Maharashtra and Bihar Economic Analysis

Maharashtra and Bihar: A Tale of Two States

• Maharashtra has the highest Net State Domestic Product (NSDP) in India.
• Maharashtra contributes 13% to India's national GDP.
• If Maharashtra were a country, it would be the 40th largest economy in the world.
• Bihar's contribution to India's GDP is less than 3%.
• Bihar has the lowest per capita income in India and is even lower than Somalia.
• 60 years ago, Bihar contributed 8% to India's GDP, but that has decreased to 3%
• Mumbai is the financial capital of India, contributing 20% to Maharashtra's GDP.
• Maharashtra was one of the first states to develop agricultural cooperative societies.
• The government provided bank loans for cooperatives, leading to the establishment of mills, dairies, and processing plants.
• In the 1950s, farmers in Western Maharashtra established sugar factories, making Maharashtra a major contributor to sugar production in India.
• The Maharashtra Industrial Development Corporation (MIDC) was established in 1962.
• MIDC enabled companies to start operations without infrastructure hassles.
• Maharashtra became a leading industrial state after the liberalization of the Indian economy in 1991.
• Pune is known as the "Detroit of the East" because of its automobile industry.
• Mumbai, Pune, Nashik, and Aurangabad are home to major pharmaceutical companies, including the Serum Institute of India.
• In 2017, Maharashtra was the second-ranked state with the most industries but was surpassed by Gujarat.
• Maharashtra's contribution to the nation's GDP has consistently been around 13% over the past 60 years.
• Bihar is described as a "failed state" burdened with debt.
• Bihar's poor reputation leads to discrimination against its residents.
• Bihar's primary economic challenge is the lack of industrial development, with industry contributing only 18% to its economy.
• Only five states and union territories have a lower industrial contribution: Andaman and Nicobar, Manipur, Nagaland, Delhi, and Chandigarh.
• Maharashtra focused on industry, while factories in Bihar were closing down.
• Before the 1950s, Bihar had a significant sugar production sector, with over half of India's sugar factories located there.
• 55 years ago, there were 29 sugar factories in Bihar, now there are 9.
• Factories shut down due to government seizure, scams, and extortion.
• Madhaura, once a hub for jobs and investment, now features a graveyard of factories.
• Similar declines can be observed in Muzaffarpur, Nawada, and Kishanganj.
• The seeds of Bihar's economic struggles were sown in the 18th century with the implementation of the Zamindari system by the British.
• The Freight Equalization Policy in 1952 further hindered Bihar's economy.
• From 1951 to 2012, Bihar and Uttar Pradesh received the least allocation for development on a per capita basis.
• During the same period, Gujarat, Maharashtra, and Haryana received double the per capita allocation compared to Bihar and Uttar Pradesh.
• 100 years ago, statistics reveal a disparity in policing, with fewer police officers per capita in Bihar compared to Bombay Presidency.
• Caste politics emerged in Bihar over the last 30-40 years, linking poverty to caste.
• Before the 1980s, there were no major caste-based political leaders in Bihar.
• Lalu Prasad Yadav and Nitish Kumar sought to challenge the upper-caste-dominated politics.
• Lalu Prasad Yadav's slogan, "We don't want development, we want respect," reflected prioritizing social development over economic development.
• Bihar's caste-based politics prioritized control of police stations by certain castes, neglecting broader governance issues.
• Nitish Kumar aimed to bring change, introducing a new industrial policy in 2006 with promises of subsidies to businesses.
• Companies did not receive the promised subsidies, leading to legal disputes.
• A new industrial policy in 2015 required companies to set up factories before receiving subsidies, which discouraged investment in Bihar.
• The central government provides significant financial assistance to Bihar.
• Bihar's economy relies too heavily on agriculture, which employs 60% of the population but contributes only 20-25% to its GDP.
• Bihar needs to focus on other sectors, improve schools, and invest in infrastructure.
• Lack of trust in the Bihar government due to poor accountability deters entrepreneurs from investing in the state.
• Overcoming the trust deficit requires the government to deliver results on its policies.

Gujarat and West Bengal: Divergent Paths

• 60 years ago, Gujarat was part of the Bombay Presidency and not among the top five states economically.
• West Bengal was the third-largest economy in the country, twice the size of Gujarat's economy.
• Gujarat focused on industries after independence, establishing large industries like power, cement, and fertilizers.
• The Gujarat Industrial Development Corporation (GIDC) was established in 1962, leading to the creation of major industrial hubs.
• Gujarat also introduced a new industrial policy, Gujarat 2018, and beyond, offering incentives to promote industrial growth.
• Gujarat focused on public-private partnerships for infrastructure, establishing the Gujarat Maritime Board to encourage private investment in ports.
• The Gujarat Infrastructure Development Act enabled companies to invest in roads, power, and industrial infrastructure.
• Narendra Modi's tenure as Chief Minister accelerated the private sector-friendly environment.
• Gujarat is now one of the most attractive states for investments in chemicals and textile manufacturing.
• West Bengal had a major industrial sector at the time of Independence.
• In 2008, Ratan Tata moved Tata Motors from Bengal to Gujarat due to protests against setting up a car manufacturing plant in Singur, West Bengal.
• In 2006, Tata Motors decided to build a car manufacturing plant in Singur in the Hooghly district.
• Buddhadeb Bhattacharjee, the chief minister of West Bengal, aimed to make Bengal an industrial hub.
• Farmers protested against the compensation offered for their land, leading to Tata's departure.
• The Bengal government lost a ₹1000 crore project and had to pay Tata ₹250 crore as compensation.
• At the time of independence, Bombay, Calcutta, and Madras were the industrial hubs of the country.
• In 1955, Bengal accounted for 24% of the country's industrial production and 27% of industrial jobs.
• 50 years later, these numbers dropped to 4% and 5%, respectively.
• The partition of India severely impacted the jute industry in Bengal, with major mills closing down.
• The wars of 1965 and 1971 led to reduced investment in railways, affecting Bengal's economy.
• Bengal's economy depended on engineering industries, which required railway investment.
• The dominance of the Communist Party in Bengal's politics led to the closure of industries due to strikes and lockouts.
• The Bengal government favored trade unions and industrial labor, discouraging companies from investing.
• The Left Front government, led by Jyoti Basu, ruled Bengal for 34 years, prioritizing small industries over large corporations.
• Small industries could provide jobs but lacked the technology to produce high-quality products.
• After the liberalization of 1991, the Left government sought investment, but Bengal's infrastructure was poor.
• Acquiring land for industry was difficult, as seen in the Tata case.
• Mamata Banerjee's tenure as Chief Minister did not resolve these issues.
• The manufacturing sector in Bengal remains unorganized and lags behind states like Maharashtra, Gujarat, Tamil Nadu, and Andhra Pradesh.
• To fix its economy, Bengal needs to invest in infrastructure, drawing inspiration from industrial corridors like Gujarat's Sanand and Andhra Pradesh's Sri City.
• Such decisions could change Bengal's image, which is currently not considered industrial-friendly.

Haryana vs. Punjab: Two States, Different Stories

• After independence, Haryana did not exist as a separate state.
• People in the Haryana region felt that the Hindi-speaking areas were not receiving enough development.
• On November 1, 1966, Punjab was divided into three states: Punjab, Haryana, and Himachal Pradesh.
• Haryana was initially considered "Punjab's poor brother."
• In 2010, Haryana surpassed Punjab economically.
• A year before Haryana was formed, India experienced two famines, leading to a 20% drop in grain production.
• India's Green Revolution started with introducing high-yielding varieties of grains, requiring a lot of water.
• These seeds were introduced in states with good irrigation systems, such as Punjab and Haryana, which were turning points for the agriculture sector in Haryana.
• Haryana became a major producer of grain for the entire country.
• A similar revolution occurred in the milk industry with the launch of Operation Flood in the 1970s.
• Cooperatives were established with dairy farmers, providing them with modern resources and training.
• Haryana was the first state to adopt this initiative.
• Haryana also focused on industry and services, unlike Punjab.
• Businesses initially came to Haryana due to Maruti-Suzuki.
• Haryana used the tax revenue from these businesses to develop its infrastructure.
• Gurugram is an IT powerhouse with over 500 IT companies in 2015.
• Punjab does not want to accept its crisis
• Punjab is in a financial crisis, with debt exceeding its annual revenue by four times.
• The financial crisis has not only hurt state finances but also public expectations.
• The Aam Aadmi Party government's first promise was to introduce the Volvo bus to the airport, effectively encouraging people to leave the state.
• The crisis has been developing over several years.
• Punjab's report indicates that Punjab's debt indicators are potentially the worst in the country.
• With the Green Revolution, Punjab has very little available ground water.
• Farmers need to pay high electric bills to keep up with water requirements
• Farmers unions started asking for government assistance, which introduced the start of a new crisis
• Punjab has a political crisis for water needs
• The Punjab government spends so much money on electricity, that there is little available elsewhere
• Business owners do not want to come to Punjab
• Punjab needs to take tough decisions, like incentivizing farmers to grow other crops instead of relying on growing rice and wheat

Uttar Pradesh vs. Tamil Nadu: Education and Development

• K. Kamaraj, born in Tamil Nadu, became Chief Minister.
• In 1954, when Kamaraj became Chief Minister, Tamil Nadu's literacy rate was only 19%.
• About 10 years later, the literacy rate increased to 36%.
• K. Kamaraj introduced midday meals in schools, which increased enrollment of poor families.
• Students in Tamil Nadu perform better in reading and math compared to other states.
• The Tamil Nadu government has invested in hospitals and primary health centers.
• Tamil Nadu is also the location of an automobile hub, with Ford and Hyundai setting up plants there.
• Half of female factory workers are in Tamil Nadu
• In 2000, the Madras High Court ruled that women could work night shifts in factories, leading to a large female workforce in manufacturing.
• Women are significantly contributing to today's manufacturing stories in the country.
• In Uttar Pradesh, politics was focused on caste, not health or education
• In 1950, the literacy rate was 12%
• Unable to fix education, 90% of the budget was spent on teachers salaries
• Teachers were ineffective in the classroom
• Less money was spent in health and care per person in Uttar Pradesh.
• Today the health index in Tamil Nadu is 2nd rank
• Things are starting to change slightly
• Reading skills have doubled, and also math skills
• In 2017, the government made an announcement to help the schools become stronger through Operation Kaya Kalp

Success Stories: Sikkim and Odisha

• Sikkim has the highest per capita income in India.

• 40 years ago, Sikkim's per capita income was less than the national average, but over the last 20 years, it has surpassed all others

• Sikkim has 100% Organic Farms without fertilizer or pesticides

• Increased agricultural productivity

• Food processing industries where Sikkim was selling finished products

• Increased tourism, labeled themselves as an "organic paradise".

• Gave subsidies to pharma products, attracted large corporates

• Odisha has a success story and adopted what the other states adopted

• Odisha used its resources and made plans for others

• Odisha adopted a Zero Casualty approach for saving people from natural disaster

• This approach has given businesses confidence to work with the government