Doing business the hard way in India's wild east

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Soon it came back, with a message from a subordinate. The official was not playing ball - at least not at that price.

"He refused to accept it, and now he is cooking up a problem," the factory manager said as the envelope was handed back. "I will have to pay the bugger 20,000 (250 pounds) in the evening."

The manager had wanted a second power line for an extension for his small factory in the Hajipur Industrial Area in India's eastern state of Bihar. A simple request, the official had threatened to tie it up in endless red tape, unless he was paid.

The routine way the bribe was offered, and the way the episode unfolded in front of a Reuters correspondent, offers a tiny insight into the problems of doing business in a state which has become a byword for poverty, lawlessness and corruption.

India's boom has not reached Bihar, a state of 90 million people almost completely disconnected from the global economy.

It is the country's poorest and one of its slowest growing states, with "exceptionally low" levels of private investment, according to the World Bank. There is no sign of any foreign investment at all.

Chief Minister Nitish Kumar took over two years ago promising to turn things around. Since then he has been wooing rich Indians at home and abroad, trying to attract the investment his state so desperately needs.

Last December, the World Bank said he was moving in the right direction. His government had initiated comprehensive reforms, it said, improved the investment climate, stepped up public investment and improved the delivery of health and education services - albeit from an extremely low base.

The Bank loaned Kumar's government $225 million, but private investors have not been so enthusiastic. India's biggest industrialists have been visiting the state capital Patna, but so far they have kept their money firmly in their pockets.

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