Sunday, March 09, 2008

World Bank India Newsletter : September 2007 :Can Bihar get out of the poverty trap?

Fifteen years into India’s economic reforms, the country’s poorest state Bihar, is finally gearing itself to catch up with the rest of India.

A slew of fiscal and legislative reforms implemented in the recent past stand testimony to this silent transformation taking place in a state that has, for long been stereotyped as a ‘failed state’ in popular public imagination.

From being the first state to abolish the Agriculture Product Marketing Control (APMC) Act, thus providing additional avenues to farmers from sale of produce, to repealing the Urban Land Ceiling Act and adopting the Model Municipal Act which is expected to attract organized construction and real estate firms to Bihar; to providing a Single Window Clearance Act 2006 and a State Investment Promotion Board (SIPB) to facilitate industrial investments, Bihar has indeed come a long way.

What is more, to make a positive impact on the state’s financial health, it has also undertaken a number of measures to eliminate the revenue deficit and contain the fiscal deficit in a time-bound manner. Financial powers have been decentralized to line departments, and, outdated financial rules, particularly with regard to public procurement, have been replaced with those that promote efficiency, transparency and accountability.

Bihar is a crucible in India’s battle against poverty

So has the ball been set rolling for India’s poorest state? With a population of 90 million, 37 million of them below the poverty line, Bihar has a per capita income of around $160, representing one of the most densely populated agglomerations of poor people anywhere in the world. While the state accounts for 8 per cent of India’s population, it contributes only 1.6 per cent of the country’s GDP. Its per capita income has averaged a mere 1.5 per cent growth per year, the slowest among major Indian states.

“Our aim is to increase the state’s GDP growth from an average of 4.5 per cent to 8.5 per cent in the next five years. Public investment is expected to be around Rs 600 billion and private sector investment Rs 1,070 billion in the 11th Five Year Plan period,” according to the Deputy Chairperson of the State Planning Commission, Mr. N. K. Singh.

The state administration also looked at what the economically better-off states like Gujarat, Maharashtra, Andhra Pradesh had done on the reforms front, and replicated their experiences, as with the Fiscal Responsibility Act, Single Window for Industry, and decentralization of financial powers to state departments.

Legislative backing to most of the reforms being undertaken has also boosted investor confidence in the state’s economic overhaul. Major international donor agencies are thus gearing up to contribute to the state’s development.

World Bank’s initiatives

It is against this backdrop that the World Bank is set to re-engage with the state in a major way after a gap of many years. That initiative was set in motion in 2004-2005 when the World Bank reviewed its Country Strategy for India and decided to focus its efforts in the poorest states of the country. The Bank identified Bihar, Jharkhand, Orissa and Uttar Pradesh and began initiatives to support the states’ development agenda. Of these, Bihar alone accounted for around 15 percent of India’s poor.

Following this, the Bank prepared a report titled Bihar: Towards a Development Strategy in June 2005 which formed the basis of the development partnership between the Bank and the state government. The report also helped the Bank get a comprehensive analysis of the development challenges and opportunities facing Bihar. Since then, the Bank has been engaged in helping the state build its capacity in a range of sectors, from public expenditure management to flood forecasting to reforming the public distribution system.

“While Bihar has a lot of catching up to do, there are signs of hope. If the current momentum for progress can be sustained, the state can hope to bring prosperity to its people. The road to development will now need the combined efforts of the state and the central government, the private sector, civil society, Bihar’s migrant population, as well as the international community,” says Ms. Isabel Guerrero, the World Bank Country Director for India.

National/multi-state World Bank projects active in Bihar

* Reproductive and Child Health II
* Third National HIV/AIDS Control Project
* Tuberculosis Control Project II
* Vocational Training India
* National Agriculture Innovation Project
* Disease Surveillance
* Food & Drugs Capacity Building
* Lucknow-Muzaffarpur National Highway
* Grand Trunk Road Improvement
* National Highways III

Improving livelihoods

The Bank has now started lending support to Bihar with a US$63 million Bihar Livelihoods Project, named Jeevika to improve the livelihoods of the rural poor in 4,000 villages in the poorest districts of Nalanda, Gaya, Muzzafarpur, Madhubani, Khagaria, and Purnea. It is expected to directly benefit about 2.9 million people belonging to 590,000 households.

Managing floods

Bihar being a flood-prone state, with 76 percent of the population in north Bihar living under the recurring threat of devastation by floods, the Government of Bihar has identified improvement of flood control as a priority area where they would like the World Bank to help. The Bank along with the Department for International Development (DFID) is providing technical support to the Government of Bihar for flood forecasting and management. A number of initiatives are already underway to improve the technical and institutional capacity of the state for flood management by developing and implementing a comprehensive Flood Management Information System (FMIS) to support flood control and management through early warning and emergency response systems, a comprehensive flood website, upgrading of hydraulic measurements and telemetry, training and building the capacity of officials and looking at new technological approaches to improve the decision making process before, during, and after a flood takes place. All this is expected to help the state move from merely responding to a disaster to improved disaster preparedness.

Apart from this the Bank has received a request for a Development Policy Loan that will enable the state government to implement its broad development agenda.

A joint framework for donor coordination

In fact donor coordination has been a key enabling factor in the Bank’s engagement with Bihar. The Asian Development Bank (ADB), The Department for International Development (DFID), and the World Bank are jointly working to support Bihar’s development agenda. “As we move forward we are working closely with the ADB and DFID to define a joint framework for a coordinated approach to our assistance,” adds Mr. Dipak Dasgupta, World Bank’s Lead Economist in New Delhi.

Donors agree that the level of poverty and degradation in Bihar is so stark that if projects are implemented well they will show immediate results and create much bigger impact. “The Government of Bihar has already undertaken a number of reforms. But implementation on the ground will be the key,” says World Bank’s Bihar State Coordinator Mandakini Kaul. The risks are also high. The infrastructure needed for accelerating growth is extremely poor. State institutions also need to gear up if they are expected to implement the government’s vision. What is more, the state is also prone to natural disasters with recurrent floods in the northern areas and frequent droughts in the southern areas.
The recently launched World-Bank supported Jeevika project will help organize women from poor and disadvantaged households into vibrant and self-managed institutions of the poor. These self-help groups will be federated into village organizations, which will receive project investments for various activities through a participatory micro-planning process. In the last phase these groups will undertake income-generating activities, and develop linkages with market institutions. The project will also finance Community Investment Funds, which the village organizations can use as a revolving fund to finance various community infrastructure works.

Optimism about the future

The state government is optimistic. “I think the present government has made a quantum shift by adopting a development centric approach, delegating power and improving governance. I am optimistic that Bihar will achieve the daunting target of 8.5 percent growth in the next five years. It is realizable and I hope that Bihar will not only improve its own economy but will also contribute significantly to the national economy,” Mr. Singh said spelling out the vision of the government.

So what’s in the pipeline?

Mr. N. K. Singh sums up the future agenda thus: Major initiatives are already underway in the infrastructure sector, which includes roads, energy, and the health sector. “We intend to spend Rs 18,000 crore in the next three years in the road sector. Massive work is already underway to construct and improve our national and state highways and our district and rural roads. Along with the PM’s Gram Sadak Yojana, we have also launched our own roads project called the CM’s Gram Sadak Yojana to connect all habitations,” says Mr. Singh.

Education and agriculture are also top priority for the government. The state has abolished the system of hiring contract teachers and instead developed a decentralized model with active involvement of the Panchayati Raj Institutions (PRIs). Already, 100,000 PRI teachers have been appointed. The aim: to bring down the pupil teacher ratio to 40:1, from around 90:1 in 2003.

Improving job skills

A large portion of the 90 million population of Bihar comprises young people. Bihar also has a huge migrant population that moves out of the state in search of jobs, most often as migrant laborers. Plans are afoot to upgrade the industrial training institutes as well as set up new vocational institutes in collaboration with the private sector. “If people have to migrate to other states in search of jobs, we would at least like to ensure that they acquire better skills and attract better jobs, so that remittances that they give to the state are better,” adds Mr. Singh. The state is also focusing on higher education and Mr. Singh says Bihar is expected to get its first Indian Institute of Technology (IIT) soon.

Similarly, the state is also gearing up to harness its comparative advantage in agriculture. It has already taken a step towards this end by abolishing the Agriculture Product Marketing Control (APMC) Act, and thus providing additional avenues to farmers. The state would now like to move into value-added and processed agriculture.

Providing better healthcare to the people

The state’s precarious health sector has been administered a major shake up: Primary Health Centers (PHCs) are reporting a spurt at an average of 3,000 patients per month against a dismal average of 39 patients per month earlier, and now stabilizing at an impressive 2,200 patients per month; routine immunization coverage has increased from 11 per cent to 33 per cent in the past 18 months. The PHCs are now open 24 hours under strict government directive.

“The government is closely monitoring the health care centers to know the kind of patients visiting these centers, the drugs that are being administered and whether the PHCs have sufficient supply of drugs. These centers are also being linked with computers to maintain such records,” Mr. Singh adds.

Tapping Bihar’s tourism potential

The much-talked about revival plan for Nalanda University is also underway. The government has already acquired 600-acres of land outside old Nalanda. The University will be sponsored by several countries, including India, Japan, China, Singapore, Thailand, Cambodia and Sri Lanka.

“We would like to make Nalanda University a world-class center for education, culture, and religion. It will be a hub to foster culture,” says Mr. Singh who is also a member of the newly-floated mentor group for Nalanda University chaired by Amartya Sen. Government feels tourism in the Buddhist circuit will also pick up if this university gains international recognition and acceptance.

Now that Bihar has also taken the bold step to repeal the Urban Land Ceiling Act and
has even adopted the Model Municipal Act framed by the Government of India, the capital city of Patna and the Buddhist destinations of Gaya, Bodh Gaya and Rajgir are geared for major makeover. “ Bihar has huge tourism potential. We are developing and strengthening the infrastructure in the Buddhist circuit,” says Mr. Singh.

The path ahead is likely to be fraught with many trials and tribulations for all those involved in Bihar’s road to prosperity but if India is to prosper, Bihar will have to be reborn again, both in purpose and in the public imagination.

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