20101109+real estate+attracting investments in bihar

8/8/2019 20101109+Real Estate+Attracting Investments in Bihar

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REAL ESTATE MANAGEMENT, DEPT. OF BEM, SPA, NEW DELHI

Attracting Investments in Bihar.

Hari Om Gupta

This is a study to identify problems which affect development of Bihar and what should be done to

mitigate them, also various steps which can be taken to boost economic investment in the region.


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2 Attracting investments in Bihar

Hari Om Gupta, 3rd Semester, Real Estate Management, SPA, New Delhi November 2010

Introduction:

Bihar is the 12th largest state in terms of geographical size at 99,200km and 3rd largest by

population. Close to 85% of the population lives in villages. Almost 58% ofBiharis are below the age of

25. This is the highest proportion in India.

Bihar lies mid-way between the humid West Bengal in the east and the sub humid Uttar Pradesh in the

west which provides it with a transitional position in respect of climate, economy and culture. It is

bounded by the country of Nepal to the north and by Jharkhand to the south. The Bihar plain is divided

into two parts by the river Ganges which flows through the middle from west to east. Bihar has notified

forest area of 6,764.14 km,[4] which is 6.8% of its geographical area. Hindi and Urdu are the official

languages of the state, whilst the majority of the people speak one of the Bihari languages Angika,

Bhojpuri, Magadhi, Maithili, and Bajjika.

Ancient Bihar (which consisted of Anga (East Bihar and some parts of Bengal), Videha/Mithila (north-

eastern Bihar and some parts of northern Bengal),Magadha (South Bihar) and Vaishali (Bihar)) was a

centre of power, learning and culture in ancient and classical India. From Magadha arose India's first

great empire, the Maurya Empire as well as one of the world's most widely adhered-to


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religions, Buddhism. & agadha em ires, no

a ' ly under

he & aurya and u

a dynas

ies, unified large

arts of ( outh)

sia under a 0 entral rule. Its 0 a ital 1 atna, earlier 2 no3

n as 1 ataliputra,3

as an

important 0 entre of Indian 0 ivilization. 4 alanda3

as a 0 entre oflearningesta ' lished ' ythe 5 th 0 entury

6 E in Bihar.

Today, Bihar lags ' ehind the other Indian states in human, economic development

terms, Economists and social scientists claim that this is a direct result of the s2 ewed policies of

thecentral government, such as the freight equalisation policy, its apathy towards Bihar,andlack of

Bihari su ' 7 nationalism (resulting in no spokesperson for the state). The current state government has

howevermade significantstrides in improvinggovernance.

The Improved overnancehas ledto an economicrevivalin the statethrough increasedinvestmentin

infrastructure, ' etter health care facilities, greater emphasis on education, and a reduction in crime

and corruption. Indian and glo ' al ' usiness and economic leaders feel that Bihar now has good

opportunity to sustain its growth in economic development, and as such have shown interest in

investing in the state.)

recent 4 ew York Times article talks a ' out vastly improved law and order

situation in the state andtheeconomicgrowth shown in past 5 years.)

notherBB6 articletitled "Where

8 ' ackward' Bihar leads India" talked a ' out how the state has made strides in the areas ofwomen

empowerment,9

udiciaryreforms, taxreforms, andpu ' lic safety. In period of @ A A 3to @ A A B , theinflow

of foreign tourists has seen a near-six foldrise from C D , A A A to 346, A A A .

The Economyof Biharis largelyservice oriented, ' utitalso has a significantagricultural ' ase. The state

also has a smallindustrial sector.

)

s of@ A A B

, agriculture accounts for35%, industryE

% and service

55% of the economy of the state. & anufacturing sector performedvery poorly in the state ' etween

@ A A @ F @ A A 6,with an averagegrowthrate of A .38%comparedto India's G .8%. However, dueto efforts

of 6 hief & inister 4 itish Kumar, Biharhas ' ecomethe second ' estmanufacturingstatein India. Bihar

was thelowest H 1 percapita in India, althoughthere arepockets ofhigherthan the averagepercapita

income. Between D E E E and @ A A 8, H 1 grew ' y5. D % a year, whichwas ' elow the Indian average of

G .3%. & orerecently, Bihar's state H 1 recorded a growth of D 8% ' etween @ A A 62007, and stood at

E42510 6 rores I upees ($21 ' illion nominal H 1 ). This makes Biharthe fastestgrowingma

9

orstate. In

actual terms, Bihar state H 1

is ranked 2nd out of28 states.6

orruption is an import hurdle for the

governmentto overcome accordingto TransparencyInternational India,whichhighlighted Biharas the

Union's most corrupt state in a 2005 report. H espite many recent economic gains, significant

challenges remain to do ' usiness in the state and the government has also stated that com ' ating

corruption is nowthe ' iggestchallenge facingthe administration. In 4 itish Kumar's governancethere


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has been an immediate change in Bihar. Life eP

pectancy in Bihar (61 years) which is almost on par with

the national life eP

pectancy of 62.7 years.

Bihar has significant levels of production

for mango, guava, litchi, pineapple, brinjal, cauliflower, bhindi, and cabbage in India. Despite the

states leading role in food production, investment in irrigation and other agriculture facilities has been

inadequate in the past. Historically, the sugar and vegetable oil industries were flourishing sectors of

Bihar. Until the mid fifties, 25% of India's sugar output was from Bihar. Dalmianagar was a large agro -


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industrial town. There have been attempts to industrialize the state between 1950 and 1980: anoil

refinery in Barauni, a motor scooter plant at Fatuha, and a power plant at Muzaffarpur. However, these

were forced to shut down due to central government policy which neutralized the strategic advantages

of Bihar. Hajipur, near Patna, remains a major industrial town in the state, linked to the capital city

through the Ganges bridge and good road infrastructure.

The state's debt was estimated at 77% of GDP by 2007. The Finance Ministry has given top priority to

create investment opportunities for big industrial houses like Reliance. Further developments have

taken place in the growth of small industries, improvements in IT infrastructure, the new software park

in Patna, and the completion of the eQ

pressway from the Purvanchal border through Bihar to Jharkhand.

In August 2008, a Patna registered company called theSecurity and Intelligence Services (SIS) India

Limited took over the Australian guard and mobile patrol services business of American conglomerate,

United Technologies Corp (UTC). SIS is registered and taQ

ed in Bihar.The capital city, Patna, is one of

the better off cities in India when measured by per capita income.

Education: Historically, Bihar has been a major centre of learning, home to theancient

universities of Nalanda (established in 450 CE)and Vikramshila (established in 783 AD). Unfortunately,

that tradition of learning which had its origin from the time of Buddha or perhaps earlier, was lost during

the medieval period when it is believed that marauding armies of the invaders destroyed these centres

of learning.


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6R

ttractinginvestments in Bihar

Hari S m T upta, 3rd U emester, V eal Estate W anagement, U XR

, Y ew elhi Y ovem a er2010

Bihar saw a revival of its education system during the later part of the British rulewhen they

esta b lished c atna University(esta b lishedin 1917) which is the seventh oldest universityofthe Indian

su b continent. d ome other centres of high learning esta b lished b y the British rule are c atna

e ollege (esta b lished in 1839), Bihar d chool of Engineering(esta b lished in 1900; now known

as f ational Institute of Technology, c atna), c rince of Wales g edical e ollege (esta b lished in 1925;

now c atna g edical e ollege and Hospital), d cience e ollege, c atna (esta b lishedin 1928) amongothers.h

fter independence Bihar lost the pace in terms of esta b lishing a centre ofeducation. g odern Bihar

has a grossly inadequate educational infrastructure creating a huge mismatch b etween demand and

supply. This pro b lem furthergets compounded b ythegrowingaspirations ofthepeople and an increase

in population. The craving for higher education among the general population of Bihar has led to a

massive migration ofthe studentcommunityfrom the state.

Bihar b eing a comparatively less literate state in India, withwomen's literacy b eing only 33.57%, is

striving to clim b as the government has esta b lishedvarious educational institutions.h

t the time of

independence,women's literacyin Biharwas 4.22%. Itis a pleasantsurpriseto findthatin spite ofthe

meagreinvestmenton education in Bihar, speciallycomparedto otherIndian states, the students have

doneverywell. i amed national institutes of learning such asIITs, II g s, f ITs andh

II g d have always

have had a good representation from Bihar which is usually higher than their proportion of the

population. Bihar has a f ational Institute of Technology (f IT) in c atna and an Indian Institute of

Technology(IIT)in c atna. S therinstitutions ofhigherlearningandcovetedpositions in thegovernment

also show a greatersharethan thepercentage oftheirpopulation.h

recentsurvey b y c rathamratedthe

a b sorption oftheirteaching b ythe Biharchildren b etterthan thosein otherstates.

Bihar esta b lished several new education institutes b etween 2006-2008. BIT g esra started its c atna

extension centre in d eptem b er 2006. S n 8h

ugust 2008, IIT of India was inaugurated in c atnawith

students from all over India. f ational Institute of c harmaceutical Education and p esearch (f Ic E p ) is

b eing set up in Haq

ipur. S n 4h

ugust 2008, f ational Institute of i ashion Technology, c atnawas

esta b lished as 9th f I i T of India. e hanakya f ational r aw Universitya law university and e handragupt

Institute of g anagement, a managementinstitutewas esta b lishedin laterhalf of2008.d teps to revive

the ancient f alanda Universityas f alanda International University is b eing taken forwhichcountries

like Japan, Korea and e hina have also taken initiatives. Theh

rya b hattKnowledge Universityis almost

framedto start in c atna this yearto dealwithtechnical & medical studies & research. Theh

. f . d inha

Institute of d ocial d tudies is a premierresearchinstitutein the state. Theplan is to createtheworlds

bestuniversityin theplacewhichintroducedtheconceptof universityto theworld. Biharis pioneerin

the field ofyogawithits internationallyrenownedinstitute Bihar d chool of Yoga in g unger.


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Hari t m u upta, 3rd v emester, w eal Estate x anagement, v ys

, ew elhi ovem er2010

Bihare-Governance ervices & Technologies (BeST) alongwiththeGovernmentof Biharhas initiated a

uniqueprogram to esta lish a centre ofexcellencecalled entre, a finishingschoolto equip students

withthelatestskills andcustomized shortterm trainingprograms atan afforda lecost. Thecentre aims

to attracteveryyouth ofthe state to hone up their technical, professional and soft skills and prepare

them forthepresentindustryrequirement/jo

market.

(http://en.wikipedia.org/wiki/Bihar)

Investments in the state has suffered in past ecause ofvarious reasons. ets look at them in time

phases:

1. ast Trou lesome.2. resent ositive.3. uture t ptimistic.

ast Trou

lesome:

ost Independence Bihar has suffered heavily due to political neglect, anti

industrial policies, etc all other reasons may e summed up as given elow and are discussed under

separateheads.

t ITI

EGLE T: Bihar was an important part of India's struggle for

independence. Gandhiji ecame the mass leader only after the hamparan Satyagraha.

fter

Independence, thecongress cameinto powerand Biharwasjudged as estadministered state atthat

time.

fterthat fortwo decades, the ongress ruledthe statewiththehelp ofpuppetchief ministries

handin glovewiththecentralgovernmentignoringthewelfare ofthepeople ofthe state. Sincethen all

successive governments have een marred y corruption charges, law and order got worsened,

unemploymentincreased, industrial unitswerecloseddown. This ledto large scale migration ofla our

to otherindustrialised states.

EGLE T Tt I UST IES: The statehas a smallindustrial sector.

s of2008, agriculture accounts for

35%, industry9% and service55% oftheeconomyofthe state. anufacturingsectorperformedvery

poorly in the state etween 20022006, with an average growth rate of0.38% compared to India's

7.8%. Historically, the sugarandvegeta le oilindustrieswere flourishingsectors of Bihar. Untilthe mid

fifties, 25% of India's sugar outputwas from Bihar. almianagarwas a large agro - industrial town.

Therehave een attempts to industrializethe state etween 1950 and1980: an oilrefineryin Barauni,

a motorscooterplantat atuha, and a powerplantat uzaffarpur. However, thesewere forcedto shut

down dueto centralgovernmentpolicywhich neutralizedthe strategic advantages of Bihar.


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POOR INFRASTRUCTURE: Thanks to British Raj, An e

cellent rail network e

ists in Bihar, through which

any part in India can be accessed. Good quality ground water is available across Bihar. Problem areas

are rural road connectivity and electricity. Many industrialists are discouraged to invest because of

absence of electricity, which is the basic necessity for all industries. This has worsened due to inaction

of successive state governments.

LOW HUMAN DEVELOPMENT INDICES: Bihar ranks much lower than other states in human development

inde

. With score of 0.449, It ranked 35th in the list of Indian states and union territories for human

development inde

in the year 2005. The literacy rate stands at 52% in which male component is

59.7% and female component at 33.1%. Healthcare facilities were absent or minimal this had led to

high infant mortality rate.

LAW ORDER PROBLEM: with absence of industries, employment and lack of a strong social setup anti

social elements developed. Illegal activities were on the rise, crime became an indispensable part of

caste based politics. All major political parties provided tickets to criminals for contesting polls and

now these criminals decorate the Bihar legislature. Armed with political protection the criminal setup


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Hari m Gupta, 3rdSemester, eal Estate anagement, SPA, ew elhi ovem er2010

further flourished. Businessmen and industrialists had to pay protection money to criminals for the

safety of usinesses and their own life. Killings and kidnappings ecame part of everyday life. This

affected Businesses, traders and usinessmen had no other choice ut to migrate. This j esulted in

closure ofindustrial and usiness esta lishmentswhichwere alreadylimited.

POLARIZATIONOF INDUSTRIES INSOUTH BIHAR (NOW JHARKHAND): South Bihar hadvast resources

coal and minerals due to which itwas home to heavy industries in automo ile, steel, power, railway,

manufacturingetc. utin year2000, Biharwas dividedinto 2 states, Jharkhand and Biharin 2000 on

cultural and linguistic grounds, y the then BJP-led union government as mentioned in the BJP

manifesto. This caused a huge loss to Bihar in terms of revenue generation, industries, natural

resources andeducation.


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10 Attractinginvestments in Bihar

HariOm Gupta, 3rdSemester, Real Estate k anagement, SPA, NewDelhi Novem l er2010

PresentPositive:

Afteryear2005 Biharhas shown tremendous growthin all sectors m eitindustrialgrowth, healthcare,

education, governance, infrastructureetc. this has ledto an image makeover of Bihar, nowpeople are

optimistic a m outBiharwhichwaswritten offtillrecently. Newinvestments arecomingup m yprivate and

pu m lic sector alike. Huge untapped potential is set to unleash. Following section covers all pro m a m le

factorswhichhaveledto theturnaround oftheimage.

n HANGE INLEADERSHIP. NEW GOVERNMENT, SINCE 2004 -05: the m iggestchangeis in leadershipthat

is change in government, Lalu Prasad Yadav let RJD had ruled the state for past 15 years andwas

defeated m y Nitish Kumar led NDA in 2005 elections. The new government took major initiative in

infrastructure. Newroadswere m uilt, existingrepaired and upgraded. Ruralconnectivityimproved. Law

and order pro m lem was dealt with. Major industrial houses were invited for identify potential

investments. Social initiatives were taken to strengthen society and forwomen empowerment. Some

popularinitiatives to strengthen system and societyinclude:

1. 50%reservation forwomen invillagepanchayats.2. Jaankari service forRTI act.3. Free m icycles forgirl students.4. Recruitmentforgovtjo m swhichwerelyingvacantforyears.5. New Industrialpolicy.6. Openingofeducationalinstitutions.

INVEST IN INFRASTRUCTURE: Basic infrastructure like Bijli, Paani, Sadak was looked after and

strengthened, which had suffered heavily due to years of neglect. New Roads are m eing constructed,

Rural electrification is on rise. Two thermal power plants which were non functional have m een

restored and production has restarted this year. Educational Infrastructure Is Strengthened, New

institutes are m eingesta m lished. Oneeach of IIT, IIM andNIFT arecomingupin Patna. Construction of

Nalanda World University, whichwas a premierseat ofeducation in ancientIndia, is m eingdonewith

assistance from orientalcountries like Japan andChina.

INDUSTRIALREFORMS INTRODUCED: HeavyPu m lic andPrivate sectorparticipation in Industrialization.

SAIL, BPCL, NTPCetcinvestingin small and medium sizeproduction units. Biharhas attractedprivate


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HariOm Gupta, 3rdSemester, Real EstateManagement, SPA, NewDelhi Novem o er2010

investmentsworthRs.1032corein thelastfouryears; The BiharState InvestmentPromotion Boardhas

cleared220 investment proposals in the past four years.An International Finance Commission (IFC)

report titled, "DoingBusiness in India 2009," has given Patna a num er-two rank in thecategory of

starting a usiness. (New Delhi is num er one.) "Business start-up is least expensive in Patna,"

accordingto the IFCreport.

Mostoftheinvestments arein the foodprocessing, power, sugar, cementand agriculture sectors.

LAW & ORDER PROBLEM: There is visible improvement in law & order situation following statistics

provethe same:

o Therewere14,664 murders in Biharbetween 2006 -Augu2010, down from 22,040in the fiveyearsfrom 2000.

o Therewere484kidnappings between 2006-10, down from 2,196kidnappings from 2000to 2005.o Roughly53,600criminalswereconvictedbetween Jan 2006-Sept2010;9,280were sentencedto

lifeimprisonmentand132 sentto thegallows.

This has helped in resurrection of businesses and tourism. In period of2003 to 2008, the inflow of

foreign tourists has seen a near-six foldrise from 61,000to 346,000.


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HariOm Gupta, 3rdSemester, Real EstateManagement, SPA, NewDelhi November2010

FutureOptimistic:

Atthe momentthe future of Biharlooks great. Thegrowthis tremendous butthe size orscaleis small

andhence a lotremains to be achieved. To sustain thedevelopmentfollowingsteps shouldbetaken:

CREATE LANDPOOL: landis thebasic necessityforanykind ofdevelopment. Biharhasveryfertileland

hence agricultureis in predominance. Thus creatinglandpoolis thebiggestchallengewhichthegovt. is

facing. All industrial houses look for ready availability of land parcels for investment. Among other

strategic advantages land pool is the biggest advantagewhich other states enjoys over Bihar. Bihar

govt. has only3387.08Acres ofland, such short supplycan severelyaffectBihar's growth story. The

manin reason forsuch a shortavailabilityis thatthelandhereis veryfertile andcostly. Henceland is

not availablecheaply. The stategovt. should make efforts to create a land pool to make land readily

available for future investments. if it actuallywants to competewith other states for driving home

investment projects. Also the land should be made available at reasonable rates and should be

competitivewith otherdeveloped states.

ESTABLISH QUALITY INSTITUTIONS : Creation ofManpowerpoolveryimportantforsustainingthegrowth

and attracting investments. Good quality employable workforce at various levels shall be made

available for ready absorption. For this Quality technical colleges (engineering, pharmacy and

management) shallbeestablishedto attractITES and manufacturingindustries. Traininginstitutes for

creation of skilled and semi skilledlaboris a mustformanufacturingindustry.Alongtheselines central

institute of plastic engineering and technology (CIPET) is set to establish three branches in Purnia,

BhagalpurandChapra.

PRODUCE POWER: Bihargenerates onlyabout5% ofits powerneeds. This is an area wherethe state

govt. needs to focus most as it is the singlelargestdeterrentto organizations consideringinvestment

opportunities. Now since thecoal reserves are transferred to Jharkhand, the stategovt. shall have to

establish non coalbasedpowergeneration facilities like, hydro power, nuclearpowerand solarfarms.

Anotherpotential source ofpowergeneration couldbeGas basedpowerplants. Bio fuels are another

interestingarea. With the availability of large reserve areas, bio-fuelproduction can betaken uptomeettherequirements of Ethanol for blending purposewith petrol and forBio-Diesel.

INFRASTRUCTURE: Strengthen powergrid structureto avoidtrippingofpowerandto ensurecontinuous

availability. Ruralelectrification shouldbetaken up aggressivelyto bridgerural urban divide. This shall

also helpin developmentof small scaleindustries in foodprocessingand animalhusbandry. Biharhas

goodrailwaynetwork, this shouldbe used moreeffectivelyforindustrial mobilization. MGlines shallbe


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convertedinto BG. Linkages to raw materialcenters shallbecreated. Longdelayedprojectofrivertrade

linkages shallbeimplementedimmediately.

ORGANIZE INVESTMENTMEETS: Organizinginvestmentmeets are a goodwayof attractinginvestments

to the state. This has beenveryeffectivelydemonstratedbydeveloped states likeGujarat, Maharashtra

and Karnataka. Recently investment meet organized by the state of Madhya Pradeshwas a huge

success. Theywere ableto attractlargeinvestments in manufacturingandeducation. Biharcan adopt

similar ways of attracting investments by showcasing the growth and opportunities available.

Prefaerablysuch meets shallbe organizedin majorcities to ensuregreaterparticipation.


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References:

www.wikipedia.org

http://www.bihartimes.in/articles/sajjad/lackofvision.html

http://indianeconomy.org/2005/11/22/development-development-what-development/

http://www.hotneus.com/bihar-shows-the-way-sonia-gandhi.html

http://books.google.com

The Times of India.

TheNewyorkTimes.

Where Backward BiharLeads India, BBC.

20101109+real estate+attracting investments in bihar

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