Economy and State Budget of Bihar: Sectors, Articles and Facts

Bihar carries a very large population on a small, crowded and extremely fertile plain, and its economy is shaped by that one fact. Farming supports the bulk of the working population, holdings are among the smallest in the country, and the state has almost no metallic minerals since the Chhotanagpur plateau went to Jharkhand in 2000. For BPSC, BSSC, Bihar Police and SSC papers this chapter has two halves: the structure of the economy, with the crops, the industries and the policies the state has framed, and the budget, which is a constitutional process with its own set of articles. The questions are usually about the articles, the laws, the firsts and the geographical indication tags, so this note keeps to facts that do not change from one year to the next.

The shape of the state economy

The primary sector still employs the largest share of workers. Paddy, wheat and maize are the main cereals, with pulses, oilseeds and sugarcane in the north-western districts; the Kosi and north Bihar districts face floods while the southern districts are drier, so irrigation and drainage decide output as much as rainfall does. Bihar is the largest producer of makhana, the gorgon nut grown in ponds of the Mithila region, and that produce carries the geographical indication tag Mithila Makhana. The Shahi Litchi of Muzaffarpur, the Zardalu mango of Bhagalpur, Katarni rice and Magahi paan are the other tagged products, and Bhagalpuri tussar silk is the state’s best-known handloom. The secondary sector was reduced at a stroke by the Bihar Reorganisation Act, 2000, which created Jharkhand on 15 November 2000 and took with it coal, iron ore, copper, bauxite, mica and the steel and engineering plants. What Bihar kept was food processing, sugar mills in the Champaran and Gopalganj belt, the Barauni refinery and fertiliser plant in Begusarai, cement and brick works, and power stations at Barauni, Kahalgaon and Nabinagar. The tertiary sector, that is trade, transport, construction, banking and public services, now contributes the largest share of the state domestic product, and construction in particular has driven the high growth rates of recent years. Per capita income remains among the lowest in India, population density among the highest, and the share of people living in towns among the lowest, which is why the state’s own revenue is small in relation to its needs.

The state budget and the Constitution

The budget is not a political document alone; it is a set of steps the Constitution lays down. Article 202 requires the Governor to have the annual financial statement of estimated receipts and expenditure laid before the legislature for every financial year, which runs from 1 April to 31 March. Article 203 separates the expenditure charged on the Consolidated Fund, such as the emoluments of the Governor and the judges and the debt charges, which is not put to vote, from the demands for grants, which the Vidhan Sabha votes. Article 204 provides the Appropriation Bill, without which no money may be withdrawn from the Consolidated Fund of the State. Article 205 covers supplementary, additional and excess grants, and Article 206 the vote on account, the vote of credit and the exceptional grant. Article 199 defines a money bill for a state and Article 207 requires the Governor’s recommendation for a financial bill. Article 266 creates the Consolidated Fund and the public account of the state, Article 267(2) the Contingency Fund of the State, and Article 293 governs the state’s borrowing, for which the consent of the Union is needed while any central loan is outstanding. The Comptroller and Auditor General audits the accounts and his report on the state goes to the Governor under Article 151(2), who lays it before the legislature, where the Public Accounts Committee examines it.

Where the money comes from

Two state decisions changed this revenue picture. The Goods and Services Tax, which Bihar was the second state to ratify after Assam, made the State GST the largest single head of its own tax revenue. Total prohibition, in force from 5 April 2016 and backed by the Bihar Prohibition and Excise Act, 2016, removed liquor excise from the budget altogether. The Bihar Fiscal Responsibility and Budget Management Act, 2006 then set the rules of the game: the fiscal deficit is to be kept within three per cent of the gross state domestic product, the revenue deficit eliminated, and a medium-term fiscal policy statement laid with the budget each year. An Economic Survey of the state is tabled in the Assembly shortly before the budget, and Article 243-I and Article 243-Y require a State Finance Commission to recommend how state revenue is shared with panchayats and municipalities.

Policies and road maps

Because agriculture carries the economy, the state works through successive Agriculture Road Maps, the first drawn up in 2008 and each later one setting targets for seeds, irrigation, horticulture, dairy, fisheries and farm credit over five years. The Bihar Industrial Investment Promotion Policy of 2016 offers capital, interest and tax incentives to new units, and the state framed a dedicated Ethanol Production Promotion Policy in 2021, the first such policy by any state in India, to use its maize and molasses in fuel ethanol. Separate policies for textiles and leather, for startups and for logistics followed, and the Jeevika rural livelihoods programme and the Satat Jeevikoparjan Yojana work on household incomes from below. For an examination, remember the pattern rather than the figures: an agrarian base with famous tagged produce, a thin industrial base since 2000, a budget governed by Articles 199 to 207 along with 266, 267 and 293, a fiscal law of 2006, and policy instruments in which the ethanol policy of 2021 was a national first.