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LATEST NEWS UPDATES | A Bengali rate of growth by Mohan Guruswamy

A Bengali rate of growth by Mohan Guruswamy

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published Published on Jan 22, 2011   modified Modified on Jan 22, 2011
Despite its slackening industry, the common perception of West Bengal as a backward state has little substance when one looks at the facts.

Most of us are conditioned to view economic development in terms of industrialisation. While industrialisation is essential for economic transformation, it is not as if economic growth is not possible without it. The sectoral structure of India's gross domestic product (GDP) and its slow transformation makes a good case study. The share of industry in India's GDP has hardly moved, even when the economy was growing at almost twice the "Hindu rate of growth" as was the case in most of the last two decades.

At a regional level, we can see this taking place in West Bengal. Despite its obviously slackening pace of industrialisation, in the post reforms period West Bengal has racked up the fastest rate of economic growth in India, both in terms of GDP as well as per capita income. Now juxtapose this fact, evidenced by official statistics put out by the Government of India against the huge investments in industry taking place in states such as Maharashtra, Gujarat and Tamil Nadu, and we are left with a startling picture of a state whose onetime industrial primacy many think is now a fading memory actually ahead of the big industrialising states. But since we cannot grasp what we cannot see — after all new factories and five star hotels are the only visible proof of development most of us accept — people castigate the Communist Party of India (Marxist) led government for what it has done to West Bengal. This is only perception and not reality.

The facts are that after 1993-94 West Bengal has the highest growth rate of 8.55 per cent with second placed Karnataka's 7.29 per cent well behind it. It would also seem that the Marxist rate of growth has been better than the Hindu rate of growth since India only grew at 6.87 per cent during this period.

Even in terms of growth of per capita income, West Bengal has fared much better than all other states during the post-reforms era. It achieved an average growth of 5.5 per cent after 1993-94 as opposed to the nationwide growth of 4.3 per cent. This is even more revealing considering that during this period West Bengal was also racking up an average annual population growth of 1.78 per cent between 1991 and 2001, which is much higher than the rate of the high achievers like Tamil Nadu (1.11 per cent). If one were to consider the population growth since 1981, West Bengal grew at 2.34 per cent, which is uncomfortably close to the national average of 2.51 per cent. Undoubtedly, the seemingly uncontrollable and unabated migration from Bangladesh has contributed to this relatively high growth of population. Whatever the reasons for this, we can only surmise that the rise in par capita incomes would have been even higher if there was no influx from neighbouring countries like Nepal and Bangladesh, and even neighbouring states like Bihar and Orissa.

Even more interesting is the fact that the per capita incomes of West Bengal and Maharashtra, after excluding the two great metros of Mumbai and Kolkata, are fairly close. West Bengal's per capita income, after excluding Kolkata, is Rs 12,671 while Maharashtra's without Mumbai is Rs 13, 897. Thus, even if we accept for a moment that West Bengal has a Marxist system, its performance is not too bad compared to what then must be the most laissez-faire of our states — Maharashtra. We can be certain that if the per capita incomes of other two big cities of Maharashtra — Pune and Nagpur — are excluded, its per capita income will be below that of West Bengal.

This performance is quite extraordinary when one factors in the dominant reality of rural West Bengal in that it ranks third from the bottom in terms of irrigated acreage with only 28.1 per cent of its agricultural land irrigated. This is when it is the third most densely agricultural state in India with almost 77 per cent of its land area under the plough. If like Punjab or Haryana, with 89.72 per cent and 65.0 per cent respectively of agricultural acreage irrigated, West Bengal too were to benefit from centrally financed irrigation and centrally subsidised procurement, it would be fair to assume that its economic performance would have been even higher.

Between 1984 and 2001, industrial capital investment in West Bengal only increased fourfold when it grew by more than seven times in the rest of India. This also coincided with the decline in the value addition of West Bengal industry from 8.8 per cent in 1984-5 to 4.0 per cent in 2000-1. During the same period the number of industries in the state was almost static — 5,369 to 6,091 — when the number grew from almost 97,000 to almost 131,000 for India. Even worse was that during this period the numbers employed in the organised industrial sector in West Bengal declined by almost half, from 917,000 to about 456,000.

Quite clearly, all has not been well with West Bengal and the slackening pace of industrialization, flight of capital and prolonged industrial unrest has taken its toll. But the question that still remains is whether this would have been any better under a public administration vested with any other political party. The effect of Partition on the commerce and industry of eastern India is well known. This was followed by the developments in technology and market preferences that made many traditional products like jute obsolete. An even bigger reason for the blight that settled over the one time industrial heartland of India were economic policies inspired by vague notions of socialism. The most pernicious of these was the freight equalisation policy of the Government of India with regard to steel and coal that lasted over three decades from 1956 to 1992. This neutralised the benefit of proximity and eastern India's main competitive advantage. This gave the engineering industry little incentive to stay around Calcutta and production inevitably shifted to areas closer to the markets. Thus, if we have to accept that Marxist notions on economic equalisation dearly cost West Bengal, it was not the doing of the Communists in West Bengal.

It is not that the Communists did not have a role to play in the industrial decline of West Bengal. Their contribution to militant union activity is well known. Chief Minister Buddhadeb Bhattacharya himself has been very candid about this when he admitted to a Confederation of Indian Industries (CII) gathering: "Yes, it's true that we have committed mistakes and have been irresponsible. You have heard of the word gherao, which means surrounding the management. It is now part of the English dictionary." MSN Encarta defines it as a transitive verb and noun meaning "surrounding somebody as protest; to surround and virtually imprison an official, employer and/or manager." Often these gheraos and the more traditional forms of industrial action ended up in violence resulting in a flight of capital from West Bengal. Worse, this kind of militancy led to competitive militancy and now trade unions affiliated to all other political parties make similar demands and use similar methods. This has made all our trade unions more comfortable with state ownership with the obvious attendant benefits of assured salaries and assured pay increases, full tenures, and annual bonuses, without any relation to productivity and corporate health. When an industry was rendered sick it was inevitably taken over by the government to protect jobs and not so much to contribute to the economy. Examples abound all over the country, but West Bengal typified it.

The consequences of this are clear to see. There were 6,091 factories in West Bengal in 2001 with as many as 252 deemed sick. This implies a sickness rate of 4.14 per cent for West Bengal when it is 2.54 per cent for India. By comparison, in industrially better-developed states like Maharashtra, the sickness rate is 3.30 per cent; and for Tamil Nadu it is just 1.54 per cent. The picture gets even gloomier for small scale industry (SSI) units. Of the 249,630 sick SSI units in India, no less than 113,846 or 45.6 per cent are in West Bengal. This picture would not be complete unless we relate this to the number of mill closures. In 2001, no mill was shut down in West Bengal when 151 were shut down all over the country, with Gujarat and Uttar Pradesh accounting for the most with 43 and 39 respectively. The question that still remains is whether this would have been the picture if eastern India did not suffer the precipitous economic decline it did after Partition and due to the now obviously questionable policies of the Government of India. But we know for certain that economic decline contributes as much to union militancy as competitive irresponsible trade unionism.

This industrial decline in West Bengal has had a profound impact on the structure of the state's economy. Much like for all of India where the share of agriculture as a percentage of GDP declined from 33.43 per cent in 1993-94 to 26.28 per cent in 2001-02, in West Bengal the decline was almost similar, from 33.84 per cent in 1993-94 to 27.36 per cent in 2001-02. The big change is visible in the share of the manufacturing sector. This sector's share grew from 23.68 per cent in 1993-94 to 24.36 per cent in 2001-02. However, in West Bengal it declined from 23.02 per cent in 1993-94 to 21.68 per cent in 2001-02, a decline of 1.34 per cent in percentage share. Since the services sector share in West Bengal grew by 7.81 per cent during this period — for India it was 6.54 per cent — it would seem that West Bengal was moving more speedily towards becoming a post-industrial society without having been even close  to becoming industrialised.

Concurrent with its industrial decline is the relatively poor performance of its power sector. That West Bengal is deemed to be "surplus" in power and with the West Bengal State Electricity Board (WBSEB) earning as much as Rs 600 crore in 2004 by selling power to neighbouring states is another matter. It gives us the perception of a thriving power sector, but the reality is otherwise. While India generated an additional 43.75 per cent of electricity in 2001-02 over 1993-94, West Bengal lagged behind with an increase of 38.64 per cent. One reason could be the proximity of Orissa, which taking advantage of its huge coal resources and a very supportive central government ramped up generation by 118.7 per cent during the same period.

But in terms of increase in per capita consumption of electricity, which is a better indicator of how a state is faring, West Bengal with an increase in consumption by 38.11 per cent remained pretty close to the national increase of 40.21%. In Orissa, by comparison, consumption only increased by 30.84 per cent, while in the other neighbouring state of Bihar it was 27.97 per cent.  While West Bengal did fairly in terms of consumption, it was well behind in terms of electrification of villages. At the end of 2002 only 78.17 per cent of its villages were electrified, while the coverage for India was 86.65 per cent. At this point of time eight states (Andhra Pradesh, Haryana, Himachal Pradesh, Karnataka, Kerala, Maharashtra, Punjab and Tamil Nadu) have almost complete coverage. In terms of this indicator West Bengal has remained pretty close to the other states in the region — Assam 77.04 per cent, Bihar 71.02 per cent, and Orissa 74.97 per cent. As rural electrification is still in general commercially unviable and hence is invariably centrally supported, this quite clearly suggests a neglect of the eastern region as a whole.

When the CPI-M led coalition came to power in West Bengal in 1977 the incidence of poverty in the state was 60.52 per cent, well above the national below poverty line (BPL) level of 51.32 per cent. In 1999-2000 these were 27.02 per cent and 26.1 per cent respectively. This means that while those below BPL decreased by 55.35 per cent in West Bengal, in all of India the decline was 49.22 per cent. West Bengal's BPL level is the lowest in the eastern region with the levels of Assam (36.09 per cent), Bihar (42.6 per cent) and Orissa (47.15 per cent) remaining well above the national level. The performance of West Bengal is comparable to that of Maharashtra where the comparable decline from 1977-78 to 1999-2000 was 55.28 per cent to 25.02 per cent or a decline in incidence of 55.22 per cent.

When one relates this performance of West Bengal and Maharashtra, the former having fared dismally in terms of industrial expansion while the latter was a star on this account, perhaps those who influence policies in this country will be able to distinguish reality from perceptions.

The author is Chairperson of the Centre for Policy Alternatives, New Delhi and former advisor to the finance minister, Government of India.

Hard News, 22 January, 2011, http://www.hardnewsmedia.com/2007/11/1803

Tagged with: Governance



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