igc bihar research presentations - a discussionon bihar™s investment climate (d™souza) two main...

IGC Bihar Research Presentations - A Discussion

Areendam Chanda

Louisiana State University

December 2010

Chanda (Louisiana State University) Bihar Discussion 12/18 1 / 11

Accelerated Growth in Bihar

Growth is concentrated in agriculture and allied activities,construction, communication, and, trade, hotel and restaurants.

Dominating hypotheses- agriculture or construction led growth

Objective - Think about issues of �openness�

Across States and within states (districts, villages)


Migration

Hsieh- Could rising growth rates elsewhere have led to out-migrationand increased MPL?

What do we know about migration across Indian States? Look atNSS data.

What do we know about time trends?


AR MN ML N

L GJ

AS MZ

MH

TR TN JK AP MP KAKL PB W

BD

N CG IND

RJ

SKG

A UP

JHO

RH

RPY H

PLD

BRAN

UK

DD

DL

CH

0.1

.2.3

.4M

igra

tion

Rat

es

Out Migration Rates to other States for 2007-08


Andhra

Assam

Bihar

Gujarat

Haryana

Karnataka

Kerala

Madhya

Maharashtra

Orissa

Punjab

Rajas than

T amil

U.P.

West

.02

.04

.06

.08

.1.1

220

07-0

8

.01 .02 .03 .04 .051999-00

1999-00 v s 2007-08Changes in Migration Rates


Remittances

Could they have �nanced a consumption/investment boom?

DL C

GG

J MH

MP

AR KA CH

SK AP HR

AN ML AS W

B TR MZ

PY IND TN O

R JH PB MN

GA UP UK H

P RJ JK

BRKL

0.0

2.0

4.0

6.0

8R

emitt

ance

s/G

DP

Remittances as a share of GDP in 2007-08


Agricultural Productivity, Structural Change and thenon-farm rural sector

Macroeconomic intersectoral models tend to ignore the non-farmsector.

Estimate is that 2/3 of non farm employment is rural.

Rising Agricultural Productivity

Can lead to a boom in non-tradeables in small open economies (Foster&Rosenzweig)

In line with their evidence that manufacturing growth was highest inareas with low ag growth.


Agricultural Productivity, Structural Change and thenon-farm rural sector

Macroeconomic intersectoral models tend to ignore the non-farmsector.

Estimate is that 2/3 of non farm employment is rural.

Rising Agricultural Productivity

Can lead to a boom in non-tradeables in small open economies (Foster&Rosenzweig)In line with their evidence that manufacturing growth was highest inareas with low ag growth.


On Bihar�s Investment Climate (D�Souza)

Two main sources: Investment Climate Survey (de facto) and DoingBusiness (de jure)

ICS is more endogenous but also has more coverage. Despite beingendogenous, states can be quite di¤erent in terms of rankingsdepending upon the measure.Highlights speci�c policy areas that can be the focus of attention(more later)

What do we learn (or not)?




ICS is more endogenous but also has more coverage. Despite beingendogenous, states can be quite di¤erent in terms of rankingsdepending upon the measure.

Highlights speci�c policy areas that can be the focus of attention(more later)





ICS is more endogenous but also has more coverage. Despite beingendogenous, states can be quite di¤erent in terms of rankingsdepending upon the measure.Highlights speci�c policy areas that can be the focus of attention(more later)



Investment Climate Survey

Bihar does badly in terms of crime and infrastructure

Does not do so badly in terms of corruption and taxation (eg Gujaratand Raj respectively)

Performs less well in skills supply (?) (Neither does Gujarat?)

Performs less well in Finance (??)Sketpicism: What is the range of values? Are the margins worthmaking distinctions for?


Doing Business

More useful, addresses the earlier shortcoming if ICS

Interesting results

a) In terms of starting a business Bihar does quite �well� (low costrelative to pcy)b) However getting a construction permit or registering property istime consuming.c) Closing a business is where Bihar takes a hit (Gujarat 6 yrs, Bihar 9)

Gujarat�s NRI- �entrepreneurship capital�. What would be Bihar�sequivalent?


Doing Business


Interesting results

a) In terms of starting a business Bihar does quite �well� (low costrelative to pcy)

b) However getting a construction permit or registering property istime consuming.c) Closing a business is where Bihar takes a hit (Gujarat 6 yrs, Bihar 9)



Doing Business


Interesting results

a) In terms of starting a business Bihar does quite �well� (low costrelative to pcy)b) However getting a construction permit or registering property istime consuming.

c) Closing a business is where Bihar takes a hit (Gujarat 6 yrs, Bihar 9)



Doing Business


Interesting results

a) In terms of starting a business Bihar does quite �well� (low costrelative to pcy)b) However getting a construction permit or registering property istime consuming.c) Closing a business is where Bihar takes a hit (Gujarat 6 yrs, Bihar 9)



Bihar�s tax revenue�s

Tax Revenues have gone from 4.5 to 5.7 as share of GDP with lattergrowing at 11% per year.

Average state government revenues in the US as share of GDP -5%

Challenge is to bring in unregistered dealers?

Is the share of Patna a problem? (non-agriculture, urban)


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