Ailing Bihar - Focus of International Media

Reuters gives the situation in BIHAR a coverage. Have a look on the Article.

India struggles to tame its heart of darkness

PATNA, India (Reuters) - Young girls and their mothers huddle under shawls in the central reservation of one of the city's main streets, picking through trash for grimy metal scraps that might earn them 20 rupees (half a dollar) a day.

Buses and auto rickshaws belt out black fumes beside them on the congested, muddy street, dogs pick through huge piles of garbage by the roadside, men urinate at their side.

This is Patna, the capital city of Bihar, India's poorest and one of its slowest growing states economically. On a rainy day, Patna can seem like some post-apocalyptic nightmare, with poverty, misery and ugliness around every corner.

So far, India has failed to trickle the benefits of its economic boom down to Bihar, a failure which could have serious political and economic repercussions. People here feel the rest of the country is simply not paying attention.

"Everyone has discarded Bihar, they think of it as a nightmare," said businessman Rajesh Singh.

"They only talk about the good things in India, they don't even look at Bihar. But this is 10 percent of India's population, you can't just chuck it away."

Bihar is home to around 90 million people and has one-seventh of India's poor, but accounts for just 1.6 percent of its gross domestic product. By any measure, literacy, infant mortality, malnourishment, it sits at or near the bottom in South Asia.

The World Bank put the challenge in its most tactful terms when lending Bihar's government $225 million (115 million pounds) last December.

"If large differences in growth rates between rich and poor states persist, these could eventually translate into vast differences in material well-being," it said. "Bihar lies at the heart of India's inclusive growth agenda."

Shaibal Gupta of the Asian Development Research Institute (ADRI) in Patna divides India into the sunrise states, those which are integrating into the global economy, and the sunset states, like Bihar and its larger neighbor Uttar Pradesh, which are rapidly being left behind.

Bihar is metaphorically and sometimes literally India's heart of darkness -- there is so little power in Bihar, night-time satellite images show it as a massive black hole.

Crumbling roads, corrupt or inept governance and a reputation for unbridled lawlessness only add to the gloom.

"India will face problems if Bihar doesn't develop," Gupta said.

A SMALL STEP IN THE RIGHT DIRECTION

Bihar's economy failed to register any growth in the first half of the 1990s, and has grown at just under four percent since, less than half the current national growth rate and barely one percent in per capita terms.

Chief Minister Nitish Kumar took over two years ago promising a new era, and his reforms won some praise from the World Bank.

Criminal convictions were almost unheard of in the reign of Laloo Prasad Yadav and his wife Rabri Devi. A new system of speedy trials helped secure nearly 10,000 convictions in 2007.

Kidnapping for ransom, Bihar's biggest industry in Laloo's days, has fallen four-fold. In the past two years, more than 200 cases have been registered against corrupt government officials.

But private investment remains tiny, and a new era of fiscal responsibility in New Delhi means the kind of public investment required to transform Bihar is almost out of the question.

"Japan and Korea developed as industrial countries with the full support of the state," said the ADRI's Gupta. "In Bihar the state is very weak."

MIGRATION SPELLS TROUBLE

Rural migrants squat on the grass verges outside government ministers' houses in Patna, under plastic sheets, encampments that they say are "too horrible" when it rains.

Thousands of homes were damaged in last year's floods, and villagers tired of waiting for work under a new government rural employment guarantee scheme have left.

Bihar has a long history of migration dating back to the 19th century, when large numbers of people left as indentured labor to overseas British colonies or to find work on plantations in neighboring Assam or in factories in West Bengal.

Today, as much of India booms, laborers from Bihar are migrating all over the country.

Biharis are often looked down upon in Delhi, and blamed for rising crime -- the city's chief minister Sheila Dikshit publicly wonders how to turn back the tide.

In Mumbai, tensions between locals and migrants boiled over this month when a small right-wing Hindu-nationalist party stoked the flames with a campaign against "outsiders".

Taxi drivers, most of whom hail from Bihar or Uttar Pradesh were beaten up, a few vehicles damaged, and a bottle thrown over the wall of the house of Amitabh Bachchan, India's biggest film star, himself from Uttar Pradesh.

But the problem of Bihar -- and by extension the problem of India's widening inequality -- has even broader implications.

The Hindu-nationalist Bharatiya Janata Party was kicked out of office in 2004 in a shock general election result, seen partly as an indictment of its failure to reach the rural poor.

The Congress-led coalition which has succeeded has made little headway with the type of economic reforms its prime minister and finance minister are associated with.

Put simply, the political consensus for further economic reforms which India may need to sustain its boom, will simply not be there if those reforms do not benefit the poor.

Some companies are already suffering shortages of skilled labor that are pushing up wage costs. If India leaves millions of rural poor unskilled and illiterate, its economic upturn could find itself built on a shaky foundation, economists warn.

"If you think Bihar is not your problem, it will be your problem very soon," said businessman Singh.

In the cities, the influx spells tension, and sometimes violence. Today nearly 11 percent of New Delhi's population hails from Bihar, another 40 percent from Uttar Pradesh.

http://www.reuters.com/article/inDepthNews/idUSSP15266820080220?pageNumber=4&virtualBrandChannel=10010

The second Article is by Herald Tribune :The Indian economic boom bypasses Bihar

HAJIPUR, India: The white envelope filled with 10 notes worth 500 rupees each was sent to the electricity board official as a "good-will gesture."

Soon it came back, with a message from a subordinate. The official was not going to be bribed - at least not at that price, the equivalent of about $12.50.

"He refused to accept it, and now he is cooking up a problem," the factory manager said as the envelope was handed back, adding that he would have to pay him "20,000 in the evening."

The manager, who requested anonymity so he could speak freely without fear of government retribution, had wanted a second power line for an extension to his small factory in the Hajipur Industrial Area, in the eastern Indian state of Bihar. It was a simple request, but the official had threatened to put endless bureaucratic hurdles in front of him unless he was paid.

The routine way the bribe was offered, and the way the episode unfolded, offered a tiny insight into the problems of doing business in a state that has become a symbol of poverty, lawlessness and corruption.

The Indian economic boom has not reached Bihar, a state of 90 million people almost completely disconnected from the global economy.

It is the poorest state in India and one of its slowest-growing, with "exceptionally low" levels of private investment, according to the World Bank. There is no sign of any foreign investment.

Nitish Kumar became chief minister of Bihar two years ago, promising to turn things around. Since then he has been wooing rich Indians at home and abroad, trying to attract investments.

The World Bank said in December that he was moving in the right direction. His government had initiated comprehensive reforms, it said, improved the investment climate, stepped up public investment and improved the delivery of health and education services.

The World Bank lent Kumar's government $225 million, but private investors have not been so enthusiastic. India's biggest industrialists have been visiting the state capital, Patna, but have kept their money firmly in their pockets.

The sad fact of Bihar is that it offers few or no raw materials, intermittent power, terrible roads, a reputation as a place where businessmen are kidnapped and some of the least business-friendly bureaucrats in the capitalist world.

"People say things have changed, but we have yet to see that change," the factory manager said. "The red tape is the same, the bureaucracy is the same."

Law and order may be improving, but Kumar's reforms are still only scratching the surface of the problem, said Shaibal Gupta of the Asian Development Research Institute in Patna.

"Why would anyone invest in Bihar?" he asked. "In a place like Bihar, you have to build everything from scratch. Where is the rate of return?"

Hajipur is Bihar's premier industrial park. Its factories get power when the rest of the state is in darkness, but only because bribes are paid. There is no drainage - factories just dump their waste in nearby ditches or ponds.

Squatters camp on the grass verges beside the factory walls, cows munch grass and wander across the pot-holed roads. Armed guards staff security gates to ward off kidnapers.

"This so-called industrial area is really in a pathetic condition," the manager said. "Bihar really is a hopeless place to do business."

On the wall behind him he displays the nearly two dozen licenses he needs to keep his business open, standards for health, safety, labor laws and pollution. Each costs a few hundred rupees a year to renew, plus a 10,000-rupee bribe.

"Twenty-three departments have the power to shut down this unit," he said. "They create problems, make money, go back. So much for a liberal economy."

Rajesh Singh received a master's degree in business administration at Bombay University before returning to Bihar to set up a tiny factory on his family's farmland to manufacture jams, juices, sauces, pickles and canned fruits.

"I realized things in Bihar were not very good, so I decided to start an agri-venture," he said. "It was a mix of good potential and good intentions."

But Singh has found the odds stacked up heavily against A-1 Farm Solutions. His friends and even his father tried to talk him out of the idea, before his bank manager took over.

"The banker was telling me I was a fool to leave my job and start a business here," he said. "That is the attitude to coming back, to dissuade you."

It took Singh five years to get a bank loan of just 500,000 rupees, or $13,000. To get it, he needed to offer three million rupees as security and have 250,000 parked in fixed-term deposits.

Today, his loan has been extended to four million rupees - still, in his terms, "a meager amount," equivalent to just 10 days of raw material and labor costs.

"I had a lot of orders from the U.K., from Sainsbury's for litchis but I couldn't complete them because bankers are not ready to back us," he said. "I am educated and I have assets. If I can't get finance, how can ordinary Biharis get finance?"

Singh has also found himself sucked into the divisive caste-based politics and society of Bihar.

His high-caste parents feared that they would be made outcastes because he employs Dalits, or "untouchables," in a food-processing factory, since upper-caste Indians are barred from eating anything touched by a Dalit hand.

Then a lower-caste boy was killed on the farm when he fell under a tractor trailer. A local politician tried to exploit the issue to get Dalit votes, filing a police complaint in which he claimed the boy had been shot in the head.

Although everyone knew this was untrue, the accident cost him a year, Singh said. "No one was willing to work for us, we couldn't get financing," he said, adding that the police constantly demanded money to drop the charges.

As he traveled down the potholed road to his factory, a three-hour trip of 35 kilometers, or 22 miles, Singh looked around at the congestion, the poverty, the crumbling infrastructure.

"Look at this," he said. "Someone has to come back. But at times you feel like asking, 'What am I doing with my life?' "