Food Processing: The Bihar Trajectory

This chapter explains the importance of studying food processing through a regional trajectory. We discuss outcomes in this industry for Bihar, which has rich agricultural base, from a temporal perspective. We use four time-frames: pre-2000, 2000–2006, 2006–2016 and post-2016 to provide a detailed sketch of developments in this industry. The cut-off points in time go hand-in-hand with major developments in the state: bifurcation in year 2000, change of government in 2006 and change in policy-stance towards food processing in 2016. This temporal framework is used as a methodology of using history to infer causality in the space of industrial outcomes. Though most outcomes in Bihar are driven by the actions of the state, many of them post-2006 are closely bunched up in time. This makes econometric inference of causality difficult, but historical-causality possible. Using the latter approach, we argue that in the period 2000–2006, there was a capital flight of the middle-sized firms due to deteriorating law and order conditions in the state. However, after the end of political misrule in 2006, there has been an increase in the number of units in food-processing. Most of these are informal, small and non-diversified units (majority in rice milling). Given the low industrial base of the state, this development as a pre-post-2006 comparison is spectacular. However, a cross-state comparison in the 2006-16 time-frame for food processing (and overall manufacturing) for Bihar reveals that it lags behind many other regions in India. We compare the Bihar trajectory with the national and the general ones discussed in Chap. 3 , to highlight the differences within them and the extent of regional constraints on food processing industries. The missing middle in the size distribution of firms that we find in this chapter is central to the theories we present in Chaps. 6 and 7 regarding the performance of firms in the Bihar trajectory.