Investing in Bihar, India: A State Profile

Bihar is a key state in Eastern India with a strong agrarian economy. As one of the largest producers of vegetables and fruits in the country, Bihar holds significant potential in the agricultural sector.

Economically and industrially, Bihar benefits from its strategic geographical location, is well connected to eastern, northern, and north-eastern states in India as well as Nepal. The Golden Quadrilateral Highway traverses the districts of Kaimur, Sasaram, Aurangabad, Gaya, and Patna, linking Bihar to major metropolitan cities across the country. New business opportunities in Bihar are abundant, as the Eastern Dedicated Freight Corridor runs through the state, offering access to East Indian ports like Kolkata and Haldia, as well as to raw material sources and mineral reserves in neighboring states like Jharkhand (which was a part of the state until 2000).

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In recent years, the Bihar government has labeled the food processing, IT and IT-enabled services (ITES), and textiles and leather sectors as high-priority. Some of the fastest growing industries in the state are food processing, dairy, sugar, manufacturing, and healthcare.

Bihar is home to a substantial, cost-effective industrial labor force, making it an appealing destination for various industries. Further, the state government is making significant investments in developing industrial zones and modernizing civil infrastructure to attract private sector interest.

Economy of Bihar

For the fiscal year 2022-23, Bihar’s Gross State Domestic Product (GSDP) at constant prices was projected to grow by 10.6 percent, outpacing the national GDP growth rate of 7.2 percent. The state’s agricultural, manufacturing, and service sectors were estimated to grow by 6.7 percent, 6.8 percent, and 13 percent, respectively. At current prices, these sectors were expected to contribute 25 percent, 17 percent, and 58 percent, respectively, to Bihar’s economy.

Additionally, the per capita GSDP of Bihar for 2022-23 was estimated to be INR 59,637, reflecting a 14 percent increase from the previous year, albeit much lower than the national per capita GDP.

As per the Bihar State Budget for FY 2024-25, presented on February 13, 2024, Bihar’s GSDP for 2024-25 (at current prices) is projected to be INR 9.76 trillion, showing a growth of 13.5 percent over the previous year.

Several factors, including shifts in governmental policy, increased private investments, and the development of industrial infrastructure, have contributed to the scale and speed of Bihar’s recent economic transition beyond the agriculture sector.

Bihar’s economic performance in the last five years

• As of FY 2022-23, Bihar contributes 2.8 percent to the national economy.
• According to a report, citing data from the RBI and CMIE Economic Outlook, Bihar’s gross state domestic product (GSDP) has increased by 29 percent over five years, reaching INR 4.42 trillion (US$52.9 billion) in FY23.
• Regarding infrastructure, Bihar’s capital expenditure (capex) rose by 35 percent in FY23, totaling INR 457.35 billion (US$5.4 billion).
• The length of national highways in India grew by 20 percent over five years, reaching 145,000 km in FY23, up from 120,000 km in FY18. In Bihar, the national highway length increased by 23 percent, reaching 5,969 km, in FY23.
• Bihar’s state tax revenue saw a 39 percent increase, reaching INR 413.87 billion (US$4.95 billion) in FY23. Bihar aims to become a growth engine for the country, focusing on developing the textile, IT, manufacturing, and tourism sectors.
• Recent media reports indicate that the central government has approved the development of two special economic zones (SEZs) in Bihar, located in the industrial areas of Kumarbagh (West Champaran district) and Nawanagar (Buxar district).
• The Union Minister of Commerce and Industries Piyush Goyal stated that a physical inspection of the proposed SEZ sites in Kumarbagh and Nawanagar was conducted on June 26 and 27, 2024. The sites were deemed favorable for development. Once approved, these will be the first SEZs in Bihar.

Top sectors

In 2022, the state government identified the top 10 sectors in Bihar that received the highest number of private investments. These sectors are:

• Food processing
• Plastic and rubber
• Renewable energy
• Tourism
• Healthcare
• Textile
• IT & IT-enabled services (ITES)
• Leather
• Small machine manufacturing
• Wood based manufacturing

• Bihar is the largest producer of litchi and makhana in India. State government incentives are provided to businesses engaged in fruit and vegetables, food grains, milk, meat, and honey processing units.
• The state hosts a traditional textiles industry and is home to about 366,000 weavers, per Invest India data. A 2022 policy promotes investment in the leather and textiles industry.
• Strategic incentives are at play for the development of the IT/ITES and the ESDM industry.
• Given its status as the birthplace of Buddhism and Jainism religions, the state has a significant religious tourism base. Further, ancient historical sites and proximity to Nepal across the border, is contributing to a fast-growing domestic tourism industry. Relatedly, the state government has a subsidy in place for cultural productions filmed in the region; these subsidies vary for one, two, and three-hour films. Popular shooting locations include the historic city of capital Patna, ancient ruins at Nalanda, and Kaimur hills.

Bihar industrial investment promotion

In 2016, the state launched the Bihar Industrial Investment Promotion Policy for promoting industrial development in the region. This policy was further amended in 2020 and extended till 2025 to make it more investor-friendly. Additionally, the Bihar Agri Investment Promotion Policy, 2020, Ethanol Production Promotion Policy 2021, Oxygen Production Promotion Policy 2021, and Bihar Wood Based Industries Investment Promotion Policy, 2020 have been implemented to augment the state landscape for private investments.

Looking ahead, key emerging sectors in Bihar like IT/ITES offer potential for many entrepreneurial ventures and start-up units. The availability of educated youth and competitive labor costs in the state pose a clear advantage to investors in these sectors in the state.

Plug & play coupled with specialized incentives

The state boasts approximately 2.4 million square feet of ready-to-move Plug and Play Industrial Sheds, equipped with all basic infrastructure requirements, situated in industrial areas across the state. These facilities are available in 9 districts of Bihar: Patna, Muzaffarpur, Vaishali, West Champaran, Begusarai, Bhagalpur, Purnea, Saharsa & Nalanda.

The plug-and-play initiative’s objective is to enable entrepreneurs to quickly start factory operations by simply installing their equipment. According to the state government’s advertisement, the monthly rent for these plug-and-play industrial sheds starts at INR 4 per square meter (US$0.048). These facilities will be to the entrepreneurs for an initial lease period of 15 years, allowing them to start production by just installing the required machinery.

Investments in Bihar

Total foreign direct investment (FDI) received by Bihar between October 2019 to January 2022 is INR 1670.9 million (US$20.02 million).

As of September 2023, under the Bihar Industrial Investment Promotion Policy 2016, the state government has approved the 2695 investment proposals worth approximately INR 6800 billion (US$81.4 billion).  

Bihar investment summit in 2023

The Invest Bihar Summit, held in December 2023, proved to be a watershed moment, showcasing the state’s transformed landscape and attracting a staggering INR 5,053 billion (US$60.5 billion) in proposed investments across diverse sectors. The summit witnessed the inking of MoUs with 278 companies, with the lion’s share—INR 3,139.4 billion (US$37.6 billion)—dedicated to general manufacturing. This influx of capital promises to breathe new life into Bihar’s industrial sector, creating a vibrant ecosystem for diverse manufacturing activities.  

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From established players like Bharat Petroleum’s INR 738.6 billion (US$8.8 billion) investment to rising stars like Patel Agri Industries’ INR 523 billion (US$6.2 billion) commitment, the summit painted a picture of a burgeoning manufacturing hub. The proposed private investments span various sectors, promising substantial job creation within the state.

The Invest Bihar Summit also marked the launch of the Bihar Logistics Policy 2023, aimed at providing world-class infrastructure facilities for industrial and social growth. This policy emphasizes the importance of logistics in enhancing the state’s economic competitiveness.

Global participation

Representatives from 16 countries, including the US, Taiwan, Japan, and Germany, attended the summit, signifying Bihar’s growing global appeal. While the manufacturing segment received the spotlight, the summit’s impact benefited other priority sectors as well. The summit drew significant investments in services, IT & ITES, textile & leather, and other sectors, thereby ensuring that the state economic growth is not lopsided. Industry giants praised the state government’s initiative to hold a meeting in California ahead of the summit, which attracted their attention to Bihar.

Breakdown of investments into key industries

Through the Invest Bihar Summit, the state has secured an investment of INR 5,053 billion (US$60.5 billion) across diverse sectors.

• General manufacturing: 99 investors, INR 3139.41 billion (US$37.6 billion)
• Food processing: 124 investors, INR 1456.41 billion (US$17.4 billion)
• Services: 30 investors, INR 317.9 billion (US$3.8 billion)
• IT & ITES: 8 investors, INR 71.75 billion (US$859 million)
• Textile & leather: 17 investors, INR 67.48 billion (US$808 million)

Major companies with investment interests in Bihar include:

• Adani Group
• Bharat Petroleum
• Patel Agri Industries
• Holtech International Inc.
• Indo European Heart Hospital
• Dev India Project
• Star Cement
• UltraTech Cement
• JK Lakshmi Cement
• Shree Cement
• Bharat Oorja Distilleries Pvt. Ltd
• Hindustan Petroleum Corporation Ltd.

Emerging industry spotlight: IT/ITES

Since 2006, several IT parks have been sanctioned and established across Bihar. The priority sectors for investment identified by the state government in IT/ITES and Electronics System Design & Manufacturing (ESDM) are as follows:

In 2022, it was announced that three IT parks were under construction in the state. This includes a 33-acre IT park in Bihta, a 110-acre IT park in Rajgir with a three-phase development for an electronic manufacturing hub, and an IT Tower in Patna with a proposed built-up area of 90,000 square feet. Additionally, an incubation center at BIT, Patna, with a floor area of 10,000 square meters, is presently operational to support start-ups in medical electronics.

 Institutions catering to the talent pipeline for the IT/ITES and ESDM sector:

• Centre for Development of Advanced Computing (C-DAC)
• Indian Institute of Technology, Patna: Incubation Centre
• Software Technology Park of India, Patna
• National Institute of Electronics and Information Technology (NIELIT), Patna
• Indian Institute of Management (IIM)
• National Institute of Technology
• Centre of Excellence by Department of Science and Technology, Bihar

The state’s industrial policy also has lucrative provisions to attract businesses and investment into its IT/ITES and ESDM sector.

Start-up ecosystem

To promote the innovation ecosystem and unlock the enormous entrepreneurial potential of the state, the “Bihar Start-up Policy” was introduced in 2017. The goal of this policy is to create an independent, open ecosystem for which the state government will finance, publicize, and offer policy assistance. An initial capital of INR 50 billion (US$599 million) has been sanctioned for the implementation of this policy.

For the start-up ecosystem, the state has undertaken several initiatives, with over 900 startups receiving 100 percent free incubation at state-notified centers. According to the information provided by the Bihar start-up portal, the state government has received 13,043 start-up applications since the launch of the policy. There are 734 recognized start-ups and 317 seed funded start-ups.

Key takeaways

Bihar’s economy has experienced impressive growth over the last five years, driven by the expansion of its manufacturing and services sectors. Recently, Bihar has attracted investor interest in diverse areas such as IT/ITES and start-ups, thanks to progressive policies, incentives, and improved infrastructure. The state, traditionally focused on agriculture and known for its talent migration to major industrial regions in India, is now pushing for greater industrialization and service sector growth. This shift presents numerous greenfield opportunities for foreign investors and private sector firms, who may benefit from higher incentives. Additionally, following the COVID-19 pandemic, more of the state’s labor force is considering entrepreneurial ventures and work opportunities within the region.

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