Laloo Yadav beats Nehru hollow

Annual average growth of gross state domestic product (%) for 14 major states.

Source: Calculated from CSO website by author; Ahluwalia (2000). Excludes minor and special category states (e.g. Delhi, Kashmir) and new states (Uttranchal, Jharkand, Chattisgarh) carved out of old states.

Many critics of globalization and economic reform complain that fast economic growth in the last two decades has been concentrated in a few fortunate states, and that the most backward ones have not benefited. Tears have been shed at the plight of the backward states, and at the supposedly pitiless logic of globalization which makes the poor poorer and rich richer.

The moaning and graining is not limited to leftist critics. A reformist critic like Lord Meghnad Desai said at a recent lecture that Bihar had stagnated and experienced virtually no development for 15 years under Laloo Yadav.

Really? Our table shows that Bihar is near the bottom of the growth league. Yet the state averaged 4.66 % growth per year in the decade 1980-91, and 4.89 % in the 12 years from  1993-94 to 2004-05, the latest period for which the CSO gives state-level data. This was the period when Laloo ruled.

Clearly, Bihar is a relatively poor performer. Yet 4.89 % growth under Laloo can hardly be called zero development. It is much faster than the 3.5% that India averaged under Jawaharlal Nehru and Indira Gandhi. Nobody ever claimed that Nehru pushed India into stagnation, or that India suffered zero development under him. Indeed, leftists hark back with nostalgia to those golden days of socialism. Let’s face it: for all its many shortcomings, Bihar under Laloo grew faster than India under Nehru.

Indeed, Bihar has been growing faster than Punjab, which used to be India’s richest state. As our table shows, between 1993-94 and 2003-04, Punjab grew at only 4.39% annually. This was slower than in other backward states such as Orissa (4.86 %) and Madhya Pradesh (4.55 %). Clearly, globalization and economic reform have not simply made the rich grow richer. The states with the best connectivity have grown fastest. But even the weakest performers have grown rapidly by world standards, and by India’s own historical standards.

Bihar has the lowest literacy rate among major Indian states. Yet, while India’s overall literacy improved by roughly 23% in the decade 1991-2001, Bihar’s improved by 27%. That cannot be called a decade of lost development.

By some yardsticks, Bihar exceeds the national average. Bihar’s infant mortality rate of 61 per 1000 in 2002 was better than the national average of 63 per 10000, and better than the 62 per 1000 recorded by relatively developed states like Andhra Pradesh and Haryana. Bihar’s life expectancy for males, 65.66 years, is actually higher than the national average of 63.87 years. Now, the quality of Bihar’s data collection is suspect, so I would not read to much into these figures. Yet the data suggest that it is absurd to claim that Bihar had little or no development under Laloo.

Why does Laloo have such a terrible image? Partly because he likes it that way. For 15 years as Chief Minister he declared that his priority was not economic growth but social justice, especially caste justice. He did little to improve public investment. Instead he aimed to provide dignity and self-respect to the lower castes, and safety to Muslims. He succeeded well enough to win three elections in a row. Even the collapse of law and order and the rise of criminals linked to Laloo was seen, locally, as lower castes improving their market share of Bihar’s biggest business—crime. This was terrible for the investment climate, but not, apparently, for electoral outcomes. 

I suspect that Bihar exceeded 4% growth under Laloo mainly because Biharis could migrate to other states for jobs, send remittances home and bring back new skills. Had Biharis been obliged to invest in Bihar itself, their savings would have fetched little return, given the poor investment climate. But since they could invest in the rest of India they enjoyed a substantial return. Education collapsed in the state, but Biharis went to Delhi and elsewhere for higher education.

Thus, Laloo succeeded for reasons beyond his control. Growth was not rapid, but was faster than during the neta-babu raj. The lower castes were able to grab a bigger slice of a growing economic pie, albeit one that grew a slower than the Indian average.

Apart from Bihar, Uttar Pradesh is often described as the Slough of Despond. Certainly its law and order and social indicators leave much to be desired. Yet it too has been growing at 4 to 5 % per year for 25 years, faster than the pace achieved by Nehru and Indira Gandhi. UP may be backward, yet it has become a major exporter of information technology, thanks to the flourishing software and BPO campuses in NOIDA, adjoining Delhi. Business-friendly sugar policy has attracted thousands of crores of investment in the last five years, and the subsequent rise in rural prosperity is reflected in a rush by businessmen to set up rural supermarkets. Once limited largely to western UP, sugar mills have now spread all over central and western UP. Cane is a very profitable crop, so every new sugar mill lifts incomes in the surrounding 200 sq. kms.

Historically, the most backward states have been Bihar, Madhya Pradesh , Rajasthan and Uttar Pradesh, sometimes known by the acronym BIMARU. Today, the BIMRU concept is obsolete. A remarkable growth performance has come from Rajasthan, which enjoyed the fastest rate of growth among major states in the 1980s (6.60 %) and the fourth highest (6.99%) between 1993-94 and 2003-04. Female literacy in Rajasthan rose by an astonishing 20 percentage points in the decade of the 1990s.

Literacy in Madhya Pradesh, another BIMARU state, skyrocketed by almost 20 percentage points in the 2001 census. At 63.74%, the state’s literacy rate was almost on par with the national 64.84%.

Now, some states have failed to create the infrastructure, education and connectivity needed to catch the globalization bus. So, they have grown less rapidly than the gung-ho globalisers. They need to do much better. But the notion that economic reform has left the poorer states in extremis is a myth. Even Bihar, which has terrible law and order, terrible roads and electricity, terrible education and telecom, has grown at close to 5% per year for over a decade. It is no longer crippled by something even more terrible called neta-babu socialism.