'Welfare Trap': Ruchir Sharma Believes Bihar Is Struggling To Find Next Growth Model

Ruchir Sharma has said that Bihar seems to be stuck in a "welfare trap" ahead of the 2025 state elections. Speaking to NDTV's Editor-In-Chief Rahul Kanwal, Sharma said growth has stalled in the state for the last 10 years.

Sharma, who is the head of Rockefeller Capital Management's international business, said after all these years of promise, Bihar is still India's "poorest state."

"The kind of poverty I've seen on this trip is quite heartbreaking. After the optimism I felt for Bihar in my previous trips, this one has been dispiriting. The kind of change that we have seen, just hasn't been as dramatic as what we were seeing or what should be the case for what is still the poorest state of India."

Sharma said there is a huge difference between the 2005 and 2015 state of Bihar.

"In 2005, the state of Bihar was terrible in every which way. After that, under Nitish Kumar in the first term between 2005 and 2010, we saw significant improvements in the roads, the infrastructure, and also in the law and order situation," he said.

"Then between 2010 and 2015, we saw significant improvement in electrification. Compared to 2005, everything is dramatically better."

"After 2015 in the evolution in the state should've been the creation of new industries and employment. And that's where the state is stalling and struggling to find it's next growth model."

"Between 2005 and 2015, Bihar's per capita income, which was always the lowest in India, began to slowly close the gap with the rest of India. The gap back then between Bihar and the rest of India was 30% in 2005. That gap closed to about 35% by 2014-15," Sharma said.

"But in the last 10 years, that gap has begun to widen. Bihar's per capita income today at about Rs 70,000 per year or so is back to being less than 30% of India's per capita income at about Rs 2 lakhs."

"The growth model in struggling to create jobs, new industries. Bihar's progress has stalled anecdotally and what the data is showing us."

Sharma feels industries like real estate and construction are finding it tough to get a footprint in Bihar, which is a landlocked state focussed on agriculture.

One of the many reasons, he feels, could be the fight against its residual image of what the law and order is like in the state.

"My big fear about Bihar is that the state seems to be getting stuck in a welfare trap. Even in this election, nearly 3% of GDP have been announced in pre-poll welfare schemes."

"Bihar is the highest in spending so much money on welfare. India cannot be like China. When China was at a similar stage of its development, it was investing everything in infrastructure and nothing on welfare. It was ruthless capitalism," Sharma said.

"In India, the issue is that we are still investing a lot in welfare. Under the Narendra Modi government, he tried to shift a balance towards infrastructure and away from the welfare the UPA government was going down under," he added.

But after the 2024 general elections, and a series of state elections after that, the amount that the state governments are spending on welfare has gone up significantly, Sharma said.

"One of the big swing factors in this 2025 elections is the women-centric Rs 10,000 Jeevika Scheme of the NDA government. But now, Tejashwi Yadav is promising Rs 30,000 to counter that. It's a vicious loop that states get stuck in."