Bihar Urbanization

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Urban Development and Rural-Urban Linkages: A Case Study of Two Towns of

Bihar
Working Paper · March 2016

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WP 01/2016
Urban Development and Rural - Urban Linkages
Case Study of Two Towns in Bihar
Tanuka Endow, Sunil K. Mishra and Abhay Kumar

URBAN DEVELOPMENT AND RURAL–URBAN LINKAGES
CASE STUDY OF TWO TOWNS IN BIHAR
WORKING PAPER NO.
WP 01/2016

Tanuka Endow , Sunil K. Mishra and Abhay Kumar
New Delhi
2016
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INSTITUTE FOR HUMAN DEVELOPMENT

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Tanuka Endow*, Sunil K. Mishra** and Abhay Kumar**
ABSTRACT
Urban development characterizes the economic transformation of any region today.

Urbanization is usually associated with industrialization and reflects the transition
from an agriculture-dependent economy to an industrialized one, accompanied by
transfer of labour from the less productive agriculture sector to other sectors. The
development process of an urban centre is likely to be linked with the nearby rural
economy through exchange of goods, services, labour, capital, etc. In this backdrop,
the current study attempts to examine the urban development of Bihar on the basis of
detailed survey in two sample towns Biharsharif and Madhubani. The paper attempts
to identify the sources of urban output in the two towns and trace the rural-urban
linkages with the help of primary data.
The paper is based on data from enterprise surveys conducted in two towns in Bihar.
Biharsharif, a class I town, is located in Nalanda district and Madhubani, a class-II
town, is located in Madhubani district. The sources of urban output in the two towns
have been analysed with the help of information obtained from the enterprise survey
regarding identification particulars of the firms, enterprise and worker related details,
details of the members of the household which has enterprise/shop located within their
living premises, related information about the own account enterprises, details of
factory workers, and challenges and problems faced by different types of enterprises.
The rural-urban linkages were also traced with the help of the primary data.
1. The paper has been prepared under an ICSSR funded research project on Inclusive Urban Development
in Bihar. The authors are grateful to Prof. Alakh N. Sharma for his overall guidance as well as to Dr
Gerry Rodgers, Dr Janine Rodgers, Dr. Sandip Sarkar and Dr. Amrita Datta for their comments. We
also acknowledge the valuable contribution of Mr. B.K.N. Singh to the field survey and Mr. Vikas
Dubey to the data-analysis. Further, the contribution of Ms. Nandita Gupta at the project formulation
stage is gratefully acknowledged. In addition, Mr Baibhav Shankar Pandey is acknowledged for his
contribution in the terms of field supervision.
* Fellow, Institute for Human Development, New Delhi.
** Associate Fellows, Institute for Human Development, New Delhi .
Urban Development and Rural-Urban Linkages: Case study of Two Towns in Bihar 6
The findings indicate that both towns have seen a gradual decline in industrial activity
over the years. They are characterized by small-sized enterprises, which are largely
informal in structure. Trading activity was found to be the most important segment of
urban development in the two towns. Rural-urban linkages were found to be strong in
terms of employment of rural labour in urban enterprises, use of raw material from
surrounding rural areas as well as in terms of urban areas providing a market for rural
produce. There was also evidence of reverse linkage in terms of rural consumers providing
a market for some of the urban products.
The employment linkage was found to be strongest for manufacturing activities,
indicating its potential to absorb labour from rural areas in more productive activities,
but in both towns manufacturing activities have witnessed a decline during the past
two to three decades, and at present most of the manufacturing units surveyed are
either contracting or stagnating. In this context, electricity supply was identified as
the most important bottleneck for industrialization, along with deficits in other
infrastructural facilities, lack of funds, inflation, corruption, lack of skilled workers,
etc.
1. SETTING THE CONTEXT
In today’s world, urban development characterizes the economic transformation of

any region. Urbanization is usually associated with industrialization and reflects the
transition from an agriculture–dependent economy to an industrialized one with
concomitant development in the infrastructure and access to basic facilities, such as
water and sanitation. The recent experiences in many South Asian countries
demonstrate that the trajectory of development need not always be from agriculture
to industry, as the impetus for growth can come from the service sector (Ghani and
Kharas, 2010; Government of India, 2015), however, the process still involves transfer
of labour from the less productive agriculture sector to other sectors. An associated
process in this context is that of increasing urbanization and urban development.
The relation between economic growth and urban development is often symbiotic.
While urbanization is an outcome of the growth process, it is also one of its drivers.
Urban centres can facilitate growth through enhancing the productivity of output and
employment, mobilizing and channelling savings as well as allowing accumulation of
wealth in the form of urban real estate, and imparting fiscal flows along with revenue
generation (Pangotra and Govil, 2008). The development process of an urban centre is
likely to be linked with the nearby rural economy through exchange of goods, services,
labour, capital, information technology and social transactions.
Research evidence indicates that the trends and patterns of urbanization are a direct
manifestation of the process of economic developments in space, especially in the
context of the contemporary phase of globalization (Kundu, 2009). A positive correlation
has been observed between per capita Gross State Domestic Product (GSDP) of states
in India and their rate of urbanization (Pangotra and Govil, 2008). For less developed
countries, in particular, a large part of urban growth has historically been linked to
stagnation and volatility of agriculture as well as to the lack of sectoral diversification

within the agrarian economy (Kundu, 2009).
(a) Urbanization in India and Bihar
According to the Census data, India has been experiencing an upward trajectory in
terms of urbanization, albeit at a slow rate. The urbanization rate rose from 25.5 per
cent in 1991 to 27.2 per cent in 2001 which further increased to 31.2 per cent in 20112.
However, not all the states are progressing at a similar pace. Bihar presents a paradoxical
situation in this context, as this state has posted relatively high rates of growth in the
last few years, yet there is very low urbanization rate of approximately 11.3 per cent in
2011. Low levels of urbanization in Bihar are associated with low levels of infrastructural
development, industrialization, and slow growth of non-agricultural employment
opportunities as well as other issues, such as lack of multilevel urban structures and
urban poverty.
(i) Pattern of Urbanization in Bihar
Bihar is not only one of India’s least urbanized states, but the pattern of urbanization
there is also not balanced. South Bihar is considerably more urbanized than the north.
Further, 2011 Census data suggested that class I towns (with population more than
1,00,000) accounted for about 57.5 per cent of the total urban population of the state,
while class II (population between 50,000 and 1,00,000) and class III (population
between 20,000 and 50,000) towns accounted for about 37 per cent of the population.
The rest of the towns accounted for only around 5 per cent of the total urban population.
On the basis of population range in cities of Bihar, the classification of those cities has
been shown in Table 1.
Table 1: Classification of Cities in Bihar into Classes as per Population, 2011
Cities Population Bihar Bihar North Bihar N Bihar South Bihar S Bihar
Range No. of % of No. of % of No. of % of
towns Population towns Population towns Population
Class I > 1,00,000 26 57.5 13 50.2 13 62.9
Class II 50,000 –99,999 28 15.6 13 16.9 15 14.6
Class III 20,000 –49,999 76 21.6 41 26.3 35 18.0
Class IV 10,000 –19,999 22 2.8 12 3.7 10 2.2
Class V 5,000–9,999 38 2.2 20 2.7 18 1.9
Class VI <5000 9 0.3 2 0.2 7 0.4
Total 199 100.0 101 100.0 98 100.0

Source: Census 2011
2. In the Indian context, a human settlement is called urban, when it has a minimum population of 5000
with a population density of at least 400 per sq km, and has 75 percent of the male population working
in non-agricultural sector.
Balanced urban development implies a pyramidal hierarchy with a broad base

of small towns, each being served by a larger town of the next order, which in turn
forms part of the hinterland of the next higher order town, but Bihar is lacking in
this structured urban development. Furthermore, there is considerable regional
variation which will be discussed in this paper.
(ii) Rural–urban Linkage
How closely is growth in urban areas and surrounding rural areas interlinked?
According to Datt and Ravallion (2010), the post 1991 data for India provided evidence
of a positive feedback effect that existed between urban economic growth and reduction
of rural poverty, which may be reflective of the growing urban–rural linkages. The
crucial importance of urbanization in the context of benefitting from the economic
growth has been demonstrated effectively by Krishna and Bajpai (2011) in their study,
where they used data for the period 1993–2005 to show that the distribution of benefits
from economic growth since the early 1990s has followed an identifiable spatial pattern.
People living in the largest cities have been found to achieve the greatest gains, followed
by people in small towns and villages close to towns. In addition, policies have an
‘urban bias’, as is seen through the way in which critical infrastructure and access to
such potential for skill development and employment opportunities have emerged in
towns or peripheries, and are thus, difficult to access from areas that are far away.
In Bihar, the scope to utilize the urban–rural linkages for growth potential is limited.
With a total of 14 urban agglomerations, 139 statutory towns and 60 census towns in
2011, the number of urban centers in Bihar is far less than other states. Moreover, these
are unevenly distributed across districts and have not achieved full potential toward
their contribution to the state’s economic growth, which gets reflected in the extremely
high rates of out migration from the state as well as urban centres.
Other features of the Bihar economy that have bearing on the urbanization in the
state are low share of workers in manufacturing and low outreach of the financial
sector. According to the Sectoral Composition of GSDP at constant prices (2000–2001
to 2010–2011)3, with the increased in the overall secondary sector’s contribution to the
GSDP from 10.5 per cent in 2000–2001 to 18.1 per cent in 2010–2011, the contribution
from manufacturing decreased from 5.8 to 4.2 per cent in the corresponding period.
Bihar’s industrial sector contributes only about 16 per cent to its GSDP against 26 per
cent for the national average. The majority of urban workers in Bihar are engaged in
wholesale and retail trade and services, rather than in manufacturing and industrial
sector which plays a vital role in urban growth. According to an analysis based on the
Locational Quotient technique, most cities and towns are largely dependent on the
3. As calculated from Bihar Economic Survey (2013-14) http://finance.bih.nic.in/Documents/Reports/

Economic-Survey-2014-EN.pdf
primary sector (Pangotra and Govil, 2008)4. Biharsharif has been found to be the
only large city where industry is the second basic sector. In addition, though Bihar
has the highest population density of 1102 persons per sq. km among all the states as
well as a high share of rural population at 88.7 percent, the state has limited exposure
to banking services.5 The per capita availability of financial services is the lowest in
the country.
Migration is an important feature of the Bihar economy that results from the
lack of economic opportunities in the state (Rodgers et al., 2013). Outmigration from
Bihar is very high and it is more from the backward districts. Thus, remittances play
an important role in the state economy, especially in reducing rural poverty (ibid).
Thus, there are financial linkages that play a vital role between the rural areas of
Bihar and urban centres in other states, rather than the usual pattern of linkage
between towns and the surrounding rural areas. The poverty ratio in the state is
33.7 per cent as per the 2011–2012 National Sample Survey (NSS) data with little
difference in the rural–urban poverty levels, thereby, implying that there are negligible
economic opportunities in the urban areas of Bihar. The Census 2011 data indicate
considerable gaps in the provision of housing and amenities, such as electricity, water
and sanitation, for most of which Bihar lies much below the national average.
(b) Research Questions
In this backdrop, the current study attempts to examine the urban development of
Bihar on the basis of detailed survey in two sample towns, Biharsharif and
Madhubani. The following research questions provide the basic framework for the
present study. At the outset, a typology of towns and cities in terms of their economic
role and structure as well as their services has been developed. In addition, on the
basis of an enterprise survey in the two towns, an attempt has been made to trace
the sources of urban output and growth, to observe the functioning of urban labour
markets and to understand the rural–urban linkages with respect to development in
the towns that influence the surrounding rural areas.
2. DATA AND METHODOLOGY
The research questions outlined in Section 1 were investigated with the help of
primary and secondary data. With the help of secondary data, mainly the data
4. The Location Quotient technique compares the local economy to a reference economy, and thereby,
identifies specializations in the local economy. Location quotient (LQ) is the ratio of share of an
industry related to employment in the local economy to the share of same in the national economy. A
value of LQ>1for any industry indicates that the local economy is a net exporter of the goods and
services provided by the particular industry. On the other hand, if the value is LQ<1, it indicates that
employment in the respective industry is lesser in the local economy as compared to the reference
economy, and therefore, the local economy is a net importer. In the framework of the standard export
base model, the industrial sectors with LQ>1 are designated as “basic” sectors while those with LQ<1
are designated as “non-basic” sectors.
5. www.sidbi.in/sites/default/files/psig/Status_of_FI_Bihar.pdf accessed on 2nd January, 2015.
collected from the Census of India, the trends and patterns of urban development
and typologies of the urban areas in Bihar were analyzed. Various rounds of the
Census data have been used in this study. The primary data collection was done by
conducting two surveys in each sample town.
The enterprise survey was conducted with the factories, shops and establishments
in the sample towns. In order to extract information about the outputs and growth of
the firms, the survey included various questions regarding identifying the particulars
of the firms, enterprise details, worker related details, details of the members of the
household which has enterprise or shop located within their living premises, related
information about the own account enterprises (OAE), factory workers details as well
as challenges and problems faced by OAE. The survey was conducted during the
months of June and July in the year 2014. A pilot study was conducted during June,
2014, which was followed by the full survey during July, 2014.
Qualitative research tools were also used for the study. In-depth interviews in
industrial settings, corporations, etc. were conducted in order to collect and understand
perceptions regarding development, changes in labour markets, employment
opportunities, challenges to expansion and growth, urban planning, etc. A total of 12
in-depth interviews were conducted with vulnerable workers in the two towns. Ten
interviews were also held with key informants and local urban administrators, state
government officials, local resource persons and officials from various other institutions
such as chambers of commerce. These consultations and interviews were used to
understand macro processes, policies and challenges.
The selection of towns was made on the basis of their size, location, main economy,
level of economic development, proximity to rural centres and large urban centres. On
the basis of 2011 Census data, Madhubani, located in northern Bihar, is a class–II town
with population of 75,736 and is one of the poorest regions of Bihar. It is a market
town and is connected to and dependent on surrounding rural areas. Similarly,
according to 2011 Census data, Biharsharif is a class-I town with a population of 2.97
lakhs. It is a prosperous urban centre, close to Patna, with strong agricultural links
and as per the typology of the urban centres—discussed in the next section on Profile
of Urbanization in Bihar and Typology of Towns—it is the only town in Bihar with
considerable presence of manufacturing activities. The two towns belong to districts
with very different urbanization rates. According to 2011 Census data, Madhubani
has an urbanization of 3.6 per cent and Nalanda has an urbanization of 15.9 per cent.
Therefore, examining the two towns would provide a glimpse into different kinds of
issues.
(a) Sampling Methodology
For the enterprise survey, lists of all the factories and shops/establishments were
collected from the concerned departments of the state government. Smaller numbers
of units were selected from these lists based on the stratified random sampling. The
stratification of the factories and shops/establishments was done on the basis of broad
industrial classification of activities. Among each group, proportionate sample has

been drawn. Using the above methodology, an enterprise survey of 251 units was
conducted in the two sample towns; out of which 139 units were covered in Biharsharif
and 112 units were covered in Madhubani.
3. PROFILE OF URBANIZATION IN BIHAR AND TYPOLOGY OF TOWNS
Bihar, with a population of 104.1 million, is demographically the third largest state of
India after Uttar Pradesh and Maharashtra, but with 11.3 per cent urbanization, it is
the second least urbanized state of India. A comparative picture of the urbanization
process in Bihar vis-a-vis the major states of India shows that most of the major states
are more urbanized compared to the national level, but Bihar along with UP is below
the national average (Table A1 in Annexure I). However, in comparison to the major
states, the population growth rate is the highest in Bihar. Nevertheless, the urban
population is growing at a much faster rate than the total population in major states
including Uttar Pradesh. However, the difference is much less for Maharashtra, Bihar
and Punjab.
(a) District Level Trend and Pattern of Urbanization
The trend and pattern of urbanization at the district level is presented in Table A2 in
Annexure I. Patna is the focus of urbanization in Bihar, which is evident from the fact
that with an urban population of 43.1 per cent in 2011, Patna shared 21.4 per cent of
the total urban population of Bihar. All the other districts have less than six per cent
share in the state’s urban population. In 2001, the number of districts with urban
population more than the state average was only nine. This increased to 11 in 2011.
Begusarai and Jehanabad were the two new entrants in the above state average group.
Fourteen districts recorded a decline (marginal) in their percentage of urban population
during 2001–2011.
In terms of the decadal growth rate of urban population, out of the total 37 districts,
23 districts had the growth rate above the state’s average of 27.5 per cent during 1991–
2001. During 2001–2011, only eight districts had the decadal growth rate of urban
population, that is, more than the state average of 37.4 per cent. Begusarai district
emerged as an outlier with a growth rate of 429.5 per cent (Table A2 in Annexure I).
(b) Economic profile of urban areas in Bihar
The economic data of Census 2011 is partially available and indicate that work
participation rate (WPR) in Bihar is 33.4 per cent, while WPR in urban areas of the
state is lower at 28.6 per cent. Moreover, gender differential is evident from the WPR
for male (46.5 per cent) vis-a-vis that for female (19.1 per cent). Female WPR in the
urban areas is only 10.4 per cent. The main workers in Bihar constitute 61.5 per cent of
the total workforce, and 78.3 per cent of the main workers are from urban areas. Among
the total main workers in urban areas, the share of agricultural and non-agricultural
workers is 17.6 per cent and 82.4 per cent, respectively. Among the non-agricultural
main workers, household industries have only 5.9 per cent, whereas 76.6 per cent
workers are engaged in other industries. Other industries include service sector as
well as factory, plantation, mining, construction, political workers etc.
An urbanized district should have more than 75 per cent of its male main workers
engaged in the non-agricultural activities. The percentage of male workers engaged in
non-agricultural activities in urban areas in Bihar varies from 47.2 per cent in Sheohar
district to 91.3 per cent in Samastipur district (Table A3 in Annexure I). Of the 38
districts in the state, 13 districts do not have even 75 per cent of the male workers
engaged in non-agricultural activities in its urban areas. Erstwhile undivided Bihar
did not take very significant strides in the industrial and economic spheres despite
being endowed with mineral resources. After separation of the state, Bihar remained
with little mineral resources to take up any significant industrial activities.
(c) Functional Classification of towns in Bihar, 2001
The 2001 Economic Census data provide some indication with regard to the
predominant economic activities in each district of the state according to the following
nine categories 6 : Agriculture and allied activities, Mining and Quarrying,
Manufacturing, Electricity, Gas and Water Supply, Construction, Wholesale, Retail trade,
Repair work, Hotel and Restaurants, Transport, Storage and Communication, Financial
intermediation, Renting & Business activities and Other services (Public Administration,
Defence, Education, Health & other services). Agriculture and allied activities is usually
not considered as an urban economic activity. In Bihar, workers in agriculture and
allied activities were in the range of 25 per cent to 50 per cent in as many as 13 urban
areas (Table A5 in Annexure I). Urban areas, however, have a larger proportion of
workers in the secondary and tertiary sectors, and it is this aspect that is relevant to
the functional classification of urban areas.
Data used for the functional classification relate to the main workers in all nine
industrial categories for the urban areas of Bihar. There is no separate table available
in the Census that exclusively provides data for all towns and cities, hence, the
urban areas from the district level tables have been selected as proxy for representing
towns and cities. The Census provides data for cities on the basis of nine industrial
categories, but for Bihar it has covered only 13 cities. Therefore, in the current
exercise, all urban areas have been selected from the district level tables that can
provide information on at least 37 urban areas representing 37 districts.
Broadly, the classification has been done by excluding the agriculture and allied
activities and clubbing the remaining eight activities in three broad categories, that
are, Manufacturing, Trade and Transport and Other Services. Manufacturing includes
household and non-household industries, electricity, gas and water supply and
construction. Trade and transport includes wholesale, retail trade, repair work, hotel
and restaurants, transport, storage and communication. Other services include financial
6. Census data for 2011 is not yet available for the current level of economic participation of workers in
the nine categories of industries, according to the 1998 NIC classification.
intermediation, real estate, renting and business activities, public administration,

defence, education, health and other services.
The classification shows that only one urban area of Biharsharif has been found to
have manufacturing as dominant activities because in this area more workers are
employed in manufacturing than trade and transport and other services. Being the
state capital, Patna has been classified as service city because the state administration
activities are located here. Banka is another urban area in Bihar which has also been
classified as service city because in this city more people are employed in the service
sector than manufacturing and trade and transport. All the rest of 34 urban areas have
been classified under trade and transport category as these activities are dominant in
the remaining urban areas (Table A4 in Annexure I).
The sub classification of the broad categories shows that within manufacturing,
household and non-household industries are predominant economic activities in
comparison with electricity, gas and water supply and construction activities. Similarly,
within trade and transport of the wholesale, retail trade, repair, hotels and restaurants
are predominant economic activities, whereas transport, storage and communication
are subsidiary activities. Likewise, within other services, public administration,
education, health and other services are predominant economic activities in
comparison with financial intermediation, real estate and business activities (Table
A5 in Annexure I).
4. OVERVIEW OF SAMPLE TOWNS
The primary data collected for the present study from both the sample towns is based
on the interviews of representatives from Nalanda Chamber of Commerce, officials of
the District Industrial Centre in Biharsharif, Mithilanchal Chamber of Commerce, and
entrepreneurs. The data collected showed that these towns are characterized by low
urbanization and industrialization, and both the towns have witnessed a decline in
industrial activity in the past few decades.
Out of the two sample towns, Madhubani located in the northern region of Bihar
has a poorer economic base than Biharsharif which is located in South Bihar. Overall,
Bihar has a low manufacturing base as has been discussed earlier, and within Bihar,
North Bihar has a weaker base for manufacturing activities compared to its Southern
counterpart (Table A6 in Annexure I). The data from Census 2011 show the relatively
poorer urban facilities in Madhubani district vis-à-vis Nalanda (Table 2).
The urban amenities are by and large better in Biharsharif compared to Madhubani,
even when adjusted related to their respective populations of 2.97 lakhs and 75.7
thousand, respectively. However, there are exceptions because road length, number
of domestic electricity connections and number of banks per thousand persons are
more in Madhubani compared to Biharsharif.
Table 2: Comparative Urban Facilities in Two Districts (Census 2011)
Facility Biharsharif Madhubani Biharsharif Madhubani

(Total) (Total) (per 1000 (per 1000
persons) persons)
Length of Road (km) 124 45 0.417 0.594
System of drainage Open and closed open
No. of Latrines (flush/pour flush) 61075 6829 205 90
Electrification (no. of connections)
• Domestic 37110 12050 124 159
• Industrial 6836 45 23 0.59
• Commercial 6217 358 21 4.7
Number of medical facilities
(no. of beds in brackets)
• Hospitals (allopathic
and others) 3 (422) 1 (175)
• Medicine shops (no.) 180 28 0.61 0.37
Educational facilities (no. of
primary and middle schools) 146 22 0.49 0.29
No. of nationalized banks 25 10 0.08 0.13
(a) Decline in Industrial Activity
The two sample towns, despite their differences in the size of population,
urbanization and availability of urban amenities, etc., nevertheless appear to be
suffering from a common ailment of low and declining levels of industrialization,
albeit in varying degrees.
(i) Biharsharif
Biharsharif has fertile land in the surrounding rural areas, high agricultural
productivity and plentiful crops, such as rice, wheat, maize, potato, onion, tomato,
cauliflower, cabbage and green chilli, but the survey findings reported a string of
closed industrial ventures in and around the town. Although the town, with good
and improving connectivity with the capital city of Patna, has clearly been growing
with rising population and traffic, it is still pre-dominantly reliant on agriculture.
Important insights have emerged about the industrialization process in Biharsharif
based on the interviews held with entrepreneurs, bank officials and representatives
from the office of District Industrial Centre (DIC) located in Ramchandrapur Industrial
Estate in Biharsharif.
There were many cold storage units in Biharsharif earlier, but the numbers have
dwindled steadily over the years to around 16 at present.7 The production of potatoes
and onions—the main products to be stored in cold storage units—was also plentiful
earlier, and the produces were exported to other states, such as West Bengal and Odisha.
Biharsharif slowly lost this advantage because no government assistance was provided
to farmers in terms of irrigation facilities, improved modern technology, transport
facilities or cooling facilities, all of which apparently were provided in the neighbouring
states such as West Bengal. Above all, the electricity situation was very poor and the
option of using diesel based generators was very costly.
The result was steady closure of many of the cold storage units, and several of
these units were converted into go-downs and rented out, some even sold their land
for construction of market complexes. According to some owners of cold storage unit,
the increase in land prices and encroachment of urban areas into villages along with
increase in house construction led to decline in areas under potato and onion cultivation,
which eventually led to underutilization of capacity in the remaining cold storage
units.
Apart from cold storage units, there were other industrial activities that also went
into decline. Weaving industry is one of them, which underwent deterioration because
of the lack of supply of threads and electricity bottleneck. There were factories for
producing threads and paper, three or four bidi-making factories, and a semi-
government shoe factory that used to supply shoes to the army and the police—all
these factories were closed down. The bidi-making factories in Biharsharif came under
the cottage and small-scale industry, where many people found employment. However,
following the union demands for higher wages and the government’s Labour Act, the
owners preferred to close the factories and provide people with raw material at home
from where they can carry out the work. At present many women work in bidi-rolling
at home, while men pursue other occupations. Another factory that was closed down
because of the intermittent power-cuts was a factory which produced tyres and tubes
for cycles.
Erratic industrial policy, red tape and corruption were mentioned by entrepreneurs
as other important reasons behind industrial closures in Biharsharif as well as behind
the lack of investment in industries. A usual fallout of uncertain industrial policy is
litigations, where entrepreneurs need to fight long legal battles to protect their own
interests.
The present cold storage units are under private limited companies; as earlier
cooperative units have closed down. Many of the cold storage units had taken loans
from banks, but defaulted in their repayment, thereby making banks wary of
extending loans again to this sector.
7. While Cold Storage units are no longer counted as manufacturing units, because they just preserve
vegetables and fruits, however, these are still considered as industrial units by DIC. In this study, these
units have been considered as industrial ventures here because of the scale of investment, use of
technology, lack of similarity with other trading and service units, etc.
(ii) Madhubani
Madhubani, the other sample town, has practically no industry at present, according
to all the key informant interviews. There has been little economic development in
Madhubani, and people migrate from here to access employment, education
opportunities, etc. Much of the industrial activity has been reported to have closed
primarily because of severe electricity shortage, infrastructural inadequacies as well
as erratic government policy8.
Around 30 years back, there was a thread factory in Pandaul in Madhubani
district, which was set up with an investment of Rs. 30 crores. But it was closed
down owing to the shortage of electricity as well as failure of government policies.
Currently, there are some rice mills, ply wood units, poultry feed units, etc. in
Pandaul9. There was also a sugar mill in Rayyam and Rahika, but this mill was closed
down not only because of the above two reasons but also because of the fact that the
sugarcane farmers were not getting price for their product. The farmers here still
produce sugarcane and sell ‘Gur’ (molasses) in the market. The key informants
emphasized that without the fundamental requirements of water, electricity, roads,
etc.; industry cannot develop. Furthermore, security is an important requirement.
According to cinema hall owners, even the business of film showing is currently
going through a crisis in Madhubani. Usually, the viewers here are from rural areas.
The urban footfall is much less because of access to TV, dish, cable, etc. But even for
the rural viewers, the crowds have thinned compared to earlier years during the festival
seasons. Pirated CDs are another source of competition to films. From the owner of a
movie hall, who is our key informant, we came to know that costs in the business have
escalated because money needs to be spent for obtaining film release order, diesel and
mobil for generator, a UFO machine for running film, the monthly rent of which is Rs.
6000 to Rs. 7000, etc. Power shortage and poor quality of power are the main reasons
behind lack of industrial activity in the area. For film industry, specifically, there is a
need for three–phase power supply, which is usually not available. The use of generator
cuts into profits. In addition, they have complained about having to pay higher rate
for high tension electricity and that too for minimum fixed units, which is not always
utilized.
8. While there are some brick-kilns near Madhubani town, this study did not cover these, since only the
enterprises close to the town were covered.
9. Only the enterprises in and around Madhubani town were covered under the survey and hence,
Pandaul was not covered
Box no. 1 Makhana-growing and Fisheries in Madhubani

Makhana: ‘Khaan-paan-makhaan’ is a well-known saying in Madhubani area.
Makhana is a unique product from this region. The survey team gathered considerable
information about the process of growing makhana. In a pond with one acre area,
100 kg of makhana seeds have to be planted in November, or some makhana plants
which have grown elsewhere, have to be replanted. This work needs skill and capital.
Around 60 to 70 labourers are needed and each labourer has to be paid around Rs.
200 to Rs.250. The rent for the pond is around Rs. 10,000 to Rs. 15,000 annually.
After planting, manure worth Rs. 3000 and insecticides have to be added. If the
growth of the plants is not adequate, then per acre a quintal of urea is to be added. In
one acre area, around 10 to 11 quintal makhana is produced. The makhana is ripe
for picking around July end or August beginning. Taking makhana out from the
pond is also a difficult task and is usually done by the Mallah and Machhuara
(fishing) communities.
The raw makhana with seeds is usually sold in the market for Rs 60 to Rs. 70 per kg.
The raw makhana can be converted into ‘Lawa’ makhana using a difficult process,
and it is usually carried out by the Mallah communities. Some other communities
engaged in this work are Sahani, Kewat and Machhuara. Around three kgs of raw
makhana yields one kg of Lawa makhana, and the cost of conversion is around Rs
120 Rs. 140 per kg.
Fisheries: Usually, seeds worth Rs 5000 to Rs. 6000 are used for one acre. Fish seeds
come in three sizes: (i) Ghani, (ii) Finger and (iii) Fry. The seeds have different rates.
Medicines and chuna are added to the pond water to keep it clean. Separate medicines
are needed if the fish gets sick, or to prevent sickness and also for adequate growth.
Around Rs. 10,000 is spent for feed. Private ponds require rental to be paid at Rs.
10,000 to Rs. 15,000 per annum. Around five to six quintal fish are bred if everything
goes according to the plan. To catch the fish from the ponds, labourers have to be
employed who take 10 kgs out of 80 kgs fish as their payment. If the catch is more,
they get paid at Rs. 500 to Rs. 600 per quintal.
Source: Field Survey.
The rural populace around Madhubani town engages in farming, but that too is
only for a few months in a year. Growing makhana and pisciculture or breeding fish
are the two main agriculture–based activities which have linkages to the urban market.
Other than that there is large-scale migration from the rural areas for sustenance in
the medium as well as long term.
At present, there is no sizeable industry that employs a large number of people.
However, there are villages near Madhubani town where many residents are known
for their ‘Mithila painting’ or ‘Madhubani painting’, which is a local art form. These
artists do not have a lot of linkage with the local Madhubani town, but have links
with bigger cities such as Patna, Delhi, etc., and have buyers even from overseas.
Brokers come from Patna to buy their products and sell these in other cities. There
is also some handicraft based on Sikki grass. The survey team interviewed employees
in a handicraft emporium run by Sarisab Pati Rural Women’s Development Association
and learned about the decline of this handicraft industry over time. Earlier 140
women workers used to work for this association, but with decline in demand for
this handicraft and lack of marketing, the number has dwindled to 40 now. The raw
material, Sikki grass, for these products is bought from the impoverished Musahar
community, so they are also adversely affected by this situation (see Annexure II for
details).
Overall, with low industrialization, the economy in and around Madhubani town
is very dependent on agriculture based activities, such as growing makhana and
fisheries. Makhana is an agricultural product that can be sold either in the raw form
or in the processed form in the market. Makhana farming is expensive and the farmers
are usually not well-off. So, they often take resort to loans from money lenders and
traders at three to five per cent per month interest rate. The capital being borrowed,
the farmers are in a hurry to sell their product and repay the debt. Fish is very often
bred in the same ponds where makhana is grown, only at a different time. Usually,
ponds are rented out for makhana from October and from July for fish-breeding.
Unlike for makhana, there is no problem in marketing and selling fish and there is
more profit (see Box no. 1 and Annexure II for further details).
5. FINDINGS FROM THE ENTERPRISE SURVEY
The lack of industrialization in the two sample towns is reflected in the findings
from the enterprise survey conducted in these two towns. The overall functional
classification for the districts in Bihar has indicated that trade is the main source of
urban output, and this is observed on the basis of number of the different types of
enterprises prevalent in the sample towns, Biharsharif and Madhunbani (Table 3).
In majority of the cases, the owners were the respondents. Trading units accounted
for 68 per cent out of 251 units that were surveyed. Manufacturing (including cold
storage units) and other services held second and third position in the sample towns,
with 18 per cent and 11 per cent shares, respectively, and there were a few enterprises
which are engaged in both service and trade.
Table 3: Distribution of Surveyed Enterprises by the Type of Activity
(Percentage in Brackets)
Type of Unit Biharsharif Madhubani Total

Manufacturing 38 (27) 8 (7) 46 (18)
Trade 84 (60) 87 (78) 171 (68)
Other Services 12 (9) 16 (14) 28 (11)
Service and Trade 5 (4) 1 (1) 6 (3)
Total 139 (100) 112 (100) 251 (100)

Manufacturing units include agro-processing units, such as rice, oil and flour
mills, cold storage units as well as furniture units, saw mills, etc. Trading is observed
in food, textiles and garments, utensils, electrical items, jewellery, watches, shoes,
etc. Other services comprise cyber cafes, hotels, restaurants, medical services, cinema
halls, etc. Six units which combined services and trading consisted of enterprises
which sell motor parts, pump sets, cycles/motorcycles, cycle tyre and parts,
motorcycle parts, etc. and provide repairing services for the same. In keeping with
lower urbanization levels, Madhubani exhibits far less manufacturing activity than
Biharsharif.
The enterprises typically exhibited small scale operation where out of the 251
units that have been surveyed; the share of Non Directory Enterprises10 (NDE) is
the highest at 46 per cent, followed by Own Account Enterprises (OAE) with a
share of 37 per cent and Directory Enterprises (DE) with only 17 per cent (Table 4).
Thus, the OAEs comprise a fairly large proportion of the sample. Since the OAE
units are of relatively smaller size and do not employ hired workers on a regular
basis, the impact of such units on the growth in other segments of the economy is
limited. Between the two towns, Biharsharif accounts for most of the Directory
Enterprises, while in the Madhubani sample, Own Account Enterprises comprise 50
percent, vis-à-vis 27 percent for Biharsharif.
Table 4: Distribution of Surveyed Enterprises in the Sample Towns
(percentage in brackets)
Type of Enterprise Total Biharsharif Madhubani

Own Account Enterprise 93 (37) 37 (27) 56 (50)
Non Directory Enterprise 115 (46) 72 (52) 43 (38)
Directory Enterprise 43 (17) 30 (21) 13 (12)
All Enterprises 251 (100) 139 (100) 112 (100)
Figure 1: Distribution of types of enterprises by size of annual turnover (percentage)
10 . An enterprise, which is run usually without the help of any hired worker employed on a fairly regular
basis, is defined as an Own Account Enterprise (OAE). The DEs are enterprises which employ 6 or
more workers (household and hired workers taken together) of whom at least one hired worker is
employed on a fairly regular basis. The NDEs refer to enterprises which employ less than six workers
(household and hired workers taken together) of whom at least one hired worker is employed on a
fairly regular basis.
The smallness of size is reflected in the 75 per cent share of enterprises with a
turnover of less than Rs. 20 lakhs (Figure 1 and Table 5)11. It is also reflected in the
fact that around 82 per cent of the surveyed enterprises have been found to employ
less than five workers (Table 6). Among the bigger units, there are cold storage
units and saw mills, all of which are located in Biharsharif. In Madhubani, DEs
include hotels and restaurants, electronics shops, and cinema hall.
Table 5: Distribution of Enterprises by Annual Turnover (Rs) of Enterprise (Percentage)
Unit type Up to 2-4 4-8 8-12 12-20 20-40 40-50 Above Total
2 lakh lakh lakh lakh lakh lakh lakh 50 lakh
Manufacturing 8.7 10.9 15.2 15.2 15.2 15.2 6.5 13.0 100.0
Trading 11.7 13.5 19.3 21.1 15.2 9.9 3.5 5.8 100.0
Other Services 21.4 14.3 10.7 14.3 3.6 14.3 7.1 14.3 100.0
Service and Trade 0.0 0.0 66.7 16.7 0.0 16.7 0.0 0.0 100.0
Grand Total 12.0 12.7 18.7 19.1 13.5 11.6 4.4 8.0 100.0
The NDEs in Biharsharif comprise grocery or kirana stores, cloth store, furniture
manufacturing, saw mill, cycle repair, hardware, engineering works, electronics, shops,
etc. In Madhubani, some of the NDEs surveyed constitute grocery store, medicine
store, machinery, book, cycle repair shops, cloth shops, jewellery shops, etc. However,
in both the towns, OAEs include cloth stores, grocery store, shoe stores, etc. Biharsharif
has some flour mills and Madhubani has some electrical goods shops, clinics, etc.
Table 6: Distribution of Enterprises by Number of Workers
Type of enterprise/shop Total worker

1–5 6 –9 >10 Total
Own Account Enterprise 93 0 0 93
Non Directory Enterprise 115 0 0 115
Directory Enterprise 0 24 19 43
Total (number) 208 24 19 251
Percentage share (%) (82.9) (9.6) (7.6) (100.0)

Among the different types of activities, only seven manufacturing units are large,
employing more than nine hired workers. This includes all the cold storage units;
some saw mills and furniture units. More than 92 per cent of the trading enterprises
employ less than five hired workers, but the corresponding percentage for other
services is lower than 50 per cent. The service units employing more workers are
cinema halls, hotels, restaurants, etc.
11. It may be noted that the total number of Directory Enterprises in the sample is fairly small at 43, but
given that a high share of around 60 percent or nearly 26 enterprises fall in the category of turnover of
above Rs 20 lakh, indicates that these are relatively large units.
(a) Structure of Enterprises: Formal vs. Informal12
Around 69 per cent of the survey enterprises claimed that they are registered with
some authority. But the survey enterprises were by and large informal in their structure
as reflected in the very low share of written employment contracts provided to the
workers (5.1 per cent of surveyed enterprises), high share of absence of contract (33
per cent in Madhubani although just four per cent in Biharsharif), and the practice of
not maintaining accounts (51 per cent). The provision of drinking water (72.8 per cent)
and toilet facilities (48.7 per cent) at the worksite shows considerable deficiency. For
both the types of provision, services units and manufacturing units are better off.
A low share of the survey units was found to provide social benefits, such as sick
leave, paid leave, PF, gratuity, bonus, housing, clothing, meals, etc. More than three–
fourth of the survey enterprises had fixed premises outside household premises as
well as permanent structure, so the informality was less in this regard. The services
units had a high share of location within the household premises. The association of
social security provisioning with larger enterprises is evident from Figure 2. Almost
all the benefits are provided relatively much more by DEs, although even for those,
the maximum percentage of reporting units does not exceed 49 per cent. Clothing,
paid leave, medical aid, etc. were provided by 44 to 49 per cent of the DEs, and even
provident fund and bonus were provided by around one-fourth of the DEs which
were surveyed.
Figure 2: Provision of selected social security benefits in DE and NDE Units
(% of enterprises surveyed)
12 . The degree of formality in the survey enterprises has been probed with the help of information regarding
whether the enterprise is registered, the type of contract provided to the workers, whether the enterprise
maintains regular accounts, the frequency of inspection and the incidence of registration of the units.
The facilities provided to the workers have also been investigated.
(b) Functioning of Urban Labour Markets
(i) Hiring of different types of workers and working hours
Of the 158 enterprises which hire workers, most employed adult males and regular
(referred to as permanent) employees, whereas approximately half of these enterprises
also employed temporary workers. Further, it was observed that 16 to 17 per cent of
the surveyed enterprises reported about hiring casual and contract workers. The hiring
of unskilled workers had been reported by 74 per cent of the 158 enterprises, followed
by skilled workers (reported by 50 per cent enterprises) and semi-skilled workers
(reported by 21.4 per cent enterprises).
Of the total hired workers in the surveyed enterprises, there are 38 per cent regular,
34 per cent temporary, nine per cent casual and 20 per cent contractual workers.
Manufacturing enterprises showed a high share of contract workers; for instance the
cold storage units have 55 to 65 per cent share of contract workers. On the other hand,
there was a high share of regular workers for other services. Between the two survey
towns, Madhubani showed a higher share of regular workers (58 per cent) compared
to Biharsharif (30 per cent). The latter has more contract (24 per cent) and casual workers
(12 per cent) than Madhubani (8 per cent contract and 2 per cent casual workers).
Working hours were found to be long for 80 per cent enterprises which reported
daily working hours to be 9 to 12, and about half of the enterprises reported that
employees work for seven days in a week, whereas the other half reported that
employees work for six days in a week.
(ii) Rural–Urban Linkages
Hiring of Workers from Rural Areas: Of the 158 enterprises that hire workers, 55 per cent
reported about hiring workers from rural areas along with workers from urban areas
(data not shown). This demonstrates quite strong linkages of the survey enterprises
with the rural milieu. Of the 87 enterprises that reported hiring workers from rural
areas, 56 are NDE or smaller units and the rest are DE. The distribution of enterprises
that hire rural workers between the two towns is 62 in Biharsharif and 25 in Madhubani.
Biharsharif has a much higher share of enterprises hiring rural workers at 60.8 percent
vis-a-vis Madhubani at 44.6 percent. The use of hired workers commuting from
rural areas was reported more by manufacturing enterprises (72.2 percent) 13.
The rural–urban linkage is identified with more clarity when we observe that of
the 610 adult workers hired for the survey enterprises14, as many as 443 workers or
13 . Although services and trade enterprises showed high share of hiring workers from rural areas (83.3 per
cent of enterprises), it may be noted that only six such units were covered in the sample.
14 . The analysis is based on the reports of 152 enterprises out of the 158 survey enterprises. Four enterprises
hire only child workers and two enterprises could not provide disaggregated data for workers from
rural and urban areas.
72.6 per cent are from rural areas (Table 7). The DEs’ share of rural workers is
higher than NDEs, and Biharsharif data show that nearly 80 per cent workers come
from nearby villages, while for Madhubani, the corresponding share is lower.15
Table 7: Hired workers among enterprises and sample towns
Hired adult worker Percentage

(Current year) of hired worker
from rural
areas (%)
Rural area Urban area Total
Type of Establishment NDE/S 126 92 218 57.8
DE/S 317 75 392 80.9
Town Bihar Sharif 360 91 451 79.8
Madhubani 83 76 159 52.2
Type of Activity Manufacturing 207 23 230 90.0
Trading 148 91 239 61.9
Other Services 77 51 128 60.2
Service and Trade 11 2 13 84.6
Total 443 167 610 72.6
Among different types of activities, the manufacturing enterprises use maximum

hired labour from rural areas (90 per cent of workers), followed by service and trade
(84.6 per cent of workers) 16. The other two categories also have a high share of
around 60 per cent. Cold storage units17, saw mills and furniture making units are
some of the types of manufacturing units which hire many rural workers. Among
the service and trade units, the automobile workshops, units engaged in cycle
repairing and selling cycle parts, etc. hire more rural workers. In trading activity,
the enterprises which hire more rural workers are grocery shops, general stores,
garment stores, electronic shops, chemists’ shops, etc. Other service enterprises hiring
large number of rural workers constitute cinema halls, hotel or restaurants, courier
services, automobile showrooms, tailors, etc.
Nearly half of the hired workers travel a distance of 4 kms to 6 kms daily and
spend around Rs. 16 to Rs. 20 daily to reach the workplace. Informal hiring practices
abound in the labour market, as around half of the 158 enterprises reported that
15 . However, it may be noted that many of the daily commuters from nearby rural areas, such as rickshaw-
pullers, masons, etc., are not part of the enterprise survey, and were covered under qualitative interviews.
16 . These were, however, very few in number.
17 . Cold Storage units have been included as part of manufacturing rather than trade or services because
of their scale of operation and dissimilarity with either trade or services.
they hire workers through family or friends connections and around 40 per cent
reported that workers come seeking employment. The role of advertisement and
employment exchange is insignificant and that of social connections, i.e. the informal
network of family, friends, and community, is the most. The enterprises reported
that they find it more difficult to recruit skilled than unskilled workers.
Box No. 2: The Decline of Cold Storage Units in Biharsharif

Over time there has been a steady decline in the number of cold storage units in the
area, till there are now only around 16 units left. The closure have reportedly occurred
mainly because of power shortage, competition from neighbouring states such as
West Bengal, lack of modern technology for chilling, etc. At present, with high land
prices, setting up new units faces the problem of prohibitively high cost. Moreover,
local banks are reluctant to extend loans because of the default in loan payment in
the past. The remaining cold storage units were have followed survival strategies
that include giving advances to farmers for output, storing fruits brought in from
North India, and so on. Most surveyed units were found to have undergone
contraction in business in the last five years. The respondents said that while prices
rose for both inputs and outputs, sales declined.
The decline in fortunes of the cold storage units have significant implications for the
Biharsharif town and the surroundings because these large units employ large
number of workers (on an average 20–30 workers) and have high rural–urban
linkages, both in terms of backward input linkage as well as hiring a large number
of workers from rural areas.
Backward and Forward Linkages: The rural–urban linkages are also manifested
through forward linkages, such as where the products of the enterprises are sold, as
well as through backward linkages, such as from where the raw materials or inputs of
the enterprises are obtained. Manufacturing enterprises were found to exhibit the
maximum rural–urban linkage in terms of input–output, because much of the raw
materials in these units are procured locally from surrounding rural areas. For instance,
cold storage units in Biharsharif source potatoes and onions from the local farmers.
There are agro-based mills, such as rice mills, flour mills, oil mills, etc. The products of
the surveyed enterprises are largely sold locally as 88.4 per cent of the 251 surveyed
units reported selling their products at local destinations. For the manufacturing
enterprises, the share of local destination is the highest with 93.5 per cent.
The local destination can have consumers both from the town itself as well as the
rural inhabitants coming to the town to buy these products. For instance, there are
many rural people who watch movies in the cinema hall in the town. People also come
from rural areas for other purchases, such as garments, shoes, food, etc. as well as for
education and medical treatment. There is traffic in the opposite direction as well as
ice cream vendors, utensil vendors and the like peddle their goods in the nearby
villages as well as in the town. These imply considerable forward linkage as well.
There are rural–urban linkages via self-employment and employment in
vulnerable occupations. Many villagers near Madhubani commute daily to the town
to earn their living as rickshaw-puller, masons or vendors. In Biharsharif, there are

many erstwhile rural inhabitants who live in settlements in the outskirts of the town.
There is considerable outmigration from villages near Madhubani, so that there is
link with the other parts of Bihar and other states of India, too. There are some
forward linkages as well because much of the output of the manufacturing units are
sold locally to both rural as well as urban customers. Subsequently, there are vendors
from the town who sell their merchandise in the rural areas, thereby showing the
importance of rural demand for these products.
(iii) Wages paid to Workers
In keeping with the informal nature of the majority of the enterprises, wages for
unskilled workers (including that for semi-skilled workers) were found to be fairly
depressed, with the majority getting paid just Rs. 3000 to Rs. 4000 per month. Skilled
workers get paid a little more between Rs. 5000 and Rs. 8000 per month. Thus, the gap
between skilled and unskilled workers is not very large. The wages are lower on an
average in Madhubani than in Biharsharif. Figure 3 shows that the wages paid to
unskilled (including semi-skilled) workers in NDEs are very low18. Among enterprises
reporting employment of unskilled workers, 63.5 per cent paid less than Rs. 4000
per month, out of which 28.1 per cent paid between Rs. 1000 and Rs. 3000 per month.
Around 35.3 per cent of the reporting enterprises pay their workers in a range of Rs.
4000 to Rs. 8000 per month.
Skilled workers earn slightly more than the unskilled workers, as might be expected,
but the wage gap is not much. The bulk (56.6 per cent) of the enterprises reporting
skilled workers in NDEs pay between Rs. 4000 and Rs. 7000 a month. Out of these,
Figure 3: Monthly Wage Rate (Rs) for NDEs by percentage of Reporting Enterprises
18 . The wages for workers employed by DEs are not analyzed, given the small number of enterprises in the
sample (43 in all).
the highest share (30.4 per cent) is for those who are paid between Rs. 5000 and Rs.
6000. In approximately 15.2 per cent enterprises, workers earn very low wages
between Rs. 2000 and Rs. 4000 per month, while 28.2 per cent have wages in the
range of Rs. 7000 and Rs. 10,000 or above.
(c) Growth in Urban Output
The assessment of urban growth was based on the perception of the respondents in
the enterprises which have been operating for the last five years. Expansion in business
was reported by a high share of 64 per cent for the 224 units which have been operating
for the last five years, but 20 per cent reported contraction and 16 per cent reported
stagnation (Table 8). The driver for expansion was the trading units with almost all
trading activities such as trading in automobile parts, construction materials, electrical
and electronic goods, chemists’ shops, fruit and vegetable vendors, grocery stores,
general stores, hardware shops, jewellery stores, etc. reporting expansion. Garments
as well as shoes and leather businesses are exception among them as these businesses
reported mixed progress because sales are dampened by competition.
Table 8: Enterprise Status over the Last Five Years (No. of Units)
Unit type Expanding Stagnant Contracting Total

Manufacturing 17 9 18 44
Trading 105 26 17 148
Services 17 1 8 26
Service and Trade 5 0 1 6
Total (% in brackets) 144 (64) 36 (16) 44 (20) 224 (100)
Manufacturing activities showed contraction except the saw mills. Other services
as well as service & trade units19 mostly exhibited growth except cinema halls, which
faced competition from television, pirated CDs, etc. apart from being adversely affected
by high cost. Some of the services which have been a source of growth are clinics,
hotels/restaurants, courier services, tailors, etc.
(d) Problems faced by the Enterprises
The maximum number of enterprises reported facing problems and bottlenecks

related to electricity shortage, general infrastructure, lack of access to funds, corruption,
lack of skilled workers, limited market, government policy issues including red tape,
taxation and lack of stability in government policy. Furthermore, many respondents
in Madhubani even mentioned a general dearth of economic development in the
region, including poor availability of education and health facilities.
Electricity was the key bottleneck area indicated by all types of enterprises. For
DEs and NDEs, this was followed by poor public infrastructure. However, for OAEs,
19 . The number of Service and trade units in the sample, however, is very small.
the second most challenging problem was lack of sufficient funds. Larger shopping
complexes have become a source of competition for enterprises dealing in garments
and some other traded items. Some respondents mentioned inadequate market. For
instance, some medical clinic-owners mentioned insufficient footfall of customers. Many
enterprises of all types suggested that the tourism destinations can be developed.
Furthermore, the entrepreneurs in DEs emphasized on providing training for
agricultural development, skill development and general development of educational
institutions, as enterprises find it difficult to recruit skilled workers.
Box No. 3 Insights into Selected Sectors
Large Enterprises: Most of the large enterprises are located in Biharsharif and all
such units reported being badly affected by the poor supply of electricity. The
owners of large hotels and restaurants complained of not getting good profit from
AC rooms because of power shortage. The alternative of using generators adds to
cost. Some hotels have been forced to close down, as the profit margin is low. Some
owners of the furniture-making units complained about higher cost of production
because of generator usage that lead to increase in price of products. For this reason,
the above-mentioned products cannot compete in the market.
Accessing credit is one of the important constraints of this sector, especially because
they are relatively more capital-intensive. Often they face difficulty in getting credit
from the formal sector, especially in terms of being asked to pay bribes. Many
large enterprises complained about a dual tax structure and said that it should be
replaced by a single tax structure.
A few owners face problems in procuring raw materials particularly when these
are sourced from other states (as in the case of saw mills), where the owners have
to pay a huge amount of bribe. The inspectors often harass the truck owners in the
name of overload. The area under potato has declined over time with increased
demand for land, so the supply of raw material for the cold storage owners has
become limited, and this has an adverse impact on obtaining credit for the cold
storages units.
All the large units pointed out the need for good roads because it directly or
indirectly affects the profitability of the unit. With better roads, the time taken to
bring raw material would be less, thereby, reducing cost. The owners of furniture
manufacturing complained that owing to lack of proper drainage facility in the
vicinity of their shop, many a time they face water logging and raw materials get
damaged.
Own Account Enterprises: Many OAEs found space to be a major constraint. The
alternative of renting premises is not attractive because of high rent. The
entrepreneurs suggested that the panchayat or municipality should construct the
shop building and rent these out.
Power shortage has a major impact on their sales. Many grocery shop owners
complained that they are forced to close the shop in the early evening, as they have
to bear a high cost of generator and also the customers hesitate to go out for shopping
during power cuts.
Change in customers’ preference is also responsible for reduced sale by OAEs. The
customers are now used to buying packaged atta/maida (flour), dal (lentils), etc., so
they do not buy unpackaged produce from the grocers. Giving the consumable items
on credit to customers is a common practice in small towns. The grocery shop owners
complained that customers repay very late after taking goods on credit. Some time
they do not repay, leading to altercations.
Again most of the OAE units face problems because of the lack of road infrastructure
that reflect the need for a planned way of investing in infrastructure. In rainy seasons,
often their earnings are less as the customers are not interested in coming to the
shops in water logged areas. Some of the vegetable and fruit vendors said that traffic
police harassed them most of the time, and they demand bribe for keeping the vending
cart in a particular place. Sometimes they take the vegetable or fruits without any
payment or paying less.
Considering the town-specific issues in Biharsharif, the DEs highlighted the power
shortage and NDEs cited encroachment on roads, lack of space, problem of parking,
etc. But the issues cited by OAEs were different in nature as these issue comprised
non-repayment by customers, bribe, insufficient profit margin, etc.
In Madhubani, apart from the electricity shortage, the DEs and NDEs focused on
steep hike in the transport cost. Located in North Bihar, Madhubani is relatively less
accessible and dependent on transport of goods over longer distances compared to
Biharsharif. Moreover, NDE units in Madhubani highlighted the problem of increasing
tax burden and changing tax rates. The OAEs had similar complaints regarding tax
rates and even pointed at lack of security.
In general, entrepreneurs in Madhubani blamed the lack of industrialization and
urbanization for poor development and as a consequence there is low demand for
goods and services. In Biharsharif, the need for holistic town planning, better
infrastructure and all-round urban development was highlighted by some respondents.
Inflation, corruption, lack of skilled workers and lack of a stable tax policy were among
the other crucial problem areas outlined by the enterprises.
7. CONCLUDING REMARKS
Madhubani and Biharsharif have seen a gradual decline in industrial activity over the
years. Both towns are characterized by small-sized enterprises, which are largely
informal in structure. Some industrial activity remains in Biharsharif in the form of
saw mills, cold storage units, etc., but much of the activity is agro-based. Biharsharif
also has better connectivity than Madhubani and can possibly revive some industrial
activity with better power supply as well as credit supply. In general, the survey
team found some planning for industries around clusters for the Nalanda district at
the District Industrial Centre located in Biharsharif.
The self-employed, in the form of OAEs, were found to comprise a fairly large
proportion of the sample, and more so for Madhubani. These units are of relatively
smaller size and do not employ hired workers, so the growth impulses that these
can transmit to other segments of the economy are limited. The smallness of size is
also reflected in the 75 per cent share of enterprises with a turnover of less than Rs.
20 lakhs, while around 82 per cent of the surveyed enterprises were found to employ
less than five workers.
Few enterprises were found in manufacturing activities, and trade was found to
be the main source of urban output in terms of number of enterprises. The evidence of
rural–urban linkages through hiring of local labour by enterprises was the strongest
for manufacturing activities, and the backward linkage through use of local inputs
was also the most for these enterprises. In addition, though the manufacturing
enterprises hire both skilled and unskilled workers, the trading and other service units
hire more unskilled workers. In the sample towns, there were not only very few
manufacturing enterprises, but also seven manufacturing units that were large,
employing more than nine hired workers. This includes all cold storage units, some
saw mills and furniture units. Although trading and other services enterprises also
hire local rural labour, the linkages are weaker in comparison with manufacturing
enterprises. Moreover, the enterprises related to trading and other services are small
in size. More than 92 per cent of the trading enterprises employ less than five hired
workers.
Biharsharif has shown some presence of manufacturing activity and these units
have strong backward linkages with the nearby rural areas. Because of the dominance
of trading activity in the towns, despite fairly strong rural–urban linkages, the towns
have not been able to provide a lot pull factor to the rural areas, and it has not been
possible to transmit growth impulses in the areas. Biharsharif has some industrial
activity and some linkages with the nearby villages owing to pull factors of better
jobs. Moreover, its rising population and good connectivity with Patna has contributed
to better demand for products, as well as rising land prices, more construction activity,
etc. However, higher land prices and subsequent construction activity along with
paucity in irrigation facilities have impacted the area under agricultural production
adversely, and this has indirectly affected some of the activities, such as cold storage
units because of lower supply of inputs.
Overall, between the two cites, Madhubani presents a worse scenario because the
linkage of workers travelling from nearby villages is more owing to push factor than
any industrial activity in Madhubani. In fact, these push factors prompt more migration
from the villages to other states for most part of the year as well as multiplicity of
occupations to make ends meet. For instance, the residents combine two months’
farming in the village with six months’ work as a construction or other type of labourer
in Delhi, Gujarat, Punjab and other states. High share of OAEs in enterprises (50 per
cent of total survey enterprises in Madhubani) imply limited scope for absorption of
local rural labour.
A high degree of informality was observed among the survey enterprises, and
the informality was reflected in the very low share of written employment contracts,
high share of absence of contract and the practice of not maintaining accounts. Less
than three-fourth of the enterprises reported that they provide drinking water at
the worksite, and sanitation facilities were found to be very deficient with just 48.7
per cent units providing toilet facilities. For both types of provision, services units
and manufacturing units are better off. The incidence of training programmes for
workers was extremely low. An important feature of the informality of the survey
enterprises was the very low share of units providing social benefits, such as sick
leave, paid leave, PF, gratuity, bonus, housing, clothing, meals, etc.
In keeping with the informal nature of the majority of enterprises, wages for
unskilled workers were found to be fairly depressed as majority of them get paid just
Rs. 3000 to 4000 per month. Skilled workers get paid a little more between Rs. 5000
and Rs. 7000 per month. Thus, the gap between skilled and unskilled workers is not
very large. The wages are lower on an average in Madhubani than in Biharsharif.
Manufacturing units are amongst the lowest payers of social benefits to workers
as well as the largest hirers of labourers from rural and remote areas. It throws up a
question regarding the poor bargaining power of workers coming in to work from
rural hinterland vis-a-vis those coming from urban or peri-urban areas. Nearly half of
the hired workers travel a distance of 4 to 6 kms daily and spend around Rs. 16 to Rs.
20 daily for reaching the workplace. Persistence of informal practices is seen in the
hiring practices in the labour market-, as around half of the 158 enterprises reported
that they hire workers through family or friends and around 40 per cent reported that
workers come seeking employment. The role of advertisement and employment
exchange is negligible and that of social connections the most.
Rural–urban linkage was observed to be the highest for manufacturing activities
both in terms of labour and input–output linkage, yet manufacturing enterprises have
been suffering most contraction and stagnation with the exception of saw mills. The
growth in the two sample towns has come mainly from trading activities with almost
all types of trading activities reporting expansion except garments as well as shoes
and leather businesses as these businesses show mixed progress. Other services as
well as service and trade units have mostly exhibited growth except cinema halls that
suffer loss because of competition from television, pirated CDs, etc. as well as owing
to high cost. Overall, the contraction in manufacturing activities has significant adverse
implications in terms of opportunity of pulling surplus rural labour into more
productive activities because of weaker rural–urban linkages.
The surveys made it evident that major obstacles; such as poor electricity supply,
infrastructural bottlenecks, credit at affordable rates, supply of skilled workers, more
stable tax policy, serious governance deficits in the form of corruption; need to be
addressed urgently if the economies are to follow a trajectory of industrialized growth.
Alongside, there is need for investment in industry and measures for skill development.
Among the two towns, Biharsharif does not appear to suffer from demand or limited
market problems, and the problems are more on the supply side. Urban growth in
Madhubani is hampered by lack of infrastructure on the supply side as well as by
limited local demand for products, such as makhana and fish, which it can grow.
There is severe indebtedness on the part of the makhana farmers, who use sales
proceeds to first repay their debt.
To conclude, firstly, the two towns need all-round improvement in infrastructure,
especially in the supply of electricity in order to revitalize their economy.20 Small
shopkeepers, in particular, will directly benefit because an improved electricity supply
would enable them to keep their shops open beyond daytime, thus, boosting sales and
revenue. It has been observed in the study, even trading and other service units have
potential for employment of rural workers. The bigger enterprises, which use high-
cost diesel generators as a substitute for electricity, will become more competitive and
therefore would lower use of diesel, and this will have a favourable impact on the
environment. Dedicated supply for Industrial Estates can also be thought of.
The second important area that needs attention is financial expansion and inclusion.
While the number of bank branches has expanded in the survey towns, especially in
Biharsharif, the credit–deposit ratio is still very low. It also appears that capacity–
building is needed on the part of the bank officials for processing loans of large size.
Simultaneously, screening procedure of loan applicants needs to be tightened to filter
out the non-serious ones. The OAEs would particularly benefit from easier availability
of funds, because these entrepreneurs find it difficult to access formal loans.
Furthermore, tt was found in the survey that there are many Muslim entrepreneurs in
the OAE segment, and thus, this minority community would directly benefit from
better availability of capital.
Governance issues must be ironed out including removal of the corrupt practices
that allegedly exist at every stage of setting up an enterprise and running it. The
governance issues also have another side, which is policy planning. Stability in
government policy regarding approval of projects, land allotment, loan approval,
taxation structure, etc. is highly desirable.
In terms of initiatives to boost industrial and urban development, there is a need
to set up industries in the state to provide stable job opportunities to the locals. The
rural–urban linkages—especially in Biharsharif which has more manufacturing
activity—are well-established from the study. Biharsharif has a very productive rural
hinterland with production of a variety of vegetables. Agro-processing industries, such
as making juice/pulp, etc., as well as frozen and packaged fruits and vegetables could
be given a boost in the town because raw material would be cheaply available.
Furniture-making, saw mills and grill-making, etc. are actively growing and so can be
further expanded. Biharsharif, being in the Buddhist circuit, is already seeing expansion
in service areas such as hotels and restaurants, and this aspect of tourism should be
promoted in this area.
In Madhubani, people depend a lot on income from migration, and more
20.
During a recent visit to the sample towns in 2015, the authors have found a much improved position
for electricity supply.
employment opportunities will give a boost not only to the urban populace, but also
to the surrounding rural areas. Madhubani suffers from a limited market, and this
market needs to be expanded. In the makhana-based activity, the produce from the
rural areas near the town must be linked to the entire supply chain by involving
both the raw makhana and refined ‘Lawa’ makhana through an organized (preferably
Government) network, so that the farmers—many from mallah, machhuara
communities—benefit more from the final profits and can escape perennial
indebtedness. A similar planning could be undertaken for the pisciculture in the area.
Similar government support is needed for the Mithila handicraft industry in
Madhubani, where the handicraft products need to be linked up with the local markets
within-state as well as in markets outside the state for sale. In this chain of production,
a major beneficiary could be the SC Musahar community that would receive higher
prices for the grass they supply. Women comprise the main workers engaged in
handicraft making, and thus would directly benefit from any boost given to this
industry. But government support must eventually enhance competitiveness, so that
the industry can survive in the market without support.
There is a need to establish skill development or training facilities for workers,
because some of the bigger enterprises indicated difficulty in recruiting skilled workers.
In this context, there is a widely felt need for establishment of better educational
opportunities at all levels, such as schools, colleges, vocational training, etc. in addition
to better medical facilities, including hospitals and healthcare facilities in both the
towns. Such provision of urban facilities could help to retain good workers and prevent
them from migrating to other parts of the state or the country.
The widespread incidence of informality in the survey enterprises underscores
the need to expand formalization of the labour market, so that in their work place
workers get better wages (to begin with at least go beyond the poverty level) as well
as water and sanitation along with other basic facilities. Furthermore, they must receive
an acceptable level of social benefits including medical leave, meals, PF, gratuity, bonus,
etc. The working hours, too, must be reduced in keeping with norms laid down by the
state government.
Finally, the enterprise survey showed a virtual absence of women workers. In
the key informant interviews, though women workers were mentioned in the context
of Mithila handicraft in Madhubani, which had started out as a co-operative, the
low female participation in wage work is a challenge that needs to be addressed
with urgency and ways must be explored, such as job schemes targeting women in
the area, skill development of women, etc. It is possible that the expansion of
education and healthcare facilities will give rise to more job opportunities for women.
ANNEXURE I
Table A1: Growth of Urban and Total Population in Some Major States of India
States Level of Level of Annual Compound Annual Compound

Urbanization Urbanization Growth Rate of Growth Rate of
2001 (%) in 2011 (%) Urban Population Total Population (%)
(%) (2001-2011) (2001-2011)
Bihar 10.47 11.30 3.08 2.52
Gujarat 37.35 42.58 3.12 2.04
Karnataka 33.98 38.57 2.78 1.60
Maharashtra 42.39 45.23 2.14 2.05
Punjab 36.00 37.49 2.33 1.81
Tamil Nadu 43.86 48.45 2.42 1.06
Uttar Pradesh 21.42 22.28 2.57 1.78
West Bengal 28.03 31.89 2.64 1.65
India 27.78 31.16 2.80 1.96

Source: Census data.
Table A 2 : District Level Trend and Pattern of Urbanization in Bihar
Urban Population % Urban Share in Decadal Decadal Differ-

Population Total Growth Growth ence
Urban Rate Rate in %
Population Urban
of Bihar Popula-
tion
Name 1991 2001 2011 2001 2011 2001 2011 1991- 2001- 2001-
2001 2011 2011
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Patna 1,376,6771,961,5322,514,590 41.6 43.1 22.9 21.4 42.5 28.2 1.5
Munger 283,172 317,847 380,120 27.9 27.8 3.7 3.2 12.2 19.6 -0.1
Bhagalpur 343,456 452,427 602,532 18.7 19.8 5.3 5.1 31.7 33.2 1.2
Begusarai 177,694 107,623 569,823 4.6 19.2 1.3 4.8 -39.4 429.5 14.6
Sheikhpura 64,575 81,313 109,002 15.5 17.1 1.0 0.9 25.9 34.1 1.7
Nalanda 296,214 353,629 457,894 14.9 15.9 4.1 3.9 19.4 29.5 1.0
Rohtas 267,147 326,806 427,765 13.3 14.5 3.8 3.6 22.3 30.9 1.1
Bhojpur 235,480 312,414 389,861 13.9 14.3 3.7 3.3 32.7 24.8 0.4
Lakhisarai 85,343 117,740 143,011 14.7 14.3 1.4 1.2 38.0 21.5 -0.4
Gaya 355,889 475,949 581,601 13.7 13.2 5.6 4.9 33.7 22.2 -0.5
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Jehanabad 74,471 111,612 135,196 7.4 12.0 1.3 1.1 49.9 21.1 4.6
Purnia 158,145 222,398 343,005 8.7 10.5 2.6 2.9 40.6 54.2 1.8
Pashchim
Champaran 235,366 309,559 393,165 10.2 10.0 3.6 3.3 31.5 27.0 -0.2
Muzaffarpur 274,965 348,353 473,437 9.3 9.9 4.1 4.0 26.7 35.9 0.6
Darbhanga 218,394 267,348 383,328 8.1 9.7 3.1 3.3 22.4 43.4 1.6
Nawada 94,556 138,443 215,579 7.7 9.7 1.6 1.8 46.4 55.7 2.1
Buxar 90,818 128,974 164,499 9.2 9.6 1.5 1.4 42.0 27.5 0.4
Kishanganj 99,281 129,008 161,123 10.0 9.5 1.5 1.4 29.9 24.9 -0.4
Aurangabad 118,049 170,057 236,854 8.4 9.3 2.0 2.0 44.1 39.3 0.9
Saran 234,360 298,637 353,202 9.2 8.9 3.5 3.0 27.4 18.3 -0.3
Katihar 171,618 218,277 273,822 9.1 8.9 2.6 2.3 27.2 25.4 -0.2
Jamui 74,565 103,244 145,333 7.4 8.3 1.2 1.2 38.5 40.8 0.9
Saharsa 80,149 125,167 156,540 8.3 8.2 1.5 1.3 56.2 25.1 -0.1
Purba
Champaran 173,359 251,086 401,343 6.4 7.9 2.9 3.4 44.8 59.8 1.5
Vaishali 143,356 186,655 233,079 6.9 6.7 2.2 2.0 30.2 24.9 -0.2
Gopalganj 96,866 130,590 162,805 6.1 6.4 1.5 1.4 34.8 24.7 0.3
Araria 102,275 132,351 168,777 6.1 6.0 1.5 1.4 29.4 27.5 -0.1
Sitamarhi 119,597 153,313 190,498 5.7 5.6 1.8 1.6 28.2 24.3 -0.2
Siwan 115,508 149,489 182,913 5.5 5.5 1.7 1.6 29.4 22.4 0.0
Khagaria 58,802 76,327 87,159 6.0 5.2 0.9 0.7 29.8 14.2 -0.7
Supaul 91,528 88,208 105,558 5.1 4.7 1.0 0.9 -3.6 19.7 -0.4
Madhepura 76,833 67,967 88,461 4.5 4.4 0.8 0.8 -11.5 30.2 0.0
Sheohar 13,915 21,262 28,116 4.1 4.3 0.2 0.2 52.8 32.2 0.2
Kaimur
(Bhabua) 27,040 41,775 65,571 3.2 4.0 0.5 0.6 54.5 57.0 0.8
Madhubani 102,761 124,545 161,495 3.5 3.6 1.5 1.4 21.2 29.7 0.1
Banka 44,634 56,420 71,313 3.5 3.5 0.7 0.6 26.4 26.4 0.0
Samastipur 134,872 123,455 147,797 3.6 3.5 1.4 1.3 -8.5 19.7 -0.2
Arwal* 51,849 7.4 0.0 0.4 7.4
BIHAR 6,711,933 8,558,345 11,758,016 10.8 11.3 100.0 100.0 27.5 37.4 0.5
Source: Census, 1991, 2001, 2011.
*The data for Arwal are not available for 2001 since it is a newly formed district.
Table A3: Main Non-Agricultural Workers in the Urban Districts of Bihar (%)
(Census 2011)
Name Non-Agricultural Name Non-Agricultural

Persons Male Female Persons Male Female
Samastipur 91.0 91.3 89.0 Sitamarhi 77.1 77.4 75.1
Siwan 89.9 90.5 85.5 Purnia 75.3 77.0 65.5
Muzaffarpur 90.4 90.3 91.2 Vaishali 76.9 76.3 82.7
Munger 89.9 90.2 87.3 Begusarai 76.2 75.8 78.3
Patna 89.6 89.7 88.6 Kishanganj 75.7 75.1 79.1
Bhagalpur 89.1 88.9 90.4 Jehanabad 74.2 74.7 70.7
Gaya 88.1 88.4 86.6 Jamui 76.4 74.3 84.1
Darbhanga 87.0 87.3 84.8 Madhubani 71.7 74.0 59.7
Buxar 85.5 85.5 85.3 Supaul 72.4 73.7 61.8
Katihar 83.9 83.9 83.7 Madhepura 73.6 72.8 77.7
Khagaria 83.4 83.5 82.5 Sheikhpura 71.9 72.7 66.2
Rohtas 84.0 83.4 89.3 Gopalganj 71.4 72.1 67.0
Saharsa 83.1 83.2 82.5 PashchimChamparan 72.1 72.1 71.8
Aurangabad 83.0 83.1 82.5 Lakhisarai 69.6 71.3 58.2
Bhojpur 82.8 82.8 82.1 PurbaChamparan 68.0 67.9 68.8
Araria 76.6 79.2 62.4 Banka 60.6 60.1 64.9
Nalanda 77.1 78.4 71.1 Arwal 51.8 51.3 55.8
Nawada 76.6 78.0 68.9 Sheohar 46.9 47.2 45.3
Kaimur (Bhabua) 78.4 77.7 86.8
Saran 78.1 77.5 83.9 BIHAR 82.4 82.6 81.2
Table A4: Functional Classification of Urban Areas in Bihar, 2001

Sl.No. Town Name Class C Status Classification
1 2 3 4 4
01. BETTIAH I M Trade And Transport
02. MOTIHARI I M Trade And Transport
03. SHEOHAR III NA Trade And Transport
04. SITAMARHI II M Trade And Transport
05. MADHUBANI II M Trade And Transport
06. SUPAUL II M Trade And Transport
07. ARARIA II M Trade And Transport
08. KISHANGANJ II M Trade And Transport
09. PURNIA I M Trade And Transport
10. KATIHAR I M Trade And Transport
11. MADHEPURA III M Trade And Transport
1 2 3 4 4
12. SAHARSA I M Trade And Transport
13. DARBHANGA I M. Corp. Trade And Transport
14. MUZAFFARPUR I M. Corp. Trade And Transport
15. GOPALGANJ II M Trade And Transport
16. SIWAN I M Trade And Transport
17. CHAPRA I M Trade And Transport
18. HAJIPUR I M Trade And Transport
19. SAMASTIPUR II M Trade And Transport
20. BEGUSARAI II M Trade And Transport
21. KHAGARIA III M Trade And Transport
22. BHAGALPUR I M. Corp. Trade And Transport
23. BANKA III M Other Services
24. MUNGER I M Trade And Transport
25. LAKHISARAI II M Trade And Transport
26. SHEIKHPURA III M Trade And Transport
27. BIHARSHARIF I M Manufacturing
28. PATNA I M. Corp. Other Services
29. ARRAH I M Trade And Transport
30. BUXAR II M Trade And Transport
31. BHABUA III M Trade And Transport
32. SASARAM I M Trade And Transport
33. JEHANABAD II M Trade And Transport
34. AURANGABAD II M Trade And Transport
35. GAYA I M. Corp. Trade And Transport
36. NAWADA II M Trade And Transport
37. JAMUI II M Trade And Transport
BIHAR Trade And Transport
Source: 2001 Economic Census
Table A5 : Bihar–Urban Main Workers in the Nine Industrial Categories, 2001
No. Agri- Mining Manu- Electri- Const- Whole- Trans- Financial Total
cultural and factu- city ruction sale, port, inter- Services
and Quarry- ring Gas & Retail Storage media-
Allied ing Water Trade- & tion,
Supply Repair, Commn. Real
Hotel Estate
and Renting
Restau- and
rant Business
1 2 3 4 5 6 7 8 9 10
1. BETTIAH 32.4 0.2 17.2 0.5 2.7 24.4 5.4 4.5 12.7
2. MOTIHARI 25.8 0.1 13.3 0.5 2.3 28.6 6.0 6.1 17.2
3. SHEOHAR 51.7 0.0 11.6 0.1 1.3 21.8 2.1 3.0 8.3
4. SITAMARHI 23.3 0.2 16.2 0.5 3.4 29.7 5.6 5.8 15.4
5. MADHUBANI 25.3 0.1 16.1 0.6 3.0 27.8 5.2 5.8 16.2
6. SUPAUL 33.8 0.1 12.5 0.6 5.0 20.8 5.4 5.6 16.1
7. ARARIA 24.4 0.1 14.7 0.5 4.2 28.3 7.6 6.0 14.1
8. KISHANGANJ 30.5 0.1 11.4 0.3 3.6 25.0 10.2 3.8 15.0
9. PURNIA 22.6 0.1 10.1 0.8 3.7 27.6 7.3 7.7 20.0
10. KATIHAR 12.2 0.3 13.5 0.6 4.0 26.5 18.0 5.8 19.1
11. MADHEPURA 29.6 0.0 9.7 0.4 2.7 25.4 6.0 6.9 19.2
12. SAHARSA 15.9 0.2 10.5 1.4 5.3 24.9 9.0 6.3 26.5
13. DARBHANGA 4.8 0.1 14.3 1.1 4.8 29.5 9.2 11.7 24.4
14. MUZAFFARPUR 8.2 0.2 13.0 1.8 3.0 31.3 8.4 10.4 23.7
15. GOPALGANJ 35.6 0.1 12.6 0.5 3.7 24.5 3.9 5.7 13.3
16. SIWAN 14.9 0.1 13.3 0.6 4.6 38.2 6.3 6.4 15.7
17. CHAPRA 24.1 0.2 11.7 0.9 5.2 25.9 9.8 6.2 15.9
18. HAJIPUR 30.4 0.1 14.5 0.7 4.5 23.8 6.4 5.2 14.4
19. SAMASTIPUR 11.6 0.1 14.3 0.8 2.3 34.6 11.7 6.1 18.5
20. BEGUSARAI 10.1 0.3 17.5 0.8 3.8 30.5 6.9 8.8 21.3
21. KHAGARIA 20.1 0.1 18.0 0.3 5.0 28.8 8.2 4.5 15.1
22. BHAGALPUR 13.4 0.1 24.0 1.1 4.4 23.5 7.2 8.4 17.9
23. BANKA 41.0 0.0 14.2 0.8 3.0 15.1 4.6 6.2 15.1
24. MUNGER 12.1 1.0 21.9 0.9 6.1 20.1 12.9 6.7 18.4
25. LAKHISARAI 36.7 0.1 14.6 0.5 4.7 21.8 6.9 4.5 10.1
26. SHEIKHPURA 31.0 3.7 17.3 0.7 2.9 23.8 5.4 4.2 10.8
27. BIHARSHARIF 21.7 0.4 27.1 0.7 3.6 22.6 5.9 5.0 12.9
28. PATNA 11.2 0.2 13.9 1.4 5.1 23.5 9.0 9.9 25.8
1 2 3 4 5 6 7 8 9 10
29. ARRAH 18.0 12.1 10.3 0.7 4.5 24.5 6.2 6.1 17.6
30. BUXAR 15.0 0.2 14.4 0.7 5.1 29.2 8.0 8.6 18.9
31. BHABUA 18.1 0.1 15.2 1.1 3.1 27.5 7.0 7.1 20.8
32. SASARAM 16.9 0.6 13.3 1.1 5.4 30.9 7.0 7.2 17.5
33. JEHANABAD 35.9 0.2 10.4 0.9 2.8 21.4 5.2 8.7 14.5
34. AURANGABAD 20.9 0.6 13.4 1.0 6.7 26.1 5.5 6.5 19.2
35. GAYA 13.8 0.4 17.7 1.2 3.7 26.5 7.3 8.3 21.1
36. NAWADA 20.4 0.2 14.8 0.6 2.4 31.3 7.5 6.2 16.7
37. JAMUI 20.5 0.4 22.6 0.6 2.8 22.3 11.6 5.7 13.5
Table A6: Distribution of Unorganized Enterprises (%) NSS 67th Round 2010-11 Urban
State/Region Manufacturing Trade Other Services Total

Bihar
-Own Account Enterprises - 13 49 38 100
Establishment 21 37 41 100
India
-Own Account Enterprises 26 38 36 100
-Establishment 29 37 34 100
North Bihar
South Bihar
ANNEXURE II
NOTE ON AGRO-BASED ACTIVITIES IN AND AROUND
MADHUBANI TOWN
1. HANDICRAFT
The survey team visited a handicraft emporium run by Sarisab Pati Rural Women’s
Development Association, referred to as Samiti from now on. The Samiti has its
marketing outlet in the Madhubani town, while its headquarters and workshop are in
the village SP in Pandaul block, which is around 21 km from Madhubani. Around 40
women workers make products from Sikki grass here. Sikki is a type of grass found in
Bihar and UP during July–August which is dried and used to make a variety of
handicrafts. Sikki grass is usually bought from the Musahar SC community in
Samastipur district. The women at the Samiti also make Mithila painting, toys,
appliqué work on chadar, bangles, shawls, jackets, etc. Moreover, they carry out
Madhubani painting work on tussar silk sari, cloth squares and paper.
The Samiti had started making such products way back in 1985, and some of the
members have acquired the capability to train others. In the early years, the Samiti
had been a profitable venture, but the market for this handicraft venture has also seen
a decline over time. Earlier, a total of 140 women used to work for the Samiti, but the
number has now come down to 40 only. There has been shrinkage in outreach as well.
As of now, the Samiti markets its products in fairs only, the season being from November
to February. The Samiti being registered with District Industries Centre (DIC), for past
five to six years they used to participate in fairs locally and outside the district within
the state, such as in Patna and Muzaffarpur, but they can no longer do so as the DIC
does not bear the cost anymore.
2. MAKHANA
North Bihar is the most important producer of makhana, and Assam too has some
production. Makhana is usually produced in ponds or ditches with still water. The
raw makhana can be converted into ‘Lawa’ makhana using a difficult process, and it is
usually carried out by the Mallah communities. Some other communities engaged in
this work are Sahani, Kewat and Machhuara. The biggest challenge the makhana
producing farmers face is related to marketing their product. There are few local buyers,
and therefore, they rely on middlemen who lift their produce.
Considerable forward linkage is possible from raw makhana production as was
learnt from an interview with a ‘Lawa makahana’ producer near Patna, who has a
factory for refining raw makhana to produce the refined version. He told the survey
team that makhana is a product unique to Bihar, and he sells the product in other
states in India and also exports abroad. In fact, when the team met him, he had just
started an outlet for selling makhana within the Patna airport. He reported that he
procures makhana directly from the farmers in and around Madhubani.
3. FISHERIES
The work of breeding fish starts in March and ends within six to eight months. People
mostly have to resort to debt for breeding fish. They have to keep their ornaments
mortgaged at 25 to 36 per cent rate of interest to get money, which they can repay only
after selling fish in the market. Since 2012, ponds are allotted for seven years, although
earlier these pond were allotted for three years, and before that for one year. The pond
is rented out for makhana from October and from July for fish-breeding. The rental is
fixed according to the estimated revenue from it, which is around one-tenth of the
produce. For instance, if it is estimated that 10 quintals of makhana will be produced,
then the rent would be 1 quintal’s price which would have to be deposited. The
procedure of payment is similar for fisheries. The rent is increased by 20 per cent after
every third year. Unlike makhana, there is no problem in marketing and selling fish,
and there is more profit.
REFERENCES
Census of India (2001), Office of the Registrar General India, Ministry of Home Affairs, Government
of India.
Census of India (2011), Office of the Registrar General India, Ministry of Home Affairs, Government
of India.
Datt, G. and M. Ravallion (2010). “Shining for the Poor too”, Economic and Political Weekly, Vol. 45,
No. 7, pp. 55-60.
Ghani, Ejaz and Homi Kharas (2010). “The Service Revolution in South Asia: An Overview” in Ejaz
Ghani (eds), The Service Revolution in South Asia, Oxford University Press, London.
Government of India (2015), Economic Survey of India-Union Budget available at
www.indiabudget.nic.in/survey.asp
Krishna, A. and D. Bajpai (2011). “Lineal Spread and Radial Dissipation: Experiencing Growth in
Rural India, 1993-2005”, Economic and Political Weekly, Vol. 46, No. 38, pp. 44-51.
Kundu, A. (2009). India: Urban Poverty Report, Oxford University Press, New York.
Pangotra, P. and A. Govil (2008). Urban Development Strategy for Bihar: A Management Perspective,
W.P. No. 2008-04-02, Indian Institute of Management Ahmedabad.
Planning Commission (2013). “Press Note on Poverty Estimates 2011-12”, Government of India,
22nd July 2013.
Rodgers, Gerry, Amrita Datta, Janine Rodgers, Sunil K. Mishra and Alakh N. Sharma (2013). The
Challenge of Inclusive Development in Bihar, Institute for Human Development and Manak
Publications, New Delhi.
Sen, K. (2013). “Inclusive Growth, Social Exclusion, and the Urban Poor: Taking a Production Lens to
Informality in India”, Inclusive Urban Planning: State of the Urban Poor Report 2013, Ministry
of Housing and Urban Poverty, Government of India.
List of Working Papers

WP 01/2016
Urban Development and Rural - Urban Linkages
Case Study of Two Towns in Bihar
Tanuka Endow, Sunil K. Mishra and Abhay Kumar
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Urban Development and Rural - Urban Linkages

Case Study of Two Towns in Bihar

Tanuka Endow, Sunil K. Mishra and Abhay Kumar

URBAN DEVELOPMENT AND RURAL–URBAN LINKAGES

Tanuka Endow , Sunil K. Mishra and Abhay Kumar

INSTITUTE FOR HUMAN DEVELOPMENT

Subscription Amount Rs. 50/- /US $ 10

Tanuka Endow*, Sunil K. Mishra** and Abhay Kumar**

Urban development characterizes the economic transformation of any region today.

1. SETTING THE CONTEXT

In today’s world, urban development characterizes the economic transformation of

stagnation and volatility of agriculture as well as to the lack of sectoral diversification

Total 199 100.0 101 100.0 98 100.0

Balanced urban development implies a pyramidal hierarchy with a broad base

3. As calculated from Bihar Economic Survey (2013-14) http://finance.bih.nic.in/Documents/Reports/

industrial classification of activities. Among each group, proportionate sample has

intermediation, real estate, renting and business activities, public administration,

Table 2: Comparative Urban Facilities in Two Districts (Census 2011)

Facility Biharsharif Madhubani Biharsharif Madhubani

(a) Decline in Industrial Activity

Box no. 1 Makhana-growing and Fisheries in Madhubani

Type of Unit Biharsharif Madhubani Total

Total 139 (100) 112 (100) 251 (100)

Type of Enterprise Total Biharsharif Madhubani

Figure 1: Distribution of types of enterprises by size of annual turnover (percentage)

Type of enterprise/shop Total worker

Total (number) 208 24 19 251

Percentage share (%) (82.9) (9.6) (7.6) (100.0)

(a) Structure of Enterprises: Formal vs. Informal12

(b) Functioning of Urban Labour Markets

(i) Hiring of different types of workers and working hours

Hired adult worker Percentage

Total 443 167 610 72.6

Among different types of activities, the manufacturing enterprises use maximum

Box No. 2: The Decline of Cold Storage Units in Biharsharif

to earn their living as rickshaw-puller, masons or vendors. In Biharsharif, there are

(c) Growth in Urban Output

Unit type Expanding Stagnant Contracting Total

Total (% in brackets) 144 (64) 36 (16) 44 (20) 224 (100)

The maximum number of enterprises reported facing problems and bottlenecks

States Level of Level of Annual Compound Annual Compound

India 27.78 31.16 2.80 1.96

Urban Population % Urban Share in Decadal Decadal Differ-

Name Non-Agricultural Name Non-Agricultural

Table A4: Functional Classification of Urban Areas in Bihar, 2001

Table A5 : Bihar–Urban Main Workers in the Nine Industrial Categories, 2001

State/Region Manufacturing Trade Other Services Total

List of Working Papers

Urban Development and Rural - Urban Linkages

Tanuka Endow*, Sunil K. Mishra and Abhay Kumar