Number Theory: Bihar's poverty hurdle, explained in six charts

What explains Bihar’s poverty? The answer to this question is not as simple as it sounds. Here are six charts which try to explain this

That Bihar is among the poorest states in the country is well known. Its per capita GSDP in 2022-23, the latest year for which this number is available, was ₹35,118 at constant prices. This is the lowest for states with a population of at least 10 million. What explains Bihar’s poverty? Can extending reservations, like the Bihar government has done with the bill introduced on Thursday, solve this problem? The answer to this question is not as simple as it sounds. Here are six charts which try to explain this.

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Bihar's poverty hurdle, explained in six charts

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  Bihar’s average wage for salaried workers is higher than a lot of states, but...

  Data from the 2022-23 Periodic Labour Force Survey (PLFS) shows that Bihar’s average wage for salaried workers is higher than the number for a lot of states which are richer than Bihar. This otherwise counter-intuitive statistic is a reflection of the fact that the share of government employees among salaried workers in Bihar is much higher than what it is at the national level.
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  In other words, lack of well paying private sector jobs is a bigger problem for Bihar than an unequal distribution of jobs in the government sector.
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  Lack of high paying private jobs shows in Bihar’s poor rank in income tax collections

  Data from the Central Board of Direct Taxes (CBDT) gives a break-up of income tax collected in every state and Union Territory. Bihar’s share in total income tax collections (this includes corporation taxes as well) was just 0.52% in 2021-22, the latest year for which this data is available. This is the 4th lowest among states with a population of at least 10 million.
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  Bihar lacks investment demand more than it lacks capital

  This becomes apparent if one compares the credit-deposit ratio of Scheduled Commercial Banks (SCB) across states in India. The ratio of total outstanding credit and deposits of SCBs was 48.5% for Bihar in 2022-23. The only two states with a population of at least 10 million or more where this number was lower are Odisha and Jharkhand. A low credit deposit ratio suggests a low demand for credit despite an availability of deposits which could have been utilised to create credit and finance investment activity. This fact becomes even clearer if one looks at the sectoral distribution of bank credit across states. Industry’s share in total outstanding bank credit in Bihar in 2022-23 was just 11%, which is the lowest after the 9.4% number for Kerala among states with a population of at least 10 million or more.
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  Bihar also has a major regional inequality problem

  An analysis published in these pages on November 9 argued that the lack of a rural-urban breakup in the Bihar caste census has kept an important part of Bihar’s poverty and inequality problem away from statistical analyses. One can extend this argument further using the Bihar government’s own data on district-wise economic inequality in the state. The Bihar government’s Economic Survey shows that there is a large disparity between districts in terms of per capita income. It is very difficult to believe that the advantages and disadvantages of being located in a rich or poor district will not transcend the social background of the people involved. While increasing reservations will definitely help a few hundred thousand people from Other Backward Classes (OBCs) and Scheduled Castes (SCs) land high-paying government jobs, solving Bihar’s structural economic backwardness needs work on attracting more private investment and bridging the regional inequality in the state.