Bihar India's Poorest State, Begins to Turn Around

March 10, 2010


March 10, 2010 - The state of Bihar in India is home to some of the country's poorest people. But a new reform effort by the Bihar government, backed by World Bank funding and technical support, has helped it improve public finance management and direct the proceeds to getting more children into schools, to immunizing its people, and to fighting corruption. Reducing poverty and accelerating growth in the state are likely to have national implications, particularly in helping India reach the Millennium Development Goals.


Bihar is one of India’s largest and poorest states. Until 2007, economic growth in Bihar was much slower than the rest of the country. The state’s public services and infrastructure were among the worst in India. Nearly half of all workers were agricultural laborers, about double the national average. Only a third of the women were literate, infant mortality was high, and over half the children were underweight.

Two million 6-13 year-old children were out of school and teacher absenteeism was rife. Over half the homes were not connected to roads, only a fifth of households had access to piped water, and electricity was not available to the vast majority of households. Since 2005, however, the government has undertaken a comprehensive reform program targeting critical areas such as health, education, roads, and rural development. It has also focused on improving law and order, the investment climate, and promoting greater accountability.


A World Bank Development Policy Loan (DPL) has supported Bihar’s efforts to undertake reforms and helped create the fiscal space for development (IBRD $150 million; IDA $75 million). While the first Bihar DPL closed on December 2009, it is potentially the first of four such loans totaling $900 million to be disbursed between 2007 and 2011. A request for the next operation is in the pipeline.

In addition, the World Bank's Bihar Rural Livelihoods Project (US$63 million), currently under implementation, aims to enhance the social and economic empowerment of about 2.9 million rural poor in Bihar. The project covers 4000 villages across six districts - Gaya, Muzzafarpur, Nalanda, Madhubani, Khagaria and Purnea - in a phased manner. The Bank has also provided technical assistance to the Government of Bihar to set up a Flood Management Information System in the flood-prone state, using DFID trust funds.


There are visible signs of a turnaround where the Bihar government has been implementing wide-ranging reforms. State revenues and development expenditures have increased. The government is now able to spend money on hitherto underfunded public services. While pinpointing the roots of economic growth is complex, the faster growth experienced by Bihar after 2004 can be reasonably linked to improvements in the rule of law, more efficient and larger public expenditures, and better infrastructure:

Roads: Some 1900 kilometers of National Highways and 3,500 kilometers of district roads have been refurbished.

Health: In almost three years time - by October 2008 - the number of out-patients visiting a government hospital surged from some 39 per month to almost 4,500 per month. By 2008, over half the population was fully immunized compared to less than one-fifth in 2005. The number of babies delivered in healthcare facilities shot up from some 100,000 in 2006 to 780,000 by 2008. Medicines are now being provided free to patients.

Education: Enrollment in primary and upper primary schools rose, while the number of out-of-school children fell steeply. The pupil-teacher ratio has improved and is expected to reach the national norm of 40:1 when newly hired teachers are placed in schools. The government has extended its midday meal scheme to cover children in grades 6 through 8, thereby increasing its reach to nearly 11 million children. Some 80% of schools sampled across Bihar were serving a cooked meal.

Anti-corruption: The government has sought to promote greater transparency, stepped up activities against corrupt officers, and bolstered service delivery innovatively through outsourcing and use of Information Technology. A Special Vigilance Unit has been created to pursue cases against high-level civil servants. Two of the state’s major governance initiatives under the Right to Information law and service delivery have won national awards.

Rise in consumer spending: Indicating improved conditions, the number of tourist arrivals in Bihar increased dramatically from 6.9 million in 2005 to 10.5 million in 2009. The number of motor vehicles in Bihar also rose by 239% in 2007 alone, reflecting more consumer spending, better infrastructure, and heightened economic activity. The number of mobile phones also rocketed from only one million in 2004 to 12 million in 2008.