THE economic performance of West Bengal has attracted quite a bit of attention for three distinct reasons. First, there has been a decline of the state in terms of industrial development relative to other states of India over the period of the last four to five decades. There has been debate about what caused this decline, and whether the pattern of development had changed in any substantial way. The second reason why the state’s economy has been under scrutiny is the rule of the Left Front government for over three decades. What did the Left Front do right, and where did it go wrong? These questions are still raised quite frequently. Finally, with the defeat of the Left Front in the 2011 elections to the state assembly and the arrival of the Trinamool Congress government led by Mamata Banerjee, analysts are curious to see how the ‘parivartan’ or change promised by the new government takes shape, and whether that change could alter the trajectory of the state’s economic performance.

Answers to the questions raised about performance and change in West Bengal vary from analyst to analyst, but certain common trends are discernable on which opinions seem to converge. The differences that exist are more in terms of interpreting the facts to determine the causes giving rise to the trends. For instance, facts like the decline of private and public investment in industry, the rise of militant trade unionism, the growth of the agricultural sector, the low level of human development indicators are seldom debated. However, the causes underlying these are. In such a situation, it is only expected that prescriptions for turning the health of the economy around would also differ widely. Somewhere in these discussions about the economic condition of the state, issues of rights and freedoms, violence and security, empowerment and gender invariably enter.

West Bengal was the richest state of India in 1960 but slipped to 9th position by the turn of the century. The share of industry in the state’s domestic production fell from 24 per cent in 1947 to 11.9 per cent in 1977 when the Left Front came to power, and now stands at 4.2 per cent. West Bengal is also a very densely populated state with 903 people living per square kilometre, making it relatively land scarce and labour abundant. Agriculture contributes a large share (24.9 per cent) to state domestic product. Unlike in other large states of India such as Punjab, Maharashtra, Haryana and Gujarat, the area under small and marginal cultivation is very large. Such farms account for only 4.0 per cent of the total number of farms in Punjab, but are as high as 67 per cent in West Bengal. Even today, 8 per cent of households are landless in the state, while a large per cent (84.3 per cent) possess less than one hectare of land. Per capita income is currently less than the national average of India.

In terms of human development indicators West Bengal is certainly not a leader in any sense. It is ranked only 10th in terms of the HDI (Human Development Index) out of 17 major states. Only 32 per cent of households have access to electricity, 84 per cent have safe drinking water and the literacy rate is 68 per cent. The mean years of schooling is very low at 4.4 years and has an unusually high dropout rate from primary school. Rural inequality is low but spending power of the people is also low.

The roots of change experienced by West Bengal go back to the 1960s with the decline of the Congress party’s political influence and the rise of the left parties. The United Front government was the first non-Congress government of the state. This, along with the peasants’ movement in Naxalbari, marked a new brand of left politics in the state. This development, arguably, was a major cause of the flight of capital away from the state highlighting the general fear of militant trade unionism and political violence of the ultra-left. When the Left Front came into power in 1977 with a large majority, West Bengal had great expectations for a new development initiative to emerge.

 

Land reforms in the agricultural sector was taken up by the new government as the core of its strategy to provide security of tenancy and to distribute some vested land to poor peasants. This itself was so rare in India (despite enabling legislation carried out in the 1950s by Congress governments) that it was labelled as a revolutionary act that only a left-of-centre government would have the political courage to undertake. The land reforms were supposed to have directly benefitted 2.5 million farmers. This strategy was backed up by a concerted effort to equip small and marginal farmers with inputs of improved seeds and fertilizers at low costs. The combination of these two actions had a very positive impact on productivity, and the consequent rise in incomes and earnings of poor peasants. West Bengal is essentially a rice producing state. In terms of vegetables, potato is the main crop. During the Left Front rule there has been a large diversification of production towards vegetables and fruits. Production has increased impressively, though the same cannot be said for the improvements in productivity of land, especially in the cultivation of rice.

 

Despite debates about the actual performance of agriculture measured in growth rates, it is quite clear that agriculture did particularly well in the decade of the 1980s. It is also clear that this growth had been led by rice producing small farmers. However, the growth has slowed down considerably in the last two decades with stagnating productivity and falling margins. Many reasons are cited for this trend. First, the rise in productivity due to the completion of the green revolution (provision of improved seeds and fertilizers) was bound to have a one-off effect and not a continuously rising curve of growth. The reforms in tenure and distribution of land were, according to many observers, incomplete. The enthusiasm of the government slowed down, and no effort was made to bring in new legislation to lower the existing ceiling on agricultural land ownership.

Others have pointed out that with the advent of market friendly economic reforms at the all-India level, public investments in agriculture slowed down. Input costs have also been increasing and supports along these lines have been much less for farmers in the past two decades. Small and marginal farming has become increasingly non-remunerative since the middle of the 1990s. Agriculture is now characterized by a preponderance of small and marginal farming, with declining profitability. There is a trend of switching to more high value crops like fruits and vegetables. There is a growing urgency in looking for supplementary sources of livelihood in both the rural areas as well as in urban regions.

Migration, as a result of this push effect from land, is noticeably growing. Had this migration resulted in better paying and more stable job opportunities, then it would have helped consolidate the agricultural sector into one with a more economic size of average holdings (as some people left the sector, thereby improving profitability). However, this has not been the case since jobs in the non-agricultural sector have been almost exclusively confined to high risk, unstable, informal, and in the unorganized sector.

 

It has been noted that the decline of manufacturing had begun even before the Left Front government assumed office in 1977. The causes behind this have been analyzed to have been many. They vary from indicating the life-cycle decline (sunset) of traditional activities like light engineering goods and jute to the rise of new opportunities in other parts of India which attracted capital and other resources. Some blame has been laid on the Union government’s policy of freight equalization that made inputs of natural resources like coal and iron more costly than what they ought to have been in Bengal given its proximity to the sources. Finally, the rise of militant and sometimes violent trade unionism and the decline of work culture have been pointed out as the source of the problem. Perhaps all of these contributed to some extent to the systematic decline. The more important aspect of this decline is perhaps the complete lack of will of the Left Front government to wean back private investments, to have some control and influence over work discipline, or even to promote new kinds of activities in the organized sector. It blamed the Government of India and the conspiracy of private capital to shy away from the state.

 

The only alternative it had was to allow a rise of unorganized sector activities. It was labour intensive as a sector and used low doses of capital and is hardly dependent on modern technology. As the organized sector declined and the unorganized sector grew, an unintended consequence of this for the Left parties was a decline in the strength and influence of the trade unions and workers’ movements. The rules of the game in the unorganized sector are very different from the rights and privileges entitled in the organized sector. There was a great need to organize these workers as their rights and privileges were hardly any compared to workers in the organized sector. But the Left parties failed in leveraging this opportunity.

In an economy of petty producers, workers union’s fight for rights and benefits would have to be against the state, to pressurize it into passing legislation, as well as provide resources for a social safety net. This, to a large extent, was avoided by the Left parties since their ability to mobilize fiscal resources for these purposes was terribly limited given a large employment force in government, a growing debt burden and very low revenue growth.

In all major non-agricultural industry groups the proportion of unorganized workers is very large, being in excess of 75 per cent except in finance (56.1 per cent) and mining and public administration (3.9 per cent). The average is significantly higher than in other industrialized states like Gujarat or Maharashtra. Similarly, total unorganized employment is significantly higher (and growing) than in other more industrialized states. On the other hand, employment in the organized sector declined from 2.7 million in 1980 to 2.2 million in 2004. West Bengal has the highest number of manufacturing units in the unorganized sector in the entire nation.

In terms of the aggregate growth of the state’s domestic product (SDP) the decadal growth rate in the state was only 2.28 per cent and 3.23 per cent in the 1960s and 1970s respectively. In the 1980s and 1990s there was a turnaround with the corresponding figures being 4.24 per cent and 6.75 per cent. The figure for the 1990s was the second best in India, only after Karnataka which clocked a rate of 7.51 per cent. It is quite evident that the source of this growth was coming from small enterprises in the unorganized sector and small peasant households. West Bengal thus was able, till the 1990s, to show a rise in growth despite a secular decline in organized industry. Small and marginal farmers in West Bengal were able to earn incomes higher than that of the average small farmer in India. However, poverty in rural Bengal was higher than that prevailing at the national level. The reason, according to some analysts, is the large and growing pressure on land, leading to higher than average unemployment and underemployment in the state.

 

The Left Front in West Bengal had long claimed that the government’s relationship with the Union government left much to be desired. The federal policies of the central government, often claimed to be discriminatory against the left wing government, were advanced as the binding constraint that held back the development of the state. One reflection of this constraint, the Left Front claimed, was the inadequacy of central government funds and financial resources that flowed to the state. Hence the condition of the state’s treasury was far from healthy.

By the turn of the century, West Bengal’s expenditure’s on committed salaries, pensions and interest payments on outstanding debt often exceeded the total revenue collected. Obviously, the ability of the state to undertake public investments to create infrastructure would be absent. Even the maintenance of the existing assets would be difficult to ensure.

The revenue deficit of the government (the difference between operating expenses and revenues more than doubled in the decade of the 1990s. High deficits in turn implied that the state would have to borrow large amounts at reasonable and affordable rates, often at short notice. Indeed, it was strange turn of events that the state had to borrow from a private company to pay salaries to its employees. An analysis of the budgetary trends shows that the rise in deficits is attributable to the poor growth in revenue generation and collection. In this respect the performance of the state has been one of the poorest in the country. There is no easy solution to this problem. There are structural problems as well as problems of governance related to this issue, such as increasing the tax base in the services sector, or reducing inefficiencies and corruption in collection.

 

Given the pattern of changes in the economy discussed so far, one way of carrying the development of the small enterprise dominated non-agricultural sector would be to create adequate infrastructure in terms of roads, supply chains to the market, power supply and financial market accessibility. However, with the problem of high budgetary deficits and paltry revenues, finding resources for these big ticket investments turned out to be well nigh impossible.

 

It is perhaps due to a growing appreciation of the emerging constraints on capital expenditures and infrastructure building that the Left Front decided to shift gears on the road to industrial development. By the early years of the current century, the leadership of the Left parties, particularly the CPI(M), thought that without modern and large scale industry, the growth of income and employment opportunities could not be sustained. The economy of Bengal had become an overwhelmingly small producer dominated, unorganized, low income, low inequality structure. Jobs were scarce and unstable. The infrastructure of the state had been neglected. Health facilities were poor, and there was a serious decline in education – poor quality primary education and a systematic policy of nurturing the rise of mediocrity in higher education. The advantage that the state had in higher education was lost by the early 1990s.

The CPI(M) began to gradually feel that capitalist, large-scale, modern industry was now the need of the hour. The complacency bred by continued political power led them to believe that taking away the little income and wealth that many small and marginal farmers had would be trouble free given the large gains the state would make in terms of a reincarnation of organized industry. Singur and Nandigram must have come as a rude shock to the Left Front government. The government that had hitherto protected the small and the vulnerable had changed its metaphor of good governance. Big capital, large projects, modern technology had to come at all costs, even if it meant destroying the trust of the weak and the vulnerable. The backlash was ferocious, widespread and decisive. It was left to Mamata Banerjee, a long time antagonist of the left, to reap the political bounty available from the sudden chasm that emerged between the left and its support base.

 

Given the pattern of development in the state in the last two decades and the political change in government, an opportunity to create an alternative pathway to sustain improvements in the livelihoods and living conditions of people has opened up. One argument, often heard, is that technologically modern, large-scale industry is the only answer. Singur failed for political reasons – the inability to find an acceptable solution by more imaginative democratic engagement with the immediate losers, especially those who would have to give up their land. Modernization, according to the proponents of this strategy, never comes without a cost. How the costs are minimized and how sensitively the human fallout is handled, will determine the success of this strategy.

One the other hand, there is an argument that talks about a non-corporate pathway which reorganizes the small and micro enterprises into producers’ cooperatives and enables them to access credit and product markets in a more equitable fashion. It also requires the liberation of the panchayats from power brokers and political patronage peddlers. The small enterprises have to be liberated from the culture of control by labour union bosses and mafia dons. It requires a systematic and planned improvement in infrastructure. It also requires a serious look at the traditional industries of the state that are supposedly dying – jute, tea, light engineering goods, leather and leather based goods, and the supply of skilled personnel from its higher education sector.

Finally, the nurturing of the weak and the small will require a concerted effort to protect common resources like grazing lands, water, forests. This is not to suggest that this strategy is against large corporate industry or foreign investments. It is essentially about consolidating the gains of the weak and the small. The second pathway, in turn, requires imaginative, transparent governance, massive staying power, and a very large commitment to democracy and its institutions that would ensure a continuous engagement with stakeholders.

 

In its two years the new government in West Bengal has not clearly articulated its vision for the future. From its claims and pronouncements, it appears that the second alternative is what it prefers, an outcome that the left ought to have delivered as an alternative to the road dominated by the big and the powerful. Perhaps it is early days yet to pronounce final judgment on the current government. However, the experience so far has been considerably below expectations.

When the Left Front came to power in West Bengal, and used laws made by earlier Congress governments to take the state a step forward in terms of its radical land reforms, it was popularly referred to as ‘the most efficient Congress government’ of the country. The way the current government of the Trinamool Congress is headed, it may soon be labelled as ‘the worst CPM government’ of the country – inefficiency, myopia, callousness, street violence, hubris and all.

 

References:

Ratan Khasnabis, ‘The Economy of West Bengal’, Economic and Political Weekly, 27 December 2008.

Abhijit Banerjee and others, ‘Strategy for Economic Reform in West Bengal’, Economic and Political Weekly, 12 October 2002.