Bihar’s Economic Growth Creating Problems for Rest of India

The state of Bihar in India has recently been enjoying substantial economic growth after years spent lagging behind other states due to increased government expenditure and private investment, and this has allowed the economy to grow by a massive 14% in 2010 and 2011.

Bihar's rapid growth is causing problems for the rest of India. Courtesy yumievriwan @ Flickr.com

This is one of the fastest rates in the whole country, and while it’s been good news for Bihar, according to a report in the Economic Times, it’s not being quite so great for the rest of the country. In fact it is creating quite a problem for real estate and construction firms, as traditionally migrant labor supplied around 50% of unskilled workers nationally. However since the Nitish Kumar government came to power in 2005 migration levels have fallen by a third, and this has not only caused labor shortages, but has also increased wage bills by as much as 50%. The shortage of labor is causing some projects to be delayed, as well as increasing costs, and construction companies face a hard time trying to juggle labor between projects.

Expenditure in Bihar has increased from Rs18,000 crore in 2010 to Rs24,000 crore in 2011, and this extra money is being spent on hospitals, schools and building roads. Construction in the area has grown by 20% year-on-year, and more people are choosing not to relocate to large cities such as Mumbai and Delhi. In the past entire families used to migrate to cities in order to find work, but nowadays just one or two family members are choosing to move away while the rest are managing to find work in Bihar. These people are either finding employment in state government projects or in the National Rural Economic Guarantee Act program. The NREGA program guarantees a minimum of 100 days employment each year to every adult member of a rural family, and this has had a significant effect on migration.

Real estate projects in the National Capital region were previously seeing delays of up to 8.9 months, but this has increased to 12.8 months during the last couple of years, with much of this increase being down to labour shortages. Although this lack of labour might not be welcomed by the construction companies, economists have pointed out that it shows the country is developing, and that has to be encouraging news.

Allison Halliday

Allison Halliday is a Realty Biz News contributing writer. She handles International Real Estate and is a seasoned blogger.

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