Bihar’s Three Bets: How the State Can Finally Close the Gap
By Avnish Anand
Bihar sits at the bottom of nearly every development ranking in India. Per capita income — the single metric that most honestly summarises where a state stands — places it last among all Indian states. What makes this more sobering is that even other states in the BIMARU group, long Bihar’s peers in underdevelopment, have pulled meaningfully ahead. UP’s per capita income is now roughly 1.5 times Bihar’s. The gap is not static — it is widening.
The starting point for any change is economic growth. Better healthcare, education, and infrastructure all require public money — and that money only comes from a growing economy. The problem is that Bihar’s economy has remained stubbornly agrarian. Industrial investment has been negligible. Ease of doing business rankings are poor. The state has missed the booms in IT, financial services, and advanced manufacturing that transformed other states over the past three decades. There is now a real risk of missing the next wave — in manufacturing, green energy, and semiconductors — as other states move decisively and Bihar stays on the sidelines.
An economic revival is not optional. It is the central challenge facing the state.
What Does an Economic Revival Require?
The sequence is straightforward, even if the execution is hard. First, a government with the genuine desire and capability to drive growth. Second, a credible plan grounded in Bihar’s actual strengths. Third, private enterprises willing to invest — and a government willing to make it worth their while.
The current government appears aligned on the first requirement, and its relationship with the Centre could unlock meaningful federal support. What is still needed is the plan.
The right approach is to look at what has worked elsewhere — in Indian states of comparable scale and in developing economies globally — and identify the models that fit Bihar’s specific assets and constraints. Bihar cannot replicate Tamil Nadu’s deep manufacturing base, Karnataka’s tech ecosystem, or Maharashtra’s financial infrastructure. Those took decades and starting conditions Bihar does not have. It needs a different playbook.
The most instructive recent examples are UP and Rajasthan. Both doubled down on their genuine strengths, aligned those strengths to national priorities, improved ease of doing business, and cracked the public-private partnership model for investment. UP leveraged its scale and geography to become India’s expressway and logistics hub. Rajasthan monetised its heritage in tourism and pivoted into renewable energy and auto manufacturing. Neither tried to be something it wasn’t.
Bihar needs to do the same. The good news is that it has three genuine, large-scale opportunities.
Opportunity 1: Turning Agricultural Abundance into Agribusiness Scale
Bihar has a large, highly fertile, well-irrigated landmass, a moderate climate, and access to a river network that connects to ports in Bengal — enabling fast, low-cost transportation. Global demand for high-quality food is rising structurally, and supply constraints are pushing prices up. The raw inputs are there.
Countries like Brazil, the Netherlands, and the United States have demonstrated what is possible when traditional farming gives way to modernised, mechanised agribusiness — high productivity, significant value addition through processing and packaging, and export-oriented scale. Closer to home, Punjab and Haryana built substantial wealth through large-scale mechanised farming.
Bihar has made genuine progress. The Fourth Agriculture Roadmap (2023–28) is targeting productivity improvements. The shift toward horticulture and niche products like Makhana has delivered better economic returns. The emergence of DeHaat — a unicorn agri-tech startup — signals that modernisation is possible.
The structural challenge is real, however: a very large share of Bihar’s farmland is held by small and marginal farmers, which limits the adoption of modern technology and the economics of scale. Addressing this — through models like contract farming, Farmer Producer Organisations (FPOs), or cooperative structures — is the prerequisite for agriculture becoming a true economic engine. It is a hard problem. But if it can be solved, the upside is substantial.
Opportunity 2: Labour-Driven Industrialisation
Bihar has one of the largest concentrations of low-cost labour in the country. Most of this workforce currently migrates to other states and cities to supply essential services and manual labour. Many would remain in Bihar if comparable economic opportunities existed locally. That gap between what workers earn outside Bihar and what it would cost to employ them inside it represents a significant labour arbitrage.
Export-oriented industrialisation using low-cost labour is the most proven growth model in the developing world. The pattern is consistent: initial gains in labour-intensive manufacturing (textiles, footwear, assembly) generate capital, which gets reinvested into infrastructure and skills. As the workforce becomes more capable, industries move up the value chain. Vietnam has done this as a China-plus-one destination. Bangladesh built a garment industry that now generates over $40 billion in annual exports. Mexico became North America’s nearshoring hub.
Bihar can follow this path. The labour cost advantage is real and significant. The challenge is investor confidence — the state’s track record on ease of doing business is a genuine deterrent. The most important thing the government can do is engineer one genuine success story. A single investment that runs smoothly, gets the support it needs, and delivers returns will do more than any policy document.
Odisha has shown what that first success can look like. The Epic Group, a leading global apparel manufacturer, has committed $100 million to the Trimetro Manufacturing Campus in Khordha district. In absolute terms, it is not a large number — but it is exactly right for creating a proof of concept. If it works, larger cheques will follow. Bihar needs its own version of that first bet.
Opportunity 3: Realising Bihar’s Underserved Tourism Potential
Bihar can rival almost any Indian state on the depth and significance of its tourism assets. It is the birthplace of Buddhism and Jainism. It is home to Nalanda — one of the great intellectual centres of the ancient world — and to Vaishali, one of the earliest examples of a republican polity in recorded history. These are not minor heritage sites. They are world-class destinations.
Yet Bihar’s visitor numbers and revenue per visitor remain far below its potential, held back by poor connectivity, inadequate facilities, safety concerns, and a lack of the ancillary infrastructure that turns a tourist visit into an economic event. Global travel is booming. The window to capture a share of that growth is open.
Two models are worth copying directly. Rajasthan has long leveraged its royal heritage to build a world-class tourism economy, pioneering industry status for tourism, attracting private investment through institutional incentives, and deliberately targeting high-value segments like luxury travel and destination weddings to maximise revenue per visitor.
UP’s transformation is more recent and perhaps more instructive for Bihar. It identified the latent potential in places like Ayodhya and Varanasi, invested heavily in the surrounding infrastructure, and has rapidly become the country’s leading domestic tourism destination. The Prayagraj Mahakumbh was a masterclass in using a single event to reshape a state’s tourism brand nationally and internationally. Private investment has followed.
The Bihar playbook is clear. Invest in tourist infrastructure. Fix connectivity, safety, and on-the-ground experience. Simplify ease of doing business for hospitality investment. Market the destinations seriously. If executed well, the combination of domestic spiritual tourism, international Buddhist circuit travellers, and heritage tourism can generate substantial and sustained economic activity.
The Ask
Bihar is not without options. It has fertile land, abundant labour, and cultural assets of genuine global significance. None of these advantages are being fully utilised.
The preconditions for change are similar across all three opportunities: articulate priorities clearly, fix the policies and regulations that deter investment, build the necessary infrastructure, and transform ease of doing business from a liability into a competitive advantage.
Above all, Bihar needs one genuine success story — a private investment that works, a partnership with the government that delivers, a proof point that industrial activity is viable in this state. It does not need to be large. An investment of Rs 500–1,000 crore, executed well and publicly visible, would change the calculus for every investor currently sitting on the sidelines.
The trickle, if it comes, will lead to the flood. But someone has to turn on the tap.
-Avnish Anand is Co Founder and former CEO of Caratlane
