Gujrat and Bihar

Topics: States and territories of India, Value added, Gross domestic product Pages: 21 (2256 words) Published: November 29, 2013

Have Gujarat and Bihar
Outperformed the Rest of India?
A Statistical Note
R Nagaraj, Shruti Pandey

In the popular and media
imagination, fed by economists
and columnists, Gujarat and Bihar
have both recorded an
extraordinary economic
performance in the past decade.
But a careful analysis shows that
Gujarat, always one of the richest
states, has done no better than
before. In neither industry nor
agriculture has its position
radically changed. The only
dramatic difference has been the
emergence of import-dependent
and export-oriented petroleum
refining, which has few linkages
with the state economy. As in the
past decades, Gujarat’s social
development continues to lag
behind its economic development.
Likewise, Bihar’s position at the
bottom of the league has not
changed dramatically. Change
seems to take place very slowly at
the regional level.

R Nagaraj ( is at the Indira
Gandhi Institute of Development Research,
Mumbai, and Shruti Pandey (shrutipandey2401@ is with the EPW Research
Foundation, Mumbai.
Economic & Political Weekly


september 28, 2013


Yet, in all the discussion the underlying empirical basis is surprisingly weak. Often trend growth rates are computed for
the gross state domestic product (GSDP)
series for short time periods, ignoring
the wild fluctuations in the official data,
yielding large standard errors for the
estimated parameters (Figure 1). To overcome such problems, this note has avoided computing growth rates but examines
the ranks of Gujarat and Bihar relative
to the national average to shed light on
their performance over the last two
decades. However, Gujarat’s performance
gets scrutinised in more detail as it has
attracted far greater public attention.

ujarat is among the richest states
in the country. It contains only
4.9% of the population (2011) but
contributes to 7.9% of the total domestic
output of all states. Bihar is one of the
poorest, with 8.2% of the population
and producing 3.0% of the domestic
output.1 Gujarat is highly urbanised with Ranking and Shares in GSDP 42.6% of its people living in towns and Figure 2 shows Gujarat’s and Bihar’s cities, whereas only 11.3% of Bihar’s popu- shares in total GSDP at constant prices lation is urban (national average is 31.2%). from 1993-94 to 2011-12. Gujarat’s share These states also represent almost the has remained roughly stable between extreme ends of the income distribution 7% and 8% for most years, though it among the Indian states, with Gujarat’s slipped below 7% for four years in the per capita income being nearly 4.6 times first half of the first decade of the 21st century. But there is no evidence of

that of Bihar in 2011-12.2
Lately, these states have drawn con- Gujarat’s share surging ahead of the rest siderable attention for their supposedly of the country as popularly believed. If outstanding economic performance, which anything, the state has only recently is credited to the good governance of recovered its share of 8% of total GSDP their political leadership. So because of as attained in 1996-97. So the best Gujarat’s economc stand- Figure 1: Annual Growth Rates in Gujarat, Bihar and All-India ing, some believe that on (in %, with 2004-05 as Base Year)

this count Chief Minister
Narendra Modi has dem- 15
onstrated an ability to be
a candidate for the prime
minister’s post in next
year’s general elections.
Bihar, on its part, is
shown to have grown -15
19941996- 1998- 20002002- 2004- 2006- 2008- 2010- 2011faster than most states in 95
11 12
Source: Based on data in Module: “Domestic Product of States of India”, EPWRF Online Database. the last decade. Newspaper columnists believe that a catching- Figure 2: Shares of Gujarat and Bihar in the up process is apparently finally on which Total GSDP (%)

would eventually reduce or eliminate inGujarat

References: Krishna, Raj (1980): “The Centre and Periphery –
Inter-state Disparity in Economic Development”,
in Facets of India’s Development, G L Mehta Memorial Lectures, published by ICICI, Bombay,
Shah, Tushaar, Ashok Gulati, Hemant P, Ganga
Shreedhar and R C Jai (2009): “Secret of
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