Assessing Bihar's economic growth: a Geweke causality analysis

Despite being one of the most backward Indian states in terms of gross domestic product (GDP) per capita, the state of Bihar recorded double-digit growth from 2005 to 2011. Although this growth turnaround has been recognised as something significant, the literature to date has not probed the causes that have driven Bihar's growth story. In this context, this paper attempts to contribute to the growing interest and literature in studying the causal factors driving growth patterns in India at the sub-national level. Specifically, the paper employs a Geweke causality analysis to investigate the drivers of economic growth in Bihar from 2001 to 2011. By decomposing and examining the linear feedback between state-level economic growth and the vector consisting of law and order as well as fiscal variables, this paper finds that a combination of improvements in law and order as well as aid from the central government played an important role in Bihar's economic turnaround in recent years.