Why are UP and Bihar So Poor? Explaining 7 Main Reasons


The economy of Bihar and Uttar Pradesh (UP) is service and agriculture-based. Data as well as on the ground reality both the states are very poor. After liberalization in 1991, the Indian economy has experienced good growth. The pattern of growth is very uneven and odd, with some states’ economic growth rate is very fast and others are very poor performing. Besides both, the states have very fertile soil as most of their part is on the Gangetic plain, they even have favorable climate conditions.

Percentage of people below the poverty line for both states are as below:

Uttar Pradesh (UP) ⇒ 30%

Bihar ⇒ 34%

Bihar GDP by sector – ₹6.86 lakh crore

Agriculture: 20%

Industry: 19%

Services: 61% (2018-19)

Bihar GDP per capita:  ₹43,822

Bihar GDP per capita rank: 33rd

Uttar Pradesh GDP by sector – ₹17.94 lakh crore

Agriculture: 24%

Industry: 26%

Services: 50% (2018-19)

Uttar Pradesh GDP per capita: ₹70,418 

Uttar Pradesh GDP per capita rank: 32nd

To understand the main reasons behind these two states remaining poor after 7 decades of independence, we need to broaden our area of understanding. A series of events are involved and responsible for the misery of any state. Despite these two states rich in natural resources, they still have very poor economic growth rates pre and post-independence. 

Unequal Land Distribution

Charles, Earl Cornwallis’s permanent settlement act was introduced in Bihar by an east India company where landlords have to pay fixed tax raised from the land. The permanent settlement act was also introduced in Bengal, madras, and Varanasi. There were 3 ways to collect the tax:

  • Zamindari system
  • Ryotwari system
  • Mahalwari system

The tax revenue given to the government is fixed, whether there is a flood, natural disaster or even no revenue generated by the landowner leads to a loss in their land to the zamindars. Although the area of land fertility is very small as compared to the states like Punjab and Maharashtra. This leads to control over the large area of lands by a handful of landlords leads to discrimination in other sectors as well. 

  • Bidding was done for the land
  • Those who won the bidding for the land and agree to pay the higher tax to the government from land revenue become the owner.
  • The farmers and cultivators who are the owner of the land lost it and became the tenant on their land.

The unequal distribution of land leads to other important social problems like poverty, lack of education, higher class, and upper-class discrimination, etc. During the 1930’s Bihar witnessed tenancy struggle under the leadership of Kisan Sabha. After independence land related crimes became more common in both the states. The lack of finances and education can be due to unequal lands, kids of zamindars have more power and money to go for the education and standards of living than the poor. 

The upper crust of Bihar and Uttar Pradesh always have the support of bureaucracy, the ruling party is always been controlled by the upper crust of the society. They do not want any changes in it because it will create quality amongst them. 

Unequal land distribution, directly and indirectly, relates to the people’s standard of living.

Freight Equalization Policy

This policy was introduced in 1952 and adopted by the Indian government for the equal growth of industry until 1993. Bihar and other states lost their competitive advantage due to this policy. In this policy, any factory can be set up anywhere in India, and mineral transport is subsidized by the central government. That means any company that in mineral mining can operate its business from any part of India, on the transportation government gives them a subsidiary for it. 

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Due to this companies have much more flexibility to set up near the coastal trade hubs like Gujrat, Maharashtra, etc. Due to this, no major industry has been established in Bihar, which can be a major source of employment for the people of Bihar.

This policy proved to be the major hurt for the economy of the mineral-rich state Bihar (including present-day Jharkhand). 

Unstable Politics

Good governance and strong political leadership play a vital role in the development of any state. The poor performance of Bihar and Uttar Pradesh is also due to caste-based politics. Other states are grabbing the opportunity of foreign investment after 1991, but on the other hand, these states are busy in caste-based politics. Caste, class, and ethnic division based politics is still a major practice in both states. Most of the national political parties are working on the polarized voting system, the major involves a candidate of their caste which after winning enjoys his tenure forgetting the problems of their people after getting the victory. The back and forth of caste-based politics is an ongoing phenomenon in Bihar and Uttar Pradesh, where people get elected based on their caste.  

With 3 president rule and more than 8 government changes between 1991 to 2002 shows the political instability of Bihar. When your elected government is busy saving its chair then how can anyone expect them to do any kind of development in their states. This political instability harms economic development. 

After Independence, Bihar and Uttar Pradesh (UP) were ruled by High caste elites. 

Lack of Funds Provided by Center

With such an unstable government, high corruption rate there is always a lack of funds provided by the center. As governance is not capable of utilizing it for public welfare. It can be easily understood that in some cases their poor governance only manages to utilize the 50% of the budget provided to them. With a new scheme to launch, the middle man and corruption come as a major hurdle. The government of Bihar and Uttar Pradesh always fails in developing the infrastructure, education system, and even in the healthcare facilities. 

Lack of funds provided by the central government is mainly due to the government failing to properly maintain and utilize it. 

Educational Infrastructure

The education system of Bihar and Uttar Pradesh is at the bottom of the list. The literacy rate of Bihar is at last and Uttar Pradesh at the second last. Only 22 universities in Bihar, with only 744 colleges which means only 7 colleges for 1 lakh students. Imagine your state has the potential of youth but they lack good quality education. Few people got the taste of quality education in both states. Early education must be made mandatory for all people because poor people seem to have no benefit in educating their children.

Lack of education rises several social problems like domestic violence, poverty, low standard of living, no basic knowledge of land and agriculture, social discrimination, continuous exploitation at a different level, etc. We can also not ignore the fact that the poor education infrastructure is due to administrative failure. Bihar and Uttar Pradesh do not seem to utilize the human sources well, there is also mismanagement of them. Lack of an educated teaching system and poorly maintained educational institution is also responsible.

The quality education in both states is a national concern, it needs to be solved at the grass-root level. 

Civil Services Mentality

We have seen Bihar and Uttar Pradesh have more civil services-oriented youth minds. Their view of business is very alarming. As the states and the people see so much poverty, youths have a clear cut mindset to earn over the table and under the table after getting a government job. This encourages the dowry at very loud and strong levels, we have seen the dowry rate list of the government employees are fixed. The person will get more dowry if he is at the higher govt post. 

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High Population

Bihar and Uttar do not contribute much to the reduction of population. While the population explosion in India raises the burden on its state. The fertility rate of Bihar has no significant changes when compared to the national average. The use of protective methods, contraceptive techniques are still considered taboo. Lack of education in rural areas is a major source of the population for Bihar. Uttar Pradesh has the same issue, with the massive population burden on natural resources also increasing. High numbers of the population also give rise to youth unemployment where they are suffering from quality education. For this, they head towards the major cities for better education, employment, and standard of living. 25% of population growth has been witnessed in the last decade. 

Both the states are so big that it is impossible for any ruling party to properly manage it. Bihar and Uttar Pradesh can be divided into two or three parts, as this will increase the administrative handle and better use of the resource allocated. 

One child policy can be considered for the population, but as we have seen china has implemented this policy to control the population. Due to which the world has seen a sudden rise in female feticide, which disbalances the male and female ratio.

Sterilization is a good technique to control the population but can result in several health issues. The only problem for this is better education amongst the people. 

When people are concerned about the population, Bihar looks the other way. 

Geographical Disadvantage

Not having a port is a big geographical disadvantage, as landlocked state Bihar has limited trade opportunities. The transportation cost is stopping potential investors to invest in the state. People will argue about the geographical advantages like it is the northeastern gateway. Besides Hindustan Unilever, no other major industry has been present in it due to geographical disadvantages. From the neighboring cities Bihar, only imports and no export has been practiced by the state. We can clearly say that geographical isolation and not port availability plays a critical role in the development of the state. 

Bihar is a landlocked state, the only potential neighbor is Nepal. As we all know Nepal is also a poor country to trade with.

Wrapping Up

Both states give rise to very serious economic development challenges, which is not only important to the Indian economy but also the global economy. As India is a major player in the contribution of the global economy, these two states with constant poor performance pulling down the economical growth of the country.

Several areas need to be worked out like better infrastructure, education system, healthcare, etc to be looked at. The majority of the population needs to be more responsible and need to know their duty towards the development of the nation. It is very good to have a civil services-oriented mentality but one should also consider doing business as a primary source of development. We have constantly seen the poor performance of Bihar and Uttar Pradesh in various indexes, if the basic problems continue in the future we will see more and more shaming data to be published in the future. 

We wish these two performing Indian economy states will become the future backbone of Indian GDP and lead it from the forefront. All the hurdles either geographical, social, political, and educational will soon go down in vain and these two states come out to be the winner amongst others.