Bihar is becoming the next Kerala: How migrant labourers are flipping the growth story

Bihar is beginning to follow in the footsteps of Kerala, driven by the increasing role of remittances in its economy. The state's growing migration trends, with workers sending money back from various parts of the world, resemble Kerala's long-standing reliance on remittance-driven growth. 

Devesh Kapur, political economist and co-author of A Sixth of Humanity: Independent India's Development Odyssey, highlighted this emerging trend during an interview with Business Today Editor Siddharth Zarabi and Rajdeep Sardesai.

He pointed out that Bihar's migrant workers, traditionally working in the Gulf countries, are now expanding their reach to countries like Africa, Greece, and Korea, contributing significantly to remittance inflows.

"We are seeing elements of the Kerala story emerging in Bihar and Bengal, but especially Bihar, which is migration out of the country," Kapur said while responding to a question on migration and whether northern states can catch up with some southern states in terms of growth. 

"Most migration to the Gulf, Kerala is just 5%. Now, 50% is from UP and Bihar. And we see workers from Bihar erecting electric transmission lines in Africa. They are in Greece. They're there in Korea. The numbers are not that large for a state of 120-130 million. But sending your people out, who earn more, send back remittances, that was the core of Kerala's strategy," the economist added. 

The political scientist said that Kerala did not have much industrialisation, didn't do much in the IT services, and agriculture, of course, was modest. "So, in UP and Bihar, we are seeing (those) elements. Now, how much this happens because you need large numbers, how the money is used when the money comes back in the state - all of those things are something that we will have to see. But I wouldn't say that necessarily this (the growth gap) will get worse."

There has been a continuous debate among the policy experts over a widening gap between northern and southern states and whether it will create social tension. 

Economist Rathin Roy, earlier in October, flagged growing divisions between the economically prosperous southern states and the politically powerful northern states. He pointed out that states like Tamil Nadu, Kerala, and Andhra Pradesh have higher per capita income compared to northern states like Uttar Pradesh and Bihar.

When asked why some states fared better post-economic liberalisation while others lagged, Arvind Subramanian, former Chief Economic Advisor and co-author of the book, suggested that states like West Bengal did not use the autonomy and decision-making power that state governments gained through the country's political and economic decentralisation after 1991.

"Although all that I said about the Center is true, that still means there's residual agency with all the states. So, the question is, why are some not using it? And I feel more and more that the example of the good states has to travel," he said in an apparent reference to the success of the southern states. 

"No longer can you sit back and say, it can't be done in India, because it's being done elsewhere next door. And you're beginning to see this change even in the Hindi heartland. For example, Uttar Pradesh is showing that. It is building infrastructure and is thinking of privatising the DISCOMs (power distribution companies)."

The former CEA said that the liquor policy in Uttar Pradesh is amongst the most progressive in India in the way that it has generated tax revenues. "So things are beginning to change. So, two-thirds of India has to catch up with one/thirds of India using their agency."