As Bihar’s Assembly election results roll in today, the verdict may not only determine which coalition governs the state—but also how a financially strained economy can sustain the soaring promises that filled campaign speeches.
Beneath the electoral noise lies a fiscal warning: Bihar is living on borrowed time, quite literally.
The Comptroller and Auditor General’s (CAG) 2022–23 report lays bare Bihar’s economic contradictions. The state, often invoked in political rhetoric as a development model, closed the fiscal year with a deficit of 6.01%—nearly double the 3.5% cap suggested by the 15th Finance Commission. Its total liabilities reached Rs 2.93 lakh crore, or 39.35% of its GSDP, with public debt alone accounting for Rs 2.43 lakh crore.
In plain terms, for every Rs 100 Bihar produces, it owes nearly Rs 40. That level of indebtedness makes Bihar the fifth most indebted state in India, with 99.3% of its capital receipts coming from borrowings.
Critically, these aren’t investments in infrastructure or industrial capacity, they’re used to service past loans, pensions, and salaries.
Bihar’s economic dependence on the Centre further deepens its vulnerability. In 2022–23, the state raised just 37% of its revenue internally through taxes and non-tax sources. The remaining 63% came from central transfers and grants. Despite receiving the second-highest share of tax devolution after Uttar Pradesh, Bihar’s own-tax-to-GDP ratio remains a meagre 6%. Property tax, GST, and mining revenue continue to underperform, limiting the state’s fiscal sovereignty.
Where does the money go? Mostly to keep the engine running. Revenue spending made up 84.7% of total expenditure, dominated by salaries, pensions, and interest payments. Capital spending—on roads, hospitals, irrigation—was just 15.3%. Welfare, education, and health combined made up a mere 23% of the budget, a steep decline from 30% a decade ago.
The implications are visible on the ground. Bihar’s per capita income remains a third of the national average. Human development indicators lag behind most Indian states. Nominal growth—10.4% in 2022–23—is largely debt-fuelled rather than productivity-driven.
Even as women have emerged as a powerful electoral bloc, outvoting men in recent elections, the state’s ability to respond to their aspirations is limited by its fiscal constraints. Welfare schemes may win votes, but without structural reforms to broaden the tax base, rationalise spending, and boost capital investment, they risk becoming unsustainable.
