What Bihar caste census tells about India growth story

Bihar's caste census report, tabled in the assembly on November 10, 2023, makes a shocking revelation on the financial health of its households. The monthly income of 34.1% is ₹6,000 or less (₹200 per day or less) and that of 29.6% is ₹6,000 to ₹10,000 (₹200 to ₹333 per day or less). Taken together, 63.7% households earn ₹333 per day or less. Given that Bihar's statutory minimum wages for unskilled labour is ₹378 per day (₹11,340 per month) and for agricultural labour ₹376 per day (₹11,280 per month) – from October 1, 2023 – this means 63.7% of Bihar's population live in acute poverty.

But make no mistake, this reflects the very skewed nature of India's high growth story in the post-reforms and post-liberalised era – when high growth produced even higher inequality both inter- and intra-state. Bihar has always been a laggard but the gap from the national growth rate significantly widened in the 1990s, compared to the previous decade – that is, after the reforms and liberalised era kicked in and much before the state was divided (in November 2000) with the mineral and industry rich southern part becoming a new state, Jharkhand.  

The growth trend reversed under Chief Minister Nitish Kumar (holding office since 2005); it became one of the fastest-growing states which continues even now. A CAG report of July 2023 says, during the five fiscals of FY18-FY22, Bihar's growth (at constant prices) was "higher than the all-India average." Yet, in terms of per capita income, the state remains where it always was – at the bottom.

In fact, the same is the case with all the four states collectively known as 'BIMARU' ('sick’) – a term coined way back in 1985 by economist Ashish Bose "to pinpoint India's demographic malady" in the Hindi heartland states of Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh. Not just these four, three states carved out from them in November 2000 – Jharkhand, Chhattisgarh and Uttarakhand – also remain among the most backward and poor.

In absence of state-wise data on household finances, it is not possible to provide a comparative picture. The Centre has not only not conducted (i) household consumption (proxy for household income) survey (MPCE) it has (ii) postponed the 2021 Census indefinitely (while conducting the NFHS-5, PLFS and other data during the same period) and has shown remarkable reluctance to conduct (iii) caste census, like Bihar, or even release the caste data of the Socio Economic and Caste Census (SECC) of 2011. The last one, which is at the heart of the Bihar caste census, is relevant only for counting OBCs (SCs and STs are counted in the decadal Census) is particularly baffling since the Centre granted 27% job reservation for OBCs in 1990; later the OBC quota was extended to educational institutions and local government bodies.

Nonetheless, the Bihar survey should serve as a wake-up call for policymakers and planners because it mimics India's growth story also and needs urgent course correction.

From a poor Third World country, India emerged as the fastest growing major economy in 2015, the fifth largest economy in 2022 (Q1 of FY23) and is set to be the third largest by 2029 – after the US and China. And yet, Indians are one of the poorest in the world and most unequal. With per capita income of $2,388.6 in 2022 (in current USD), India is way below the world average of $12,647.5; in terms of purchasing power parity (PPP, current international dollar) considered a better yardstick, India's per capita income of $8,379 is also far below the world average of $20,645.5.

Not just the per capita income data, enough evidence exists to show the Indian growth story gone awry – without sparking national debate, parliamentary debate or scrutiny or concerns in the government circles – which needs to be flagged for obvious reasons.

High growth gone awry

First, on November 6, 2023, the Prime Minister declared extending a "free" ration to 67% of Indian households (50% in urban and 75% in rural areas) for another five years. The "free" ration scheme began in April 2020 – more than three-and-half years ago – over and above the “subsidised” ration. It would be naïve to dismiss the Prime Minister’s announcement as electoral "revdi" (freebie), given the ongoing elections in five states and the looming general election of 2024. The Prime Minister has been publicly denouncing such freebies year after year, beginning with 2019. Besides, he would be acutely aware how the extension negates his claims of making India the fastest growing major economy, the fifth largest economy and promise to make it the third largest if voted to power in 2024.

It is also highly unlikely that the Prime Minister would be unaware of the harsh ground realities – the after impacts of twin shocks (demonetisation and GST) and pandemic lockdowns on the livelihood of millions – notwithstanding the episodic contrarian assertions from many quarters.

Now, compare the Centre's "free" ration to 67% of Indian households to 63.7% of Bihar households living in acute poverty and the latter would no longer seem outlandish or exceptional.

Second, on November 9, 2023, the UNDP released the Regional Human Development Report further confirming the K-shaped Indian growth story. It said, despite India's economic successes over the years "poverty remains persistently concentrated in states that are home to 45% of the country's population but contain 62% of its poor". It also said, “in addition, many other people are very vulnerable, hovering just above the poverty line” and "the groups at greater risk of falling back into poverty include women, informal workers, and inter-state migrants."

No prizes for guessing which states it is talking about. In July 2023, the NITI Aayog released its first multidimensional poverty index (MPI) report (following the baseline report in 2021). It shows, all the four Hindi heartland ‘BIMARU’ states, along with Jharkhand, Chhattisgarh and Uttarakhand carved out of them in 2000, top the list of the most multidimensional poor. The MPI takes into consideration deprivations in health and education, in addition to household incomes.

Third, the PLFS report released in October 2023 is also in sync with the above findings. While showing improvements in the headline numbers, employment rate (WPR), labour participation (LFPR and FLFP) and unemployment rate (UR) – which are far lower than the OECD averages – the report revealed several distressing trends, the key ones being:

Continued flight of workers from high productive, high-paying manufacturing to low-productive, low-pay agriculture and self-employment, particularly swelling the number of unpaid workers most of which happen to be women. 

Consistent growth in informal enterprises ("all proprietary and partnerships are household enterprises") in non-farm sector – which mean lower wages, lower security cover and lower job security. Their numbers grew from 68.2% in 2017-18 to 74.3% in 2022-23.

Negative growth in ‘real’ wages in the best category jobs, regular wages/salaried, since 2017-18 (by -2.9%) and self-employed (by -1.8%) and moderate increase in bad jobs, casual (by +0.6%). The ILO’s 2022-2023 wage report confirms this – showing negative growth in India’s ‘real’ wages in 2020 and 2021 (up to which data for India is available). Ironically, Indian workers are among the most hardworking. The ILO's database shows, Indian workers, at 47.7 hours a week, next only to Bhutan, at 50.7 hours, among 66 countries in 2021 (up to which India data is given). In comparison, those in the US worked for 36.43 hours (2022), in the UK 35.95 hours (2019) and in China 46.1 hours (2016).

Consistent fall in social security cover for the best quality jobs, "regular wages/salaries" with those "not eligible" for any social security cover whatsoever has risen from 49.6% to 53.9% during 2017-18 and 2022-23.

Highest unemployment rates among the most productive segment – youth (15-29 years) at 10% and educated (secondary and above) at 7.3% in 2022-23. Against this, total unemployment rate was 3.2%. This means lower productivity in the economy which translates to lower wage earnings. An analysis of August 2023 said (using the CMIE data), Indian workforce is rapidly ageing – young people were being driven out of the job market (due to job scarcity) and the proportion of over 60 years is rising.

The last point is strengthened by CMIE’s September 2023 report which says, youth in the age group of 15-24 comprised 27% of working age population in 2022-23 but only 18.1% were in labour force – either working or looking for jobs.

Fourth, in September 2023, RBI released data on household financial assets and liabilities. It showed, net financial assets dropped sharply to 5.1% in FY23 – to a 47-year low. The last time it went below 5.1% was in 1975-76 when it was 4.7%. The National Accounts Statistics data, released in January 2023, showed, net household savings (financial and physical) fell to 19.7% of the GDP in FY22 (up to which data is available) – from 23.6% in FY12. And net physical assets fell to 12% of the GDP in FY22 – from 16.3% in FY12.

Fifth, a series of data relating to income tax returns released since July 2023 shows (i) 54% fall in ITRs declaring taxable income in seven years – from 48.9 million in FY17 to 18.9 million in FY22 (ii) number of ITRs filed by those in the lowest income bracket, Rs 0-5 lakh, fell from 52.55 million in FY18 to 49.78 million in FY23 – while that of higher income groups increased – and (iii) number of those in the lowest income group (Rs 0-5 lakh), constituting about 80% of all ITR filers, fell from 80.6% of the total in FY18 to 72.6% in FY23.

Tragically, none of the above evidence is un-foreseen or un-foretold.

India tried to address the skewed growth, intrinsic to the very reforms and liberalisation paradigm adopted beginning with mid-1980s, was during the previous. The then government tried course corrections to ensure "inclusive" growth – through rights-based laws like the MGNREGS, National Food Security Action Act, Forest Rights, Land Acquisition, Rehabilitation and Resettlement Act, rural and urban health missions and also good governance initiatives like the RTI Act, Pre-Legislative Consultation Policy (PLCP) etc. There were extensive national and parliamentary debates and consultations on every policy, law and reform.

The actual gains from those initiatives may have been limited or debatable but the answer doesn’t lie in not acknowledging the problems.

It isn’t in raising the quota – as Bihar has done by taking the total to 65%, not counting the 10% EWS – because the job pie isn’t rising either in government sector or private. Nor in dismissing the Bihar problem simply as a symptom typical of a 'BIMARU' state – lacking in investment, infrastructure, skilled labour, ease of doing business etc. – because addressing these has also not led to the desired result either.