Will Bihar’s new government give the state the economic reset it needs?

The Bihar election has delivered political continuity. The coalition likely to form the government in Patna is made of parties that are familiar with one another and aligned with the Union government. This alignment creates a window of stability that Bihar has not often enjoyed. Stability alone does not produce development, but it creates the conditions for a more coherent strategy. The task ahead is to convert political calm into developmental momentum.

Bihar’s new government will begin its term facing structural constraints: limited fiscal space, low administrative capacity and a narrow economic base. Yet, the state also has strengths—a young population, a culture of migration-linked enterprise and rising public expectations. A realistic development strategy must acknowledge both sides of this ledger.

Rather than launch a new wave of schemes, Bihar needs a few focused priorities supported by evidence and careful execution.

One starting point is to look at what works elsewhere. Across India, states that have sustained progress, such as Tamil Nadu and Karnataka, built their success on reliable basic services. Their trajectory echoes the work of Nobel laureate Amartya Sen, who has long argued that health, education and basic public goods are the foundations of modern development.

For Bihar, this means concentrating on the essentials: functioning health centres, consistent teacher attendance, timely road maintenance and predictable delivery of frontline services. Improvements in these areas do not require radical restructuring but disciplined monitoring and regular accountability.

Global experience also offers lessons. Abhijit Banerjee, Esther Duflo and Michael Kremer transformed development practice by showing that small, well-tested interventions can outperform sweeping reforms. Countries such as Indonesia and Kenya have applied these insights by conducting pilot programmes before scaling new policies.

Bihar could establish a State Evaluation and Innovation Unit to test agricultural initiatives, education reforms or local governance models on a small scale, study the results honestly, and then expand only what works. This approach reduces costly missteps and builds public credibility.

Agriculture and rural livelihoods remain central to Bihar’s economic landscape. Here, the state can learn from international experience, especially Vietnam’s rural transformation. Vietnam raised rural incomes not through subsidies, but by strengthening farmer cooperatives, improving logistics and promoting export-oriented processing.

Bihar can adapt similar logic by investing in farmer producer organisations, modern storage facilities and market-linked rural aggregation centres. These steps would help farmers earn more and create non-farm jobs in logistics, processing and packaging.

Closer home, India’s own best performers offer valuable examples. Kerala’s decentralised planning model shows how empowered local governments can shape development priorities better than top-down directives. Telangana’s use of digital platforms demonstrates how transparent land records and unified service delivery can reduce uncertainty for investors and citizens alike.

Bihar does not need to replicate these models wholesale, but selective adoption—especially in land management, public procurement, and district-level planning—could significantly improve governance.

To move from examples to action, Bihar must organise its priorities across time horizons.

In the short term, the focus of governance should be on stabilising basic services. Ensuring medicine availability in health centres, improving school attendance and maintaining rural roads can produce visible improvements within two years and strengthen public trust.

In the medium term, Bihar needs to reshape its economic structure. Agriculture must become more profitable and rural areas must generate more non-farm employment. A network of rural enterprise zones, cold chains and aggregation hubs can create steady income gains.

Sector-specific industrial plans for areas such as food processing, textiles and light manufacturing will help diversify the state’s economy and attract investment.

The long-term horizon must centre on human capital and urban growth. As Angus Deaton’s work on health and nutrition shows, early investments pay lifelong dividends. Bihar’s young population can become an economic advantage only if it receives better schooling, stronger nutrition support and market-relevant skills.

The state also needs a second tier of urban centres beyond Patna that can support jobs, small industry and mobility. Many successful emerging economies built such town clusters well before incomes rose; Bihar can begin by improving power supply, transport and industrial land in select towns.

Underlying all of this is one requirement: transparent and predictable governance. Regular public dashboards, district report cards and timely disclosures of spending can shift the focus from announcements to outcomes. Citizens need to see results to maintain trust, while administrators need consistent metrics to stay accountable.

The next five years will not solve all of Bihar’s challenges, but they can define a new direction. Political stability allows the state to move from fragmented schemes to a coherent strategy built on global evidence and local realism. If Bihar focuses on a few foundational priorities and executes them well, this post-election moment could become the start of a more durable developmental trajectory.

The author is managing director and CEO, People Research on India’s Consumer Economy