Biharis are poor, but bullish on sentiment | Number Theory

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That Bihar is among the poorest states in India and Biharis among the poorest people is well known. However, what is also remarkable about the state is that there have been no large-scale protests or even a change in government for a long time in the state. The incumbent chief minister, Nitish Kumar, has now been in office for almost 20 consecutive years. What explains this apparent contradiction? The translation between economics and politics is never as straight as some assume it to be. However, at least one set of statistics published by the Reserve Bank of India could throw some light on the issue: consumer sentiment in Bihar is quite high when compared to its poor income and consumption levels. Here is what the numbers show.

Election paraphernalia on display at a shop in Patna ahead of Bihar assembly polls 2025. (Santosh Kumar/ HT Photo)

Biharis are poor, but bullish on sentiment

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  Bihar is ranked high in terms of both rural and urban consumer sentiment

  RBI’s Consumer Confidence Surveys (CCS) are now available in both rural and urban areas. Because unit-level data is available, it is possible to segregate consumer sentiment at the state level. It shows that average consumer sentiment in Bihar – as seen in the Current Situation Index (CSI) in both urban and rural areas – is higher than the all-India average and also much higher than in many high-income states too. CSI is a composite indicator that measures households’ perceptions of the present economic situation based on their views on income, spending, employment, prices, and overall economic conditions, compared with a year ago. A similar pattern can be seen for the Future Expectations Index (FEI) or FEI, which seeks responses about economic prospects a year from now and averages them on the same lines as CSI. To be sure, there is good reason to be slightly circumspect about at least the urban CCS data from Bihar because the only city which has been sampled here is Patna, by far the richest in the state. However, the CCS only samples large cities across states and data for other states should have a similar bias as well.
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  Bihar’s sentiment advantage is across income categories

  This is another striking fact in the CCS data. Because the CCS also classifies respondents by income category, one can try and find out whether Bihar’s higher sentiment levels are because of the relatively better-off being canvassed in the survey. This does not seem to be the case as Bihar’s households, rural and urban, across income categories, mostly report a higher CSI and FEI value than all-India levels. To be sure, Bihar does not violate the larger trend of higher income classes reporting a higher consumer sentiment which exists at the all-India level.
• How irrational is finding a higher consumer sentiment among Biharis?

  It is an important question to ask and there can be two ways of looking at it. The first can be checked by looking at the larger correlation between consumer sentiment and income levels across states. The best way to do it in this case is to compare rural and urban monthly per capita consumption levels from the Household Consumption Expenditure Survey (HCES) data and latest consumer sentiment numbers. There does not seem to be any neat relationship between how much people spend and how they feel about the economy. In fact, states with higher spending do not always report higher sentiment, and poorer states like Bihar rank high on confidence despite low consumption.
• But consumer sentiment captures past perceptions rather than absolute values

  What goes into calculating CSI in the RBI CCS is responses which compare economic conditions today compared to what they were a year ago. This means as long as more people see an improvement in conditions compared to a year ago, consumer sentiment will be higher even if absolute income levels are much lower than what they are at other places. This could well be a reason why a state like Bihar is reporting higher consumer sentiment levels. Its economic challenge is not that things are going south. What it needs is for them to improve at a much faster pace than they are improving right now. They might be impatient, even angry, but are not necessarily bearish about the future because things are far better when compared to the past.