When Nitish Kumar became the chief minister of Bihar in 2005, the eastern Indian state had just 384 kilometres of rural roads, power cuts that lasted most of the day, and crime syndicates that controlled highways. Kidnappings for ransom were so routine that anyone with means travelled with armed guards.
“Law and order was not broken, it was missing,” says Sanjay Kumar Jha, a federal lawmaker who has served in Kumar’s cabinet for nearly two decades.
Today, Bihar has more than 100,000 kilometres of rural roads and round-the-clock electricity in every village. By any administrative metric, it has gone from collapse to stability. But Jha says the next five years will be about something else entirely: industry.
“Earlier, there was no groundwork for investment. Today, we have the fundamentals in place—security, connectivity and power,” Jha says. “Now comes the big challenge—getting capital to move in.”
The transformation represents one of India’s most dramatic turnarounds in governance, but now comes the bigger test: Can a state once synonymous with dysfunction convince investors it’s ready for business?
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Why industry didn’t come earlier?
Bihar’s industrial underperformance isn’t a recent problem. Even when it included mineral-rich Jharkhand before the 2000 partition, the state failed to attract large-scale industry. “We had the minerals. We had the state machinery. Still, investment did not come,” Jha says, offering a blunt diagnosis: the lack of trust.
“Before Nitish Kumar came, those in power were directly or indirectly involved in crime. Industry doesn’t come where kidnappings are routine. There was no law, no confidence, and no visibility on returns,” he says.
The dysfunction wasn’t just perception—it was structural. Budget allocations were erratic. Basic services like power and water were either absent or inaccessible. Only 22% of households had electricity in 2005. “What industry would come to that?” Jha asks.
The problems compounded each other. Without reliable power, manufacturers couldn’t operate. Without roads, raw materials couldn’t reach factories, and finished goods couldn’t reach markets. Without law and order, executives feared for their safety and avoided the state entirely.
The 20-year fix: Infrastructure as the foundation
Rather than launching flashy industrial policies, Bihar’s leadership took a methodical route. The first focus was building the backbone of a functioning state—roads, electricity, schools and rural connectivity.
The electricity transformation is particularly striking. “In 2005, 78% of homes didn’t have electricity. Today, 100% are connected—and it’s not just a wire. Power is available 24 hours, even in villages,” Jha says. Capacity expanded from 700 megawatts to full rural coverage.
Road construction followed the same comprehensive approach. Jha recounts a turning point when Finance Minister Nirmala Sitharaman visited Darbhanga and Badhawani. “She told the CM that Bihar’s rural roads were better than those in any other state. And she was right, we’ve stitched the state together with roads,” he says.
“Wherever you go in Bihar now, you can reach in five to six hours. That wasn’t possible before. This is not cosmetic work. This is the foundation.”
The state-wide reengineering was expensive and politically slow. Infrastructure spending doesn’t generate immediate returns, and voters often prefer visible benefits like subsidies or employment programs. But Jha insists it was essential. “You can’t talk about industrial policy when your district magistrate’s office doesn’t have electricity. You can’t talk about textile exports when your weavers can’t get to the city.”
The Janata Dal (United) party won multiple elections during this period, suggesting voters approved of the long-term approach despite its political risks.
Bihar’s industrial pitch: Cheap labour, good roads, full power
Now, with two decades of groundwork complete, Bihar is ready to talk business. The state is leveraging three value propositions that didn’t exist before: Firstly, a surplus of young, trainable labour. “We’re a young state. The average age here is 28 or 29. Japan is ageing, and we’re growing,” Jha says. Bihar’s workforce is cost-competitive, mobile and increasingly educated thanks to school retention schemes, including programs that provide bicycles and uniforms for girls.
Next, cheap and now-connected land. Road density expanded across districts has made even remote land accessible to manufacturers. Industrial clusters are being proposed in regions like Madhubani and Bhagalpur, historically known for handlooms and textiles but previously cut off from major markets.
Lastly, power reliability. What used to be Bihar’s biggest liability due to six-to-eight-hour daily blackouts has become a selling point. “We don’t advertise it, but we now have uninterrupted power, even in rural belts,” Jha says.
These advantages matter in a global economy where manufacturers are diversifying supply chains and seeking alternatives to traditional production hubs. Bihar’s demographic profile contrasts sharply with rapidly ageing populations in developed countries, while its infrastructure now supports industrial operations that would have been impossible a decade ago.
A textile opportunity amid global realignments
Jha believes Bihar’s textile sector offers the biggest near-term opportunity. “Madhubani and Bhagalpur were once textile powerhouses. That heritage never vanished; it just never got investment,” he says, pointing to global trade shifts that favour alternatives to traditional export hubs.
Companies are diversifying away from China-centric supply chains, while India’s government promotes decentralised manufacturing in eastern states. Bihar’s government is already coordinating with New Delhi to establish textile parks and plug-and-play industrial zones.
Districts like Madhubani retain centuries-old weaving traditions that could support modern textile manufacturing. The combination of traditional skills, improved infrastructure and favourable global conditions creates what Jha sees as a unique window of opportunity.
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Still chasing special status
Yet significant hurdles remain. Bihar continues seeking Special Category Status from the federal government, a designation that could ease borrowing constraints, offer tax breaks and increase central funding. “We’ve been asking for it for years. Still, it hasn’t come,” Jha says.
Without that status, Bihar operates at a fiscal disadvantage compared with other industrialising states. The state’s debt-to-GDP ratio limits its ability to finance large infrastructure projects or offer the kind of incentives that attract major manufacturers.
Jha believes momentum is building, however. “In Budget 2024 and Budget 2025, we saw additional support. This government, both at the centre and the state, are aligned. That matters. This is the window,” he says.
The political alignment matters because industrial development requires sustained policy support across electoral cycles. Bihar’s experience suggests that infrastructure development alone isn’t sufficient—states also need fiscal flexibility and policy continuity to attract private investment.
The final hurdle
Despite physical infrastructure gains, Bihar continues battling perception problems that persist in India’s national imagination. For decades, the state symbolised dysfunction, backwards, caste-ridden, ungovernable.
“We need to brand ourselves better,” Jha says. “Political leaders too must think—what are we saying about Bihar? Are we helping it or harming it?”
The perception gap is particularly acute regarding law and order, which has quietly transformed. “In the 1990s, people roamed with guns and tinted windows. Today, no one dares. That’s not a small change,” Jha notes.
But changing decades-old perceptions requires more than policy improvements. It demands sustained communication efforts and visible success stories that demonstrate the state’s transformation to potential
investors who may still view Bihar through outdated stereotypes.
The branding challenge reflects a broader problem in Indian development: states that achieve genuine improvements often struggle to translate those gains into economic opportunities because perceptions lag reality by years or decades.
A 20-year plan for a 50-year problem
Jha’s vision for Bihar’s future doesn’t rest on a single megaproject or flagship policy. Instead, it represents something rarer in Indian politics: systematic state-building as the foundation for economic growth.
“Bihar’s problem was not just that it lacked industry. It lacked readiness. We spent 20 years building that readiness. Now, we want results,” he says.
The approach offers lessons for other struggling regions. Bihar chose patient capacity-building over quick fixes, prioritising governance improvements that don’t generate immediate economic returns. Whether this strategy ultimately succeeds could influence development models across emerging markets.
Jha is clear-eyed about the challenge ahead. “We’re not asking for sympathy. We’re asking for investment.
The ground is ready.”
As Bihar looks toward 2030, its promise lies in proving a proposition that’s simple in concept but rare in execution: that state capacity, once lost, can be rebuilt through political discipline—and that growth, even when delayed, can still arrive with patience. The state is also going to elections this year.
The next five years will test whether two decades of infrastructure development can attract the private investment needed to transform one of India’s poorest states into an industrial hub. Success would validate the idea that in politics, long-term thinking can still produce dramatic results.
Edited by Jyoti Narayan
