Bihar Economic Survey 2021-22
■ Bihar Economy: An Overview
■ Bihar Economy:
★• The Gross State Domestic Product (GSDP) of Bihar at Constant prices grew by 2.5 percent in 2020-21. This performance was better than the national average, as the Indian economy shrunk by 7.2 percent in 2020-21.
• Comparing the growth performance of Bihar and India in the medium term (2011-12 to 2020-21), it is observed that the average yearly growth rate has been nearly the same in Bihar and India.
★• In 2020-21 the GSDP, of Bihar at Current prices was ₹ 6,18,628 crore and ₹4,19,883 crore at Constant prices with the base year 2011-12.
( To remember: Current prices = FRFBH ; Constant Prices = DSHHC)
• The annual Real growth rate of GSDP in Bihar in the last five years has been 7.5 percent.
• In 2020-21, the Per Capita GSDP at constant (2011-12) prices was ₹34,314, after increasing marginally from ₹ 33,979 in 2019-20. At current prices, the Per Capita GSDP in the state was ₹50,555 in 2020-21, after increasing by 2.5 percent from ₹49,272 in 2019-20.
• The Net State Domestic Product (NSDP) in 2020-21 was ₹5,66,465 crore at Current prices and ₹3,79,549 crore at Constant (2011-12) prices.
• The Per capita Net State Domestic Product (NSDP) in 2020-21 was ₹46292 at Current prices, with a growth of 2.7%. While the Per capita Net State Domestic Product (NSDP) at Constant prices (2011-12) in 2020-21 for Bihar was ₹31,017, after increasing marginally by 1.3%.
• In 2020-21, Bihar, Tamil Nadu and West Bengal were the states to record an increase in Per Capita NSDP, every other state had experienced a decline in this respect. ( But the survey mentions only Bihar and Tamil Nadu; which is incorrect )
★•The Net Per Capita Income (PCI) of Bihar was 35.8% compared to the national average of ₹ 86,659 in 2020-21.
■ Structural Composition of Bihar Economy
Among the three major sectors (Primary, Secondary and Tertiary), the share of each sector in the overall Gross State Value Added (GSVA) in the year 2020-21 are as follows:
• Primary sector: 19.2% (Its contribution has declined steadily from 22.1% in 2016-17)
The share of the Crop sector has decreased from 12.6 percent in 2016-17 to 9.3 percent in 2020-21, a sharp drop of 3.3 percentage points, whereas the share of Livestock increased from 5.7 in 2016-17 to 6.6 in 2020-21.
• Secondary sector: 19.5% (It has recorded a small decline from 20.6% in 2016-17)
In the secondary sector, only EGWUS (Electricity, Gas, Water Supply & Other Utility Services) has achieved an increase from 1.4 percent in 2016-17 to 2.3 percent in 2020-21.
Within the tertiary sector, four sub-sectors have noticeably increased their share in GSVA between 2016-17 and 2020-21 these are Transport, Storage, Communication & Services related to Broadcasting (from 9.8 to 11.0 percent), Road Transport (from 5.0 to 6.1 percent), Financial Services (from 3.8 to 5.9 percent), Public Administration (from 4.6 to 5.1 percent) and Other Services (from 11.2 to 15.2 percent).
These structural changes indicate that the share of rural economy (home of the primary sector) in GSVA is decreasing and that of urban economy (home of secondary and tertiary sectors) is increasing. Unfortunately, this structural change is not accompanied by movement of people from rural and urban areas, causing much pressure on the rural economy.
■ Sectoral growth rate:
In 2020-21, the growth rate for three major sectors was the following:
• Primary sector: 0.0%
Within the Primary sector, the Livestock sector recorded the highest growth of 11.9% while Mining and quarrying declined the most with -76.6%.
• Secondary sector: 2.2%
Within the secondary sectors, EGWUS (Electricity, Gas, Water Supply and Other Utility Services) recorded the highest growth of 5.4%, while the Construction sector recorded the lowest 1.1%.
• Tertiary sector: -0.1%
Within the tertiary sector, Financial services recorded the highest growth of 11.9% while Trade & repair services declined the most -13.2%.
During 2012-13 to 2020-21, for Bihar, the average growth rates for three major sectors have been 2.3 percent (primary), 6.4 percent (secondary) and 6.7 percent (tertiary). For India, the corresponding growth rates have been 3.2 percent (primary), 4.0 percent (secondary) and 6.2 percent (tertiary).
These sectoral growth rates underline at least three important features of the overall growth process of the Bihar economy.
- First, in spite of an endowment of fertile land, the primary sector in Bihar is growing at only 2.3 percent, in comparison to 3.2 percent for the entire Indian economy.
- Secondly, although industrial infrastructure is not very strong in Bihar, the secondary sector is growing here at no less than 6.4 percent, the corresponding figure being much lower, 4.0 percent, for the entire country.
- Finally, one may note that, despite a much lower PCI in Bihar, the tertiary sector is growing here at a faster pace (6.7 percent for Bihar and 6.2 percent for India).
One can also note that year-to-year fluctuations in growth rates are very wide not only for the primary sector but for secondary and tertiary sectors as well, in both Bihar and India.
- Livestock,
- Transport, storage, communication & services related to broadcasting,
- EGWUS (Electricity, Gas, Water Supply and Other Utility Services),
- Railways,
- Road Transport,
- Financial Services,
- Communication and Service related to Broadcasting,
- Public administration
■ Regional Disparity:
Bihar's economy is also characterised by considerable regional (inter-district) disparity. One of the key indicators of this phenomenon is the Per Capita GDDP of various districts. The estimates of Per Capita Gross District Domestic Product (GDDP ) is prepared by the Directorate of Economics and Statistics (DES).
From the ranking of the 38 districts with regard to Per Capita GDDP at Constant prices in 2019-20;
The three most prosperous districts in Bihar are:
- Patna (Highest) (₹ 1.31 lakh)
- Begusarai
- Munger
The three most impoverished districts are:
- Sheohar (Lowest) (₹0.19 lakh)
- Araria
- Sitamarhi
The Per Capita GDDP of Patna is nearly seven times the Per Capita GDDP of Sheohar.
The economic disparity across the districts may also be considered through Consumption of Petroleum Products (Petrol, Diesel and LPG) and Per Capita Small Savings. Based on this, the relatively prosperous and backward districts of Bihar are as follows:
■ Inflation:
The annual Inflation Rate for Consumer Price Index (CPI) base 2012, for the year 2020-21 is as follows:
Rural: 2.8%
Urban: 4.9%
Combined: 3.1%
For the Rural area, the inflation rate was lower in Bihar than in India; but in Urban areas, the inflation rate in Bihar was higher than in India. It must be noted that, for Bihar it's the CPI for Rural areas that is more relevant, as close to 90% of the population lives in rural areas.
■ Few Definitions:
■ Gross State Domestic Product (GSDP): GSDP is defined as a measure, in monetary terms, of the volume of all final goods and services produced within the boundaries of the State during a given period of time.
■ Gross State Value Added (GSVA): Value of output minus cost of inputs is the value added by a production unit. GSVA is the sum of value added for all final goods and services. GSDP is GSVA plus subsidies, minus taxes.
■ Per Capita Income (PCI): PCI or average income measures the average income earned per person in a given area in a specified year. It's calculated by dividing the area's total income by its total population.
■ Constant prices are a way of measuring economic change considering a year as base year as in this case, it is 2011-12. It gives the real Gross State Domestic Product (GSDP) growth.
Constant prices adjust for the effects of inflation, while computing GSDP. Use of constant prices enables measurement of the actual change in output, correcting for the effects of inflation.
■ Current prices are a way of measuring economic change considering price prevailing in the same year. It gives the nominal Gross State Domestic Product (GSDP) growth.
■ Factor cost: It is the total cost of all the factors of production (Land, Labour, Capital and Entrepreneur) consumed or used in producing a good or service.
■ Basic Price: It’s the amount receivable by the producer from the purchaser for a unit of a good or service produced as output minus any tax payable, and plus any subsidy receivable, by the producer as a consequence of its production or sale. It excludes any transport charges invoiced separately by the producer.
Basic prices exclude any taxes on products the producer receives from the purchaser and passes on to government but include any subsidies the producer receives from government and uses to lower the prices charged to purchasers.
Factor Cost
+ Production taxes
– Production subsidy
↓
= Basic prices
+ Taxes on products excluding invoiced VAT
- Subsidies on products
↓
= Producers’ prices
+ VAT not deductible by the purchaser
+Separately invoiced transport charges
+Wholesalers’ and retailers’ margins
↓
=Purchasers’ prices (or the price at which that product is being sold in the Market)
■ Production taxes or subsidies: These are paid or received with relation to production and are independent of the volume of actual production.
Examples of production taxes: Stamp duty, Registration Fee, Land Revenues etc.
Examples of production subsidies: Interest subsidies, Farm subsidies etc.
■ Product taxes or subsidies: These are paid or received on per unit product hence it is dependent on volume of production.
Examples of Product taxes: Indirect taxes like Sales Tax, GST etc
It is designed to measure the changes over time in general level of retail prices of selected goods and services (basket of commodities) that households purchase for the purpose of consumption.
CPI measures price changes by comparing, through time, the cost of a fixed basket of commodities. The basket is based on the expenditures of a target population in a certain reference period. Since the basket contains commodities of unchanging or equivalent quantity and quality, the index reflects only pure price.
Uses:
- as a macroeconomic indicator of inflation.
- as a tool by Government and Central Bank for targeting inflation and monitoring price stability.
- as deflators in the National Accounts.
Given the many uses of CPIs, it is unlikely that one index can perform equally satisfactory in all applications. Therefore, there is a practice of compiling several CPI variants for specific purpose. These are:
- CPI for Industrial Workers (IW) - Base Year 2016;
- CPI for Agricultural Labourers (AL)- Base Year 1986-87
- CPI for Rural Labourers (RL) - Base Year 1986-87;
- CPI (Rural/Urban/combined) - Base Year 2012.
N.B.: The first three are compiled and released by the Labour Bureau in the Ministry of Labour, while the fourth one is released by the National Statistical Office (NSO) in the MoSPI.
The all-India linked CPI for Urban Non-Manual Employees (UNME) has been discontinued w.e.f Jan 2011.
For IIP definition, importance etc. click here.
■ Wholesale Price Index (WPI):
It’s a measure to monitor the dynamic movement of prices at the wholesale level.
It comprises all possible transactions at first point of bulk sale in the domestic market.
WPI tracks prices at the factory gate level, but it's only for Goods and does not include Services.
It is compiled and released on monthly basis by the Office of Economic Adviser, Department of Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce & Industry.
The base year of All-India WPI is 2011-12 and it uses 697 items in the basket.
Uses:
- Track the supply and demand dynamics in industry, manufacturing and construction.
- Used as a deflator of various nominal macroeconomic variables including GDP.
- Serve as an important determinant, in formulation of trade, fiscal and other economic policies by the Government.
- Also used for the purpose of indexation/escalation clauses in the supply of raw materials, machinery and construction work.
Components of WPI:
- Primary articles (Weight 22.62%).
- Fuel & Power (Weight 13.15%)
- Manufactured Goods (Weight 64.23%)
- WPI Food Index (Weight 24.38%)
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■ References:
• Bihar Economic Survey
• Economic Survey of India
• Ministry of Statistics & Programme Implementation
• Directorate of Economics and Statistics, Government of Bihar
■ Extra Links:
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