It takes two to tango

To promote inclusive growth, the Centre must help laggard states to industrialise faster.

Bihar ended last year with an economy bigger than Punjab's and less than a fifth smaller than Haryana's. With this, chief minister Nitish Kumar has bootstrapped his state into the front line of India's farm economy. The three states are predominantly agrarian and Bihar catching up with the country's erstwhile grain baskets shows that pragmatic policymaking can deliver inclusive growth in the poorest provinces. Bihar owes its scorching 13% plus growth rate to newly laid village roads, improvements in law-keeping and crop yields, and imaginatively crafted social welfare schemes like gifting cycles to school-going girls. None of these costs a bomb. Mr Kumar's focus on welfare comes through in the 25% jump in this year's spending on health and education. His government has projected a 2.87% fiscal deficit for the current year and its debts are a mere 22.64% of the state's domestic product. The UPA, in contrast, is staring at a 5.1% fiscal deficit, half of which goes into subsidies for fuel, fertiliser and food.

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To be fair, New Delhi's social welfare obligations are far more onerous than Patna's. A part of the Centre's handouts ends up in Bihar, which has a long climb ahead to reach national metrics of income and human development. Bihar's per capita income in 2010-11 at Rs. 20,069 was a fourth that of Maharashtra, India's richest state. But the average income in Bihar is rising by 6% a year, while Maharashtra's is climbing by 7.2%. If it can sustain its current pace, Bihar will reach Maharashtra's present standard of living in 2032, Delhi's in 2043 and Chandigarh's in 2047. The last would be around the time India becomes the world's third largest economy, after the US and China. Thirty-five years is a long transition from a predominantly farm economy to a services-driven one.