Jharkhand carries a strange distinction. It sits on some of the richest mineral wealth in the subcontinent, coal, iron ore, bauxite, uranium, mica, copper, and it remains one of India’s poorest states by every human development measure that matters. NITI Aayog’s first Multidimensional Poverty Index, released in 2021, put Jharkhand’s poverty headcount at 42.16%, 2nd only to Bihar.
By the 2023 progress review, using NFHS-5 data, that number had fallen to 28.81 percent, still the second highest in the country. A state that produces roughly 40% of India’s mineral reserves has spent a quarter century unable to convert that endowment into prosperity for its own people, particularly its tribal population, who make up about 26% of the state.
This is not a story about the absence of resources. It is a story about the presence of a particular kind of state: extractive, discretionary, and captured. The standard explanation offered by the political class, that Jharkhand is poor because of insufficient central funding or insufficient welfare spending, gets the causality backwards.
Jharkhand is poor because its economy runs on permission rather than exchange, on royalty disputes rather than property rights, and on patronage rather than entrepreneurship. What the state needs is not more statism dressed up as social justice. It needs economic freedom, restored property rights for tribal communities, and a serious application of public choice reasoning to why its institutions behave the way they do.
The ‘public choice’ diagnosis
Public choice theory, associated with James Buchanan and Gordon Tullock, treats politicians, bureaucrats, and interest groups as rational actors pursuing their own advantage, not disinterested guardians of the common good. Applied to Jharkhand, this framework explains a great deal that conventional development economics cannot.
Consider the ongoing dispute between Jharkhand and the Centre over mining dues. Following the Supreme Court’s nine-judge bench ruling in July 2024, which held that states, not Parliament, have the power to tax mineral rights, Jharkhand’s government claimed the Centre and coal companies owed it roughly Rs 1.36 lakh crore in unpaid royalties, land compensation, and related dues. Of this, about Rs 1.01 lakh crore was attributed to unpaid land compensation alone, with only around Rs 2,532 crore of an estimated Rs 80,000 crore in compensation disbursed to the tribal families whose land was acquired. This is the public choice story in miniature.
Concentrated benefits flow to coal companies and to whichever political coalition controls disbursement, while costs are diffused across millions of ordinary Jharkhandis and displaced Adivasi households who see little of the money even when courts rule in the state’s favour. Mining revenue formed close to 85% of Jharkhand’s own non-tax revenue in 2024-25, meaning the state’s fiscal survival itself depends on a rent extraction relationship with the Centre and with mining companies rather than on a broad-based productive economy. That is not federalism. It is a rent-seeking equilibrium in which both governments bargain over a resource pie while the people who live on the land wait.
The same logic explains the persistence of illegal mining in the state. Once mining operations conclude, land is frequently neither returned to state control nor properly rehabilitated, creating a vacuum that gets filled by unauthorised extraction, often with the tacit cooperation of local officials. This is a textbook example of what public choice theorists call regulatory capture combined with incomplete property rights. When no one holds a clear, enforceable title to a resource, and when bureaucratic discretion determines who gets access, the rational response of every actor, official and operator alike, is to seek rents rather than build value.
Zamindari’s ghost and the ‘property rights’ trap
Jharkhand’s land laws are often defended as protections for tribal communities, and in their original 1908 and 1949 intent, the Chotanagpur Tenancy Act and the Santhal Pargana Tenancy Act were responses to real historical dispossession under colonial and zamindari landlordism.
But a century later, these laws have calcified into something closer to a new zamindari of the state itself. Tribal land in Jharkhand largely cannot be sold, mortgaged, or transferred to non-tribals, and in practice this restricts an Adivasi landholder’s ability to use land as loan collateral, to enter joint ventures on his own terms, or to capture the full market value of what he owns. The land is his in name, protected on paper, but functionally frozen.
Economist Hernando de Soto’s argument about the “mystery of capital” applies directly here: assets that cannot be formalised, leveraged, or exchanged under clear title do not function as capital, they function as subsistence holdings. The well-meaning colonial-era statute has quietly become an instrument that keeps Adivasi households land rich and capital poor, while state agencies and connected intermediaries retain the discretionary power to decide when and how that land gets “acquired” for mining or infrastructure, almost always on terms set by the state rather than the owner.
A genuinely libertarian reform would not abolish these protections against exploitative outside capital, but it would separate protection from paternalism. Secure, transferable, individually held tribal title, enforceable in courts, with the right to lease, mortgage, or partner on the owner’s own terms, would do more to prevent land grabs than a permission-based regime administered by the same officials who negotiate mining contracts. Ownership with exit options is a stronger shield than dependency on a benevolent bureaucrat.
Casteism, appeasement, and the politics of the vote bank
Jharkhand’s politics since its creation in 2000 has revolved around a competition to claim the tribal vote through symbolic gestures rather than structural reform: reservation announcements, ration card expansions, loan waivers, and periodic land redistribution promises. The state government’s own request for additional foodgrain quotas, covering some 20 lakh beneficiaries beyond the Centre’s National Food Security allocation, illustrates the pattern. Welfare expansion is treated as the primary lever of development, while the underlying constraints on tribal economic activity, land immobility, permit requirements for small enterprise, absence of formal credit access, go largely unaddressed.
This is ‘appeasement politics’ in the public choice sense: politically rational vote-buying that concentrates visible, short-term benefits on identifiable groups before elections while imposing diffuse, long-term costs, fiscal strain, dependency, stalled entrepreneurship, on the same communities it claims to serve. It also entrenches a caste and tribe-based patronage hierarchy in which access to government schemes, contracts, and jobs depends on political proximity rather than merit or market performance, reproducing exactly the kind of hierarchical gatekeeping that Dr. Ambedkar spent his life opposing.
Dr Ambedkar’s own vision was never mere redistribution; it was the destruction of graded inequality through individual rights, education, and the ability to exit oppressive social and economic arrangements. A libertarian reading of Ambedkar is entirely coherent: he wanted Dalits and Adivasis to own capital, access courts, and compete on equal legal footing, not to remain permanent wards of a discretionary state apparatus.
Corruption scandals in Jharkhand rarely involve outright theft from an empty treasury. They typically involve the diversion of funds meant for tribal welfare through layers of contractors, cooperative societies, and shell beneficiaries, a pattern consistent across mining royalty disbursement, PDS ration distribution, and rural employment guarantee payments. Public choice theory again supplies the mechanism: whenever a scheme creates a large, discretionary pool of money administered by officials with weak accountability and short political time horizons, an intermediary class emerges to broker access to that pool.
The Adivasi beneficiary at the bottom of the chain typically receives a fraction of the nominal allocation, while the political and bureaucratic class that controls disbursement captures the rents. This is not a failure of good intentions. It is the predictable output of an institutional design that concentrates discretion instead of dispersing rights.
Where the state gets out of the way, Adivasis are already building
The most persuasive argument for economic freedom in Jharkhand is not theoretical. It is happening on the ground; in the gaps the state has not yet managed to fully control.
Van Dhan Vikas Kendras, the network of tribal enterprise clusters built around non-timber forest produce, have become one of the more effective vehicles for self-employment among forest-dwelling communities, organising tribal gatherers into value-addition units for tendu leaves, mahua, lac, and medicinal herbs rather than leaving them as raw-material sellers dependent on middlemen.
Jharkhand is India’s leading lac-producing state, and lac-based enterprises, bangles, dyes, cosmetic-grade resin, represent exactly the kind of low-capital, high-skill informal sector activity that tribal entrepreneurs are positioned to dominate if credit and market access were freed up. Sohrai wall painting and Dokra lost-wax metal casting, traditional Adivasi art forms, have found growing urban and export markets when artisans get direct digital access to buyers rather than routing through state emporia and craft boards that take a cut and add delay.
Women’s entrepreneurship data tells a similar story. A 2024 Invest India assessment found women-led e-commerce ventures growing substantially through platforms like Flipkart Samarth, which connect rural and tribal producers directly to national consumer markets, bypassing several layers of traditional intermediation.
Research on Jharkhand’s MSME sector consistently identifies the same barriers holding this growth back: limited access to formal finance, socio-cultural constraints, and weak market linkages, not a lack of entrepreneurial appetite. Every serious study of tribal enterprise in the state reaches the identical conclusion: capability and demand exist, and what is missing is capital, title, and freedom from discretionary permission at each step. Self-employment in Jharkhand’s informal sector already runs high, roughly a third of the urban workforce nationally is self-employed by Periodic Labour Force Survey figures, but this energy is channelled into precarious, unregistered, undercapitalised activity because the formal path is blocked by paperwork, collateral requirements the CNT Act makes nearly impossible to satisfy, and licensing regimes designed for an industrial-era mindset.
Social entrepreneurship among Adivasi youth, eco-tourism ventures built around Jharkhand’s waterfalls and forests, organic farming cooperatives for tulsi and lemongrass, small-batch food enterprises around litti chokha and dhuska, shows a generation trying to build businesses that monetise cultural and ecological assets on their own terms. Every one of these ventures would scale faster with three specific reforms: transferable land title usable as collateral, a single-window registration process replacing multiple departmental clearances, and direct fiscal transfers from mineral royalty and DMF (District Mineral Foundation) funds to individuals and gram sabhas rather than to state-administered schemes with heavy administrative leakage.
What a ‘libertarian’ Jharkhand would look like
A genuinely reformist agenda for the state would rest on a small number of clear principles rather than another 5-year plan.
First, decentralise mineral rents to the household and gram-sabha level through direct transfer, rather than routing them through DMF bureaucracies and state welfare departments where discretionary disbursement invites exactly the rent-seeking public choice theory predicts. Alaska’s Permanent Fund model, in which resource revenue is paid directly to residents, is worth studying seriously for a state where mining already generates the overwhelming share of own revenue.
Second, reform CNT and SPT tenancy provisions to allow individually titled, transferable, mortgageable land rights for consenting tribal owners, with strong anti-fraud safeguards, rather than a blanket transfer ban administered by the same officials who negotiate land acquisition on the state’s behalf.
Third, dismantle the permit and licensing raj facing small tribal enterprises: single-window clearance, presumptive taxation for micro-enterprises, and formal recognition of informal lac, NTFP, and craft businesses without requiring capital or connections most rural entrepreneurs do not have.
Fourth, replace opaque, politically timed welfare announcements, foodgrain quota hikes and loan waivers before elections, with transparent, rules-based direct benefit transfers insulated from electoral cycles, reducing the incentive for parties to compete on patronage rather than growth.
Fifth, apply constitutional and institutional constraints, independent audit of DMF spending, judicial fast-tracking of pending land compensation cases, transparency mandates on mining contracts, to reduce the scope for the kind of capture that keeps Rs 80,000 crore in compensation claims unpaid for years.
What should be the future of Jharkhand?
Jharkhand does not suffer from too little government attention. It suffers from too much discretionary government and too little economic freedom. Every data point, from the MPI figures to the unresolved coal dues to the frozen land titles, points toward the same diagnosis that public choice theory would predict concentrated interests, whether central ministries, coal companies, or entrenched local patronage networks, capture the gains, while the costs of a permission-based economy fall on the tribal families who were promised protection and got dependency instead.
The tribal artisan making Dokra castings, the Van Dhan collector processing mahua, the woman selling through Flipkart Samarth, these are the actual engines of Jharkhand’s next economy, and they are succeeding despite the state’s architecture, not because of it. Give them clear title to their land, direct access to their own mineral wealth, and freedom from discretionary permission, and Jharkhand will not need another welfare scheme to escape the bottom of India’s development tables. It will need only what Dr. Ambedkar and Friedrich A. Hayek, from very different starting points, both insisted on: the individual’s right to own, to trade, and to be free of arbitrary power.
(Disclaimer: The views, opinions, and data presented in this article are those of the author and do not necessarily reflect the views of Town Post.)
