal deficit as a percentage of the GSDP at 2% and the revenue account in surplus during 2019-20, lower than 2.7% in 2018-19.

Bihar has consistently claimed to be a revenue-surplus state since 2004-05. The revenue account remained in surplus during 2018-19 also, says the report, though borrowing by the state as a share of the GSDP witnessed a jump from 3.6% in 2018-19 to 4.8% in 2019-20.

Economic experts, however, say that for a poor state like Bihar, which depends so heavily on central transfers and has low expenditure, showing revenue surplus could hurt, as it would lose revenue deficit grants that many relatively better-off states avail, as per the recommendations of the 15th Finance Commission.

Besides, they said, it was a matter of concern for the state that it was already under the impact of economic slowdown, as was the case elsewhere in the country, even before the advent of Covid-19 pandemic, as reflected through the fall in revenue and capital expenditure in 2019-20, compared to 2018-19. While revenue expenditure dropped from ₹1,24,897 crore to ₹1,23,533 crore, the capital expenditure fell from ₹29,759 crore to ₹20,080 crore.

The report, however, points to a slight increase in the state’s own tax and non-tax revenue from ₹33,539 crore in 2018-19 to ₹33,858 crore in 2019-20. According to the report, the share of revenue expenditure in the total expenditure has increased over the years from 74.4% in 2015-16 to 86% in 2019-20, while the share of expenditure in the capital account has declined from 25.6% to 14% during the same period.

“Over 70% of the state revenue comes from central transfers. With Bihar maintaining revenue surplus, it is certainly disadvantageous, as it cannot avail revenue deficit grant,” said Sudhanshu Kumar, an economist at Centre for Policy and Public Finance.