Growth in West Bengal
12th 2008, C.P. Chandrasekhar and Jayati Ghosh
the greater part of the past three decades, West Bengal
has been among the middle ranking states of India, both
in terms of per capita income and human development
indicators. This has been despite the special feature
of the state, that it has been ruled continuously by
a Left Front government that has provided political
stability and also, particularly in the first two decades,
a clear orientation towards improving the conditions
of workers and peasants.
This has made West Bengal the most active state in respect
of land reform in the past two decades, leading the
rest of the country not only in recording and legal
recognition of the rights of sharecroppers but also
in enforcing land ceilings and distributing surplus
and vested land. (It should be remembered that even
now West Bengal distributes more land to landless peasants
than it acquires, and certainly distributes more than
any other state.) It also made the state a pioneer in
the decentralisation of powers to the panchayats, well
before the 73rd and 74th Amendments to the Constitution
encouraged greater devolution in other states as well.
While these measures certainly contributed to the breaking
of the “agrarian impasse” in Bengal and allowed for
more rapid and diversified agricultural performance
in the state, in other respects the economic performance
of the state has been below expectation. This reflects
the inherent difficulty of an autonomous development
trajectory within a single state, even with a federal
system of government, and the role of broader macroeconomic
processes in determining outcomes even within the state.
To this must be added several other constraints on growth,
which are essentially the effects of history and geography.
At Independence, West Bengal was among the more industrialised
states of the country. Subsequently, however, a combination
of factors meant that organised manufacturing industry
generally stagnated, especially compared to other regions.
These included the absence of a local bourgeoisie with
an inherent interest in investing within the state;
reduction in public investment in railways that had
previously encouraged the local engineering industries;
and national policies such as the freight equalisation
policy that eliminated the state’s regional cost advantages
from proximity to coal and steel resources.
In addition, West Bengal has been situated in what has
been a relatively poor and economically stagnant region
of India, such that there have been very few economic
growth stimuli coming from the surrounding region. Indeed,
for the better part of the past two decades the economy
of West Bengal has been the only dynamic one in the
Despite these constraints, it is not generally known
that over the 1990s West Bengal was one of the fastest
growing states in India, and actually showed the second
highest rate of aggregate SDP growth among major states,
after Karnataka. This tendency was even more marked
in per capita terms, because West Bengal has been successful
in controlling fertility to a greater extent than many
While agricultural output growth was the dominant reason
for this, industrial output also grew rapidly, not so
much in the organised sector but in the non-registered
and unorganised manufacturing industries that proliferated
as a consequence of greater rural prosperity. For the
past decade, West Bengal has had the largest number
of and the most rapid growth in small-scale and cottage
industries among all the states of India.
However, much like small manufacturing elsewhere in
the country, such small units in West Bengal have recently
been adversely affected by neo-liberal economic policies
implemented by the central government, which have led
to rising costs and greater competition from both organised
manufacturing and liberalised imports. The negative
fallout of these processes on small manufacturers and
traders has been particularly evident since the start
of the current decade.
These tendencies in turn form the backdrop to the new
industrialisation strategy of the Government of West
Bengal especially since 2004, which has sought to engage,
attract and provide incentives for large corporate capital
in order to increase the rate of industrial investment.
This article considers the available evidence on growth
trends in the state since 1999-2000.
Chart 1 indicates that after 1999-2000, West Bengal
was growing slightly faster than India as a whole in
per capita terms until 2004-05, after which its expansion
has been slightly less rapid but still creditable. The
per capita income of West Bengal is now slightly lower
than the national average.
Charts 2a and 2b show that growth up to 2004-05
was accompanied by even more rapid changes in the sectoral
composition of output than have occurred in the rest
of India. As for India as a whole, the share of the
secondary sector has remained almost constant, increasing
only very slightly. But the share of the primary sector
(which in West Bengal is dominantly agriculture) has
shrunk by as much as 7 percentage points in just five
years, with the gap being taken up by services expansion.
2a >> Chart
Within services, only a few sub-sectors account for
this growing share. The transport and communications
sectors, trade, hotels and restauranats and public administration
and community services have actually fallen in terms
of share of State Domestic Product in these five years.
However, banking and other financial services and real
estate and business services have increased their respective
The critical issue from the point of view of
well-being of the people, of course, is how far the
changes in sectoral composition of output have involved
changes in employment patterns as well. Therefore, Table
1 presents some calculations of the relative shares
in output and employment by major sectors in 1999-2000
and 2004-05, using NSS estimates based on the two recent
large-sample Employment and Unemployment Surveys.
The evidence presented in Table 1 is disconcerting.
While the share of the primary sector in outout has
fallen sharply, as noted above, its share in employment
has barely changed at all, and it continues to account
for around 46-47 per cent of the work force. This is
also true of India as a whole, of course, although the
absolute share of the primary sector in employment is
lower in West Bengal (at less than half of all workers),
and the decline in share has also been smaller than
in the average for India.
the manufacturing sector has also declined in relative
importance, to some extent in terms of the share of
output and even more in terms of the proportion of workers
engaged in such activity. Meanwhile, the services sectors
that have accounted for the biggest increases in share
of output have increased their share of employment to
a much lesser extent. In particular, financial, real
estate and business services accounted for 23 per cent
of the State Domestic Product in 2004-05, but only 2
per cent of the work force! So both in the manufacturing
sector and in the more dynamic services sectors, growth
of output has involved very little expansion in employment.
This is of course in a nutshell the central problem
of development today, not only in West Bengal but in
all of India. Clearly it cannot be solved by a concentration
only on corporate-driven growth in industry or services,
as such investment is typically more capital-intensive
and generates less employment per unit of output than
investment by smaller producers. So the state government
obviously has to develop a multi-pronged strategy for
employment generation that encompasses several different
There is a further issue on the nature of recent growth
in West Bengal, which is in terms of its regional spread
– or rather, the lack of it. Post-1999 income growth
has been overwhelmingly concentrated in the metropolitan
area of Kolkata and the surrounding hinterland, thereby
widening income gaps between Kolkata and the rest of
the state that were already very large.
Chart 3 show the disparity between per capita income
in Kolkata and in all other districts in 2004-05. No
other district had a per capita income that was even
half of that of Kolkata, not even those that are contiguous
or nearby the capital. More than half the districts
had per capita incomes of around one-third that of Kolkata,
or even less. While it does not appear on the chart,
it should also be noted that for almost every district,
the per capita income gap with respect to Kolkata has
actually widened since 1999-2000, indicating that the
recent pattern of economic growth has accentuated spatial
inequalities within the state.
Finally, of course, it is well known that growth in
aggregate income need not always translate into improvements
in material consumption of the people in general. This
is evident from a comparison of the per capita income
of the districts with estimates of mean per capita consumption
obtained from the NSS 61st Round consumer expenditure
survey. Table 2 presents this information.
district-level data on per capita consumption is derived
by using Small Area Estimation techniques to arrive
at estimates with the least variation for each district.
They do have a number of limitations, since the sample
sizes are generally not large enough to permit generalisation.
Nevertheless, the data presented in the table reveal
several interesting facts. Firstly, and expectedly,
there is substantial variation between the per capita
income and mean consumption in general and across districts.
Second, in several cases the variation is so large as
to change the rank of the district quite significantly,
as for example for North 24 Parganas (where the rank
improves hugely for per capita consumption) and Jalpaiguri
(where the rank falls sharply for per capita consumption).
While the disparities between Kolkata and the rest of
the state in terms of per capita consumption were also
large, they were slightly less than has been observed
for per capita income. Overall, this table suggests
the need for caution in interpreting per capita District
Domestic Product as an accurate indicator of either
consumption or overall well-being of the local people.
It is evident that the estimated per capita consumption
in the different districts was somewhere around one
half and one-third of the per capita output. Assuming
that workers and small peasants consume all or most
of their income (and may even dissave through debt)
this suggests a very large share of surplus in the form
of profits, rents, etc.
This knowledge allows for a further refinement of the
basic development question mentioned earlier: how can
existing surpluses be tapped and mobilised to ensure
both expansion of productive capacity in a way that
creates gainful employment opportunities and better
material and human development conditions for the people?
It is this very difficult question that must be answered
if the development strategy of West Bengal government
is to be successful in creating unambiguous and widely
welcomed gains for the citiziens of the state.