Bihar, Karnataka's per capita income gap would be substantially lower by 2030: NK Singh

Economist and 15th Finance Commission chairman N K Singh

Economist and 15th Finance Commission chairman N K Singh has a bucket list of recommendations for the newly-elected Bihar government. Establishing an investment commission, an empowered ministerial group to draw private investment and setting up monitorable targets to attract private capital are the slew measures that Singh feels could be used by Nitish Kumar for his latest tenure as chief minister.

Singh is optimistic that the state’s per capita income is likely to grow close to about 10-11 percent and if it continues at the same pace for a decade, Bihar will double its per capita income in less than ten years. In a conversation with Moneycontrol's Shweta Punj, Singh details Bihar's economic trajectory and the challenges it ought to address to continue its growth. Edited excerpts:

Shweta Punj: In your view, what has the average Bihari voted for, considering Bihar’s per capita income is still the lowest in the country?

N K Singh: Bihar has voted decisively for continuity and trust. The JDU–BJP partnership has delivered a multiplier effect on the quality and efficiency of infrastructure. The leadership of Prime Minister Modi, supported by Chief Minister Nitish Kumar, has strengthened macroeconomic stability and financial planning, reflecting effective centre–state cooperation under the idea of “Team India.” Despite being among the most economically challenged states, Bihar has seen high GDP growth in recent years. Earlier, when population growth was around 3 percent, per capita income barely grew. Now, with demographic growth at about 1.3–1.4 percent and strong GDP expansion, per capita income is rising about 10–11 percent a year. At this pace, it could double in under ten years, helping millions move out of extreme poverty and pushing Bihar toward lower-middle-income status.

Punj: What should be Nitish Kumar’s first priority when it comes to enthusing young people and attracting private investment?

Singh: The first priority must be security and trust. The second is to maintain macroeconomic stability. Bihar’s finances are better managed than many believe, with a more comfortable debt-to-GDP ratio than several advanced states. The composition of expenditure has shifted, with more spending now directed toward capital expenditure. Infrastructure—roads, railways and airports—has improved significantly. New or expanded airports in Darbhanga, Purnea and Patna have strengthened connectivity. Such improvements historically encourage private investment.

Punj: How can Bihar incentivise the private sector to create jobs and encourage youth to stay rather than migrate?

Singh: Migration involves push and pull factors. Earlier, people migrated out of compulsion due to inadequate livelihood options. Today, much migration is voluntary, supported by remittances; around 52 percent of households receive roughly Rs 40,000 annually. Still, Bihar must create more local jobs. This requires better skilling and pedagogy aligned with emerging needs. Bihar has significant strength in agro and agro-processing industries such as corn, potato, millets and pulses, as well as fisheries, where the state has moved from being an importer to an exporter. Labour-intensive industries like leather, footwear, toys and textiles also hold promise. Bhagalpur’s silk heritage is an example of historic potential. Tourism is another high-potential sector. Bihar’s heritage—from the Maurya and Gupta empires to Nalanda and Rajgir—can support major tourism-led employment. But hospitality infrastructure, especially hotels, must be developed to unlock this potential.

Punj: Cash transfers promised in the election may cost as much as Rs 40,000 crore in FY26. Are cash transfers necessary, or should the government focus on other measures to boost growth?

Singh: The financial outlay is lower than what the Mahagathbandhan had proposed. The World Bank’s rural livelihood programme is expected to support these transfers, which are not unconditional but linked to promoting gainful rural activities. Bihar does have some fiscal space. Sustainability depends on maintaining growth rates higher than interest rates. If Bihar sustains strong growth, it can meet these commitments while improving living standards.

Punj: Which sectors are best suited for private investment in Bihar?

Singh: District-level skilling centres will be crucial. While educational access is widespread, dropout rates at the higher secondary level remain concerning, as shown in ASER reports. Skilling centres aligned with labour-intensive sectors and upgraded pedagogy, including AI and IoT, can raise productivity. Strong skilling institutions within Bihar would reduce the need for youth to travel to other states and generate significant multiplier effects.

Punj: What would you like the Nitish Kumar government to focus on in its first six months? What big policy initiatives should be launched?

Singh: The government should establish mechanisms with clear, measurable responsibilities. This includes empowered ministerial groups tasked with attracting private investment, an investment commission chaired by the chief minister or deputy chief minister, and stronger monitoring of capital spending to ensure funds are fully utilised. The rollout of district-level skilling centres must be monitored closely. Tourism and hospitality should be strengthened with specific targets. If these systems with quantifiable outcomes are created early, centre–state coordination can deliver the commitments made.

Punj: Bihar has been losing revenue because of prohibition. Do you see a case for removing prohibition?

Singh: This is a balance between revenue loss and enhanced safety for women. Women’s security is important and cannot be ignored. Prohibition has had mixed results globally, but this should not be the government’s primary concern. Growth, education, tourism and labour-intensive industry should take precedence.

Punj: Bihar has a deep preference for government jobs. How can the state break this mindset?

Singh: Government jobs are preferred because they offer security, pensions and long-term stability. The only way to change this is by creating higher-paying private sector jobs. In industrial cities like Jamshedpur and Dhanbad, many people would not leave private jobs for government roles. Bihar needs credible private investment to create similarly attractive opportunities.

Punj: What are the key challenges for Bihar’s growth story?

Singh: The main challenge is staying focused on sustaining high growth and strong centre–state cooperation. Another key need is orderly urbanisation. Bihar must identify several major urban or semi-urban centres to drive growth. Construction creates immediate employment and growth. Infrastructure must increasingly incorporate renewable energy. Strengthening third-tier governance—municipalities, urban local bodies and panchayats—is essential. Many of their revenue sources were absorbed under GST. A portion of the state’s GST should be assigned to them. Property tax also offers potential revenue, given rising land values. Stronger local finances would allow urban bodies to eventually raise market borrowing.

Punj: What is your outlook on Bihar becoming a middle-income state?

Singh: If Bihar maintains per capita income growth of 10–11 percent until 2047, it could narrow the gap with Karnataka significantly by 2030. Bihar had earlier begun closing the gap with Uttar Pradesh before losing momentum for a decade. With renewed focus on growth and inclusion, sustained high growth over the next 10–15 years can meaningfully bridge these gaps.

Punj: Do you see women rewriting Bihar’s economic trajectory, just as they have influenced its politics?

Singh: Absolutely. Bihar has seen major political empowerment of women through reservations in government jobs and panchayats. As economic empowerment expands, women will play a larger role in governance and productivity. In skilling, agro-processing, services and improved agricultural practices, women will be central to Bihar’s progress. Bihar’s prosperity, he says, is essential for India’s prosperity.