7 PM Editorial |Bihar and eastern India: Need for state specific stimulus| 6th June 2020


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Bihar and eastern India: Need for state specific stimulus

What has happened:

Government of India has announced a Rs. 20 lakh crore package of AtmaNirbhar Bharat Abhiyan. It is to provide stimulus to the economy and reduce the impact of COVID 19 on livelihoods. Four tranches of this package include measures for  MSME’s, NBFC’s, agriculture, migrant welfare, defense, space, power etc. These are primarily supply side measures like increased credit, marketing reforms, liberalization, privatization. It focuses on reviving investment by industry and hence employment.

Experts argue that such one-size-fits-all supply side interventions will not benefit Northern and Eastern states where industrial development and startups are low. They also sight the difference between Nehru’s ‘self sufficiency’ and Modi’s ‘Atmanirbhar Bharat’. Nehru’s self sufficiencyfocussed on economic empowerment from below, while Modi’s ‘Atmanirbharbharat’ is more individualistic, covering select industrialists and ‘start-ups’.Thus, the advantage of the present stimulus, if any, will accrue only to the southern and western Indian States which are industrially advanced. Thus, they argue for a regional and state specific approach in states like Bihar.

In addition, rent seeking behaviour prevalent in Eastern and some northern states will make this stimulus less effective. Example of rent seeking is crony capitalism where industries seek to influence regulation through donations to political parties and candidates

Such rent seeking behaviour in these states is an effect of historical causes. Understanding them will help in formulating state specific stimulus to improve governance and economic growth.

Rent seeking and poor governance in Eastern India- Historical causes:

 Zamindari/Permanent settlement areas of British India were present in Eastern India(Bengal, Odisha, Bihar). In this system, intermediaries between state and peasants collected land revenues. They didn’t contribute to any economic investment and only seeked collection of revenues. This feudal system had imbibed rent seeking behaviour in elites in these areas. Attitude towards civil services is an example of this. Civil services is seen as an avenue to help people from respective caste or region.

Socio-economic factors too contributed to rent seeking behaviour. Land reforms are poorly implemented in states like Bihar, Jharkhand leading to wealth inequalities. In addition, socio religious movements for equality of castes, class were not prevalent in states like Bihar, Jharkhand. These were concentrated in Bengal, Western and Southern India. Examples are Raja Ram Mohan Roy’s Brahmo Samaj in bengal; Jyotiba Phule’s SatyasodhakSamaj in Maharashtra; Sri Narayana Guru Dharma Paripalana Movement(SNDP) in South India. Hence in absence of land reforms and socio religious reform movements, rent seeking has continued since centuries.

Poor governance in eastern regions is also the cause of less industrialization. Lack of development strategy at regional level has led to lack of industrialization. During British times all entrepreneurship was discouraged. Post Independence, freight equalization policy prevented industrialization.

Freight Equalization policy: 1952 – 1993

●     Objective was to achieve equal industrial development across the country by subsidizing transportation of minerals to any area of the country.

●     It led to establishment of industries near coasts in Western and Southern India. Maharashtra and Gujarat benefited the most

●     It had negative effects on the mineral rich eastern states of Odisha, WB, Bihar(then including Jharkhand), MP(including Chhattisgarh). Prior to independence these were the areas of industries with Tata, Dalmia etc.

Comparison with ryotwari areas:

In contrast, in areas of the Ryotwari system there is direct settlement between the state and peasants. Southern India and Western India were areas of such an agrarian system during British times. These areas are now characterized by industrialization and development.

In these areas the feudal system is weak. It allowed for substantial social movement (for example, the anti-Brahmin movement) which acted as a lubricant to develop a law-enforcing civil society and sub-national identity.Hence, rent seeking behaviour is low. Excess capital is invested by elites in economic activities. Example is Kammas of Andhra Pradesh who invested in tobacco, films and knowledge industries. This is seen across states such as Tamil Nadu, Gujarat, Maharashtra.

Socio economic reforms led to further weakening of feudal system in these areas. Land reforms and socio religious movements created conditions for reduced socio-economic inequalities.

Good governance with a clear economic vision too contributed to industrialization. Experts were used for advancing socio-economic agenda. Examples are M. Visvesvaraya’s Five year plan was adopted by Wodeyar dynasty of Mysore; Dr.B.R.Ambedkar was sent to Colombia university. Financial institutions like Andhra Bank, Bank Baroda, Syndicate bank were established.  Post independence, many finance ministers were from these regions.


Eastern India and some Northern states have poor governance and rent seeking tendency. Considering this, a state specific stimulus is needed in social, economic and governance spheres. Land reforms must be taken up. Civil society must be encouraged to bring social transformation to reduce influence of caste and religion based identities.

Related revision topics:
  1. Land revenue settlement systems in India during British rule

Source: TheHindu

Mains question:
  1. Explain zamindari and ryotwari systems of land revenue settlement? How did they impact industrialization in their respective areas? [15 marks, 250 words]
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