The 2025 elections present a rare window to reimagine Bihar’s economic agenda. While caste alliances and welfare delivery will remain part of the political conversation, the real breakthrough will come from a credible, statewide push for MSME development.
August 1, 2025 | Hemant Kumar
Bihar is steadily moving beyond its old BIMARU image. To build on this progress, MSME development must now become the cornerstone of its economic journey. Despite years of political churn and policy experimentation, the state continues to struggle with private enterprise growth, job creation, and industrial momentum. Agriculture, public employment schemes, and remittance inflows remain the economic mainstays, but they cannot carry Bihar’s future.
Micro, small, and medium enterprises (MSMEs) offer the most practical and immediate pathway to reverse this stagnation. Bihar’s economy has long overlooked its grassroots entrepreneurial energy. Millions of micro units in manufacturing, services, and agro-processing exist with minimal support or recognition. Unlocking their potential is not just a development imperative; it is a political opportunity.
As someone from Begusarai, I have witnessed both the potential and the paradox of Bihar’s growth story. Begusarai is home to major national assets such as the Barauni oil refinery, NTPC’s thermal power plant, the recently revived fertilizer unit, and a new Varun Beverages bottling facility. These are significant milestones. However, while such large-scale projects are critical, they cannot absorb the state’s vast workforce alone. The real engine of inclusive growth lies in nurturing the thousands of MSMEs that can thrive around such anchor industries by supplying inputs, services, logistics, and skilled labour across the district and beyond.
Aspirational youth across Bihar are demanding more than subsidies and slogans. They want jobs near home, a dignified income, and a future that does not require migrating to other states. Local enterprises, not distant factories, will provide those answers.
The 2025 elections present a rare window to reimagine Bihar’s economic agenda. While caste alliances and welfare delivery will remain part of the political conversation, the real breakthrough will come from a credible, statewide push for MSME development. Bihar’s future will be shaped not just in Patna but across its thousands of small workshops, service centres, and rural enterprises.
Bihar does not lack entrepreneurship. As per the Ministry of MSME, the state has more than 35 lakh micro, small and medium enterprises, but most are unregistered and informal. The units vary from handloom weaving in Bhagalpur to Sikki grass crafts in Madhubani and from agro-processing in Muzaffarpur to leatherwork in Gaya.
Yet over 90 percent of them are micro enterprises, frequently family-owned, with small amounts of working capital and zero formal backing. They are a tribute to the dormant entrepreneurial potential of the state, but they are an indication of neglect of the system.
Bihar boasts one of the highest rates of outmigration in the country. Tens of thousands of workers from the state migrate to Delhi, Punjab, Gujarat, Maharashtra, and further for low-wage jobs. It is no personal or familial tragedy, but a structural economic hemorrhage. Migration breaks up families, destabilizes community structures, and subjects workers to exploitation.
MSMEs also possess the special potential to turn this trend around. By providing work where individuals reside, MSMEs have the capability of grounding local economies. Industries such as food processing, garments, renewable energy maintenance, digital services, small logistics, and mobility repair activities are all compatible with Bihar’s topography and talent pool. Rather than exporting manpower, Bihar can export finished goods and services.
In contrast to mass industries requiring gigantic land acquisition, power infrastructure, and environmental clearance, MSMEs are naturally flexible. They need smaller amounts of capital to commence and can easily expand with minimal interference. Bihar, with its fragmented landholding systems and truncated industrial belts, lends itself more towards a cluster network of MSMEs than heavy manufacturing corridors.
Agro-processing is a good case in point. Bihar’s lush production of litchi, makhana, mango, maize, and vegetables provides huge scope for value addition. And yet, because of the absence of cold storage, packaging units, and brand infrastructure, farmers end up selling at distress prices. MSMEs in the local economy concentrated in these supply chains can alter that script.
Over 60 percent of the population of Bihar is below the age of 35. This bulge in population is routinely discussed as a strength, but it can become a weakness without equal opportunities. The state’s formal job market is very small and overcrowded. MSME entrepreneurship presents the possibility of an expandable alternative.
Bihar’s youth don’t require only financing but also a nurturing environment. District-level incubation centres, online marketplaces, access to accountancy and legal advice, and on-the-ground skilling programs specific to local markets can open up a generation of entrepreneurs. The transition from job-seeking to job-creating has to be facilitated by the state with purpose and urgency.
Bihar’s women’s labour force participation is among the lowest in India. Social culture has a contribution, but the absence of proximate, flexible employment opportunities is the big stumbling block. MSMEs in industries such as food processing, tailoring, handicrafts, home-based health services, and digital work are good platforms for women-led development.
Self-help groups and women-producer companies have already shown success in the islands of Bihar. Scaling these up through credit availability, training, and market linkages can bring lakhs of women into the economic mainstream. Any genuine development agenda must squarely confront this potential.
One of the greatest challenges for MSMEs in Bihar is access to finance. In spite of several schemes, credit disbursal percentages in Bihar continue to rank among the lowest in India. The majority of micro-entrepreneurs do not have collateral, formal registration, or digital transaction histories, leaving them out of the formal credit system.
Additionally, compliance systems are convoluted. GST, UDYAM registration, environmental regulations, labour legislation, and municipal permits form a labyrinth that many micro-entrepreneurs find impossible to negotiate. Streamlining these systems, setting up facilitation centres at the district level, and providing bundled compliance services can liberate productive energy.
Digital finance platforms, invoice-based lending, and peer-to-peer models of credit are new solutions that need to be taken up by the state on a large scale.
In the last ten years, Bihar has laid critical foundations for a thriving MSME ecosystem. The state has steadily moved beyond its historical limitations, investing in infrastructure and unlocking a wave of industrial activity that can now be deepened and decentralized.
One of the strongest signals of this shift is the Madhepura Electric Locomotive Factory, a joint venture between Indian Railways and Alstom. Operational since 2018, it produces India’s most powerful electric locomotives, the WAG 12B, capable of hauling 6,000 tonnes at 120 km/h. In July 2025, Prime Minister Narendra Modi remarked, “Now the engine made in Bihar will run the trains of Africa. I firmly believe that Bihar will become a big centre of Made in India.” This statement marks Bihar’s ascent in India’s industrial map.
In parallel, Marhowrah’s Diesel Locomotive Factory with GE Transportation is producing high horsepower freight locomotives. The Rail Wheel Plant in Bela has scaled up output for Indian Railways. These rail-linked facilities anchor advanced engineering supply chains, fertile ground for MSMEs in metalworking, casting, precision components and electrical systems.
The revamped Barauni oil refinery in Begusarai and the continued operations of the NTPC thermal power station provide both energy and industrial momentum. The fertilizer plant, once stalled, is now fully revived, generating local employment and agro-industry linkages. The entry of Varun Beverages has further sparked a cluster of packaging, bottling and logistics MSMEs.
The momentum is not limited to heavy industry. The Bihta Inland Container Depot, inaugurated in 2024, connects Bihar’s small exporters to global markets. In Muzaffarpur, Cosmas Lifestyle has begun production of travel bags under the state’s new textiles policy. Meanwhile, Sudha’s new dairy plants in Bhagalpur, Bihian and Purnia show that agro-based MSMEs also have room to scale.
These developments are not isolated. They are strategic nodes. With targeted policy, vendor linkages and entrepreneurial capacity-building, Bihar can now unlock its real potential, a dense and distributed network of MSMEs rooted in its districts, serving both national and global value chains.
For political parties, the MSME agenda is not just an economic policy, but a voter strategy. Migration, unemployment, and underemployment dominate conversations across Bihar’s districts. Voters are weary of slogans and eager for local solutions. A well-crafted MSME development agenda can win the confidence of youth, women, farmers and first-time voters.
This requires more than schemes. Parties must present a credible blueprint that includes:
Those who get this right can own the economic narrative of the 2025 election.
A state like Bihar cannot wait for top-down industrialization or FDI-driven transformation. Its growth story must emerge from within, from its artisans, its youth, its women and its rural entrepreneurs. MSMEs are the most realistic and impactful vehicle for this transformation. Making them the centerpiece of the election discourse is not just smart politics; it is sound economics.
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