West Bengal : Economical turmoil and the glorious past

 Hundred years after the fall of the Mughal Empire. North India witnessed frequent rebellious uprisings. The torments and atrocities of the East India Company had made people’s lives miserable. Before East India Company set foot in India, Bengal’s textile industry was renowned worldwide(Still famous in Bangladesh)

In the late 15th century, Portuguese travellers talked about Bengal’s cotton and sugar export. They mentioned that clothes manufactured in Bengal was of the finest quality. Marco Polo, a popular explorer, also talked about Bengal’s cotton. Europeans liked the muslin of Dhaka and Sonargaon, and the malmal of Malda and Shantipur. They praised malmal asserting that there’s nothing that compares to it in the world.

By 1720, around 1.5 million tons of Bengali textiles were exported to Europe. The industries in Bengal were severely affected by colonialism and partition. The industrial revolution of Britain introduced new technology. And Bengal’s textile industry couldn’t compete with it. After partition, the jute factories that manufactured jute clothes still operated in Bengal. But the mills that created jute were in East Pakistan. And after partition, it became difficult for these factories to acquire raw jute. With the worsening conditions, East Pakistan imposed export duties on raw jute. Due to this, the quality of jute declined in India while its price soared.

Despite partition and colonialism, West Bengal’s economy remained strong. In 1951, West Bengal’s literacy rate was second only to Kerala’s. In the 1960s, West Bengal’s economic performance was better than that of Maharashtra’s. You can mark that Bengal’s Net State Domestic Product (NSDP) was better than Maharashtra’s and best when compared to the rest of India. But over time, Maharashtra overtook Bengal. And the gap between them widened. Between 1960 and 2013, Bengal’s growth rate was lower than the all-India growth rate.

So what happened?

The key factor that contributed to the downturn of Bengal’s economy was the decline in its industry. In 1955, Bengal accounted for 24% of India’s industrial production and 27% of the industrial employment of the country. But by 2007, these figures fell to 3.9% and 4.9%. Not just that, even the contribution of the industry to Bengal’s economy also fell. For any economy, there’re broadly three sectors– agriculture, industry, and services. In 1960, the industries contributed 20% to Bengal and Maharashtra’s economy. But for Bengal, the figure dipped between 1960 and 1995. Several economists conducted researches to understand this industrial decline.

What happened to Bengal’s industries after the 1950s?

If we consider the time period of 1965 onwards, three factors are responsible for the condition of Bengal’s industries.

·        The first factor is the India-Pakistan wars that took place in 1965 and 1971. These wars reduced the government’s investment in the railways. Between the 16th and 19th centuries, the textile industry dominated Bengal’s economy. But in the 1960s, Bengal’s industry depended more on the engineering industries. In 1965, more people worked for engineering industries as compared to jute industries. Government investment was necessary for the development of engineering industries. The more the government invested in railways, the greater would be the need for engineering industries. Because the investment would’ve created the need for building wagons or installing electrical equipment. But this didn’t happen. And it led to the fall of Bengal’s engineering industries and consequently, it's economy.

·        The second factor was the domination of the Left political parties in Bengal. The 1969 state elections were the first elections when CPI(M) won more seats than the Indian National Congress. And the Left parties had a degrading impact on Bengal’s industries. Between 1967 and 1970, the number of industries and the number of people employed in these industries witnessed a sharp decline.

How did the rise of Left parties led to the decline in Bengal’s industry?

It was due to the strikes and lockouts. You might want to know the difference between a strike and a lockout. A strike takes place when the employees refuse to work. And the lockouts take place when the management refuses to give work. Between 1967 and 1970, strikes and lockouts increased suddenly. In fact, as the vote share of Left parties increased, several man-days were lost in strikes and lockouts. Due to this, many companies transferred their plants to other states. And the applications for private investments ceased too.

·        The third factor was the Freight Equalization Policy introduced by the Indian government in 1956. Under this policy, railway freight rates for minerals like coal and iron were made similar across the country. This means that if you want to transport coal from Bengal to Maharashtra or from Bengal to Bihar, the railway cost would be the same.

What was its impact?

The companies that were based in mineral-producing states like Bihar, Odisha, and Bengal, weren’t obliged to remain in those states. They could simply set up manufacturing plants in Maharashtra and Gujarat, that had better facilities and bigger ports. That’s why several industries left Bihar, Odisha, Bengal and moved to Maharashtra and Gujarat. This policy had a deprecating impact on the industries of Eastern India. After the emergency in 1975, the Left government ruled Bengal steadily between 1977 and 1991. Jyoti Basu was the chief minister of the state. During this time period, two factors were responsible for the sluggish growth of Bengal’s industry.

1.      The first factor was the industrial policies announced by the Left government in 1978. Under this policy, the government wanted to support small-scale industries. It’s because of the ideology of the Left government. It’s not happy with large-scale industry. It curtails the industry’s influence to increase the power of labour. Due to this, in 1989, while Maharashtra’s small-scale industries employed 67% of the people, the figure for the same in West Bengal was 89%. The small-scale industries succeeded at providing jobs, but it hampered the growth of local industries due to their poor quality, service, and delivery.

2.      The second factor was the persisting strikes and lockouts. As compared to 1969, the industrial disputes had decreased, but they were still prevalent. We can observe that lockouts were now more common than strikes. This implies that the management had become more aggressive than the labour union. It could be because of the Left parties. As they (Left parties) were now ruling the state, labour unions needn’t go on strikes. But the disputes originated from the management. And what was its impact? The large-scale industries started seeking ways by which they could reduce the disputes with the labour union and ultimately increase their productivity. They signed small unorganized companies for work as these were less affected by the labour union.

An unorganized company doesn’t pay taxes and receives no benefit from the government. For example, the provision stores near your home. These stores don’t pay taxes and have no business registration. The unorganized companies might do the job. But they lack money and thus there’s no room for innovation and growth. And as Bengal’s industry was dominated by unorganized companies, it couldn’t innovate and flourish.

In 1991, the Indian economy was opened up for foreign investments. This simplified the businesses. Moreover, in January 1992, the government abolished the Freight Equalization Policy, which had discriminated against mineral-rich states like Bihar, Odisha, and Bengal. To attract foreign investment, the Left government introduced a new industrial policy in 1994. The government also created a single-window facility, known as Shilpabandhu. Under this, the companies could easily acquire permissions. And the government also announced tax concessions which attracted foreign investment to the state. For example, Mitsubishi Chemicals, a Japanese multinational company, invested in the Haldia Petrochemical project. In fact, between 1991 and 2006, Bengal implemented more projects compared to Andhra Pradesh and Tamil Nadu. This led to the dip in Bengal’s urban poverty rate between 1983 and 2004.

Despite this progress, there existed a wide gap between West Bengal and other Indian states. The major reason behind this was poor infrastructure. In 1971 Bengal’s infrastructure was better than the Indian average,it declined in 1997. Raychaudhari and Basu assert that the poor public infrastructure could be because of the lack of state funds. This is the same problem our central government is currently facing. Bengal’s public sector was in debt. Most of the funds went into paying the government employees. And the government wasn’t collecting enough tax revenue. When the government didn’t have tax revenue, it had to borrow more money to pay the salaries. That’s why Bengal’s Debt to Gross State Domestic Product Ratio was higher compared to other states in 1997. That’s why the government couldn’t spend enough money on infrastructure. Apart from the infrastructure, it was challenging for the companies to set up a plant in Bengal as acquiring land had become difficult. This created a controversy in 2008. Trinamool Congress (TMC), a rising opposition party, initiated a pro-farmer protest. It claimed that the government had forcefully removed them from their lands to help Tata build a car factory. This incident made a great impact on Bengal’s image. The opposition wasn’t the only one responsible for it.

The government policies were pretty confusing. For instance, the Left government didn’t keep a record for land. This made it difficult for the companies to locate the land that they could acquire and the one that they couldn’t. After 2011, Trinamool Congress formed a government in Bengal. But Bengal’s economy kept struggling. Between 2012 and 2017, the Bengal growth rate was 5.5%, while the national average was 7.1%. It was due to the persistence of the same problems. For example, in 2015, West Bengal was home to the highest number of unorganized companies. Like we explained before, the manufacturing industries can’t grow in the presence of unorganized companies. In 1980, Bengal contributed nearly 12% to India’s manufacturing. But in 2011, the figure was only 5%. Due to the unorganized companies, Bengal might not face problems of unemployment. The problem Bengal faces is income. Unorganized companies can easily hire anyone and similarly, fire them too as they pay on daily basis. In 2017, Bengal’s unemployment rate was lower than the national rate. But many in Bengal are casual labourers which means they don’t have a steady monthly income but have to look for work every day.

Now the Left parties aren’t ruling the state, but the labour union is still predominant. Labour union claims that they help each and every labourer in case of medical and personal emergency. This could be true to some extent. But most of the time, the job of the trade union is to collect money. The labourers need to contribute money to the union regularly. The union asks for Rs. 50, but it’s difficult to pay the sum in the absence of work. Apart from this, Bengal’s financial situation is still struggling. But Bengal progressed a lot in terms of social indicators. Literacy rate, infant mortality rate, access to safe drinking water, and toilets are some of the indicators where Bengal exceeds the national average. The reason behind this social progress could be the welfare schemes of TMC. For example, the Krishak Bandhu Scheme, which offers Rs. 5000 a year to around 7 million farmers and landless sharecroppers. Or the Karma Sathi Prakalpa Scheme, which provides free electricity to the poor. To improve its economy, Bengal needs to solve the issues that it’s been facing for years. For example, infrastructure development doesn’t get enough attention. In the 2020 budget, the spending on the infrastructure of Bengal was lower than the national average. To promote the growth of the industry in Bengal, many factors need to be addressed. For example, unorganized manufacturing is still common in Bengal and its financial situation remains challenging.

Once these issues are addressed, we might witness a change in Bengal.