West Bengal, as soon as a dominant participant in India’s financial system, has seen a constant decline in each its share of India’s GDP and its relative per capita revenue over the previous six many years. In 1960-61, West Bengal contributed 10.5% to the nationwide GDP, rating third amongst Indian states, however this share has shrunk considerably to five.6% in 2023-24, based on information from the Ministry of Statistics and Programme Implementation (MoSPI). The info has been collated in a working paper by the Financial Advisory Council to the Prime Minister by Sanjeev Sanyal & Aakanksha Arora. This decline is much more evident by way of per capita revenue. As soon as boasting a per capita revenue 127.5% of the nationwide common, West Bengal now sits at solely 83.7%.
West Bengal’s financial decline, notably compared to its counterparts Maharashtra and Tamil Nadu, displays a marked divergence in progress trajectories because the Sixties. On the time of independence, West Bengal, together with Maharashtra and Tamil Nadu, was an industrial powerhouse, with Calcutta being one of many largest industrial clusters within the nation. Nonetheless, whereas Maharashtra maintained its financial standing and Tamil Nadu surged after the 1991 liberalisation, West Bengal’s decline started as early because the Sixties. The state’s share in India’s GDP fell from 10.5% in 1960-61 to a mere 5.6% by 2023-24, the sharpest drop amongst all states. This decline endured even after financial liberalisation, which benefited different areas. In consequence, West Bengal’s industrial and financial prominence has considerably eroded, leaving it lagging behind its former friends.
Share of Maharashtra, Tamil Nadu and West Bengal in India’s GDP (Supply: EAC-PM Working Paper)
In distinction, Odisha, a state that traditionally lagged behind in most financial indicators, has undergone a big transformation. From a relative per capita revenue of 54.3% in 1990-91, Odisha now stands at 88.5% in 2023-24, a outstanding turnaround that highlights the divergent paths of the 2 states.
Relative per capita revenue of West Bengal, Odisha and Assam. (Supply: EAC-PM Working Paper)
The important thing distinction between West Bengal and Odisha lies of their respective responses to nationwide financial reforms, notably these initiated in 1991. Whereas West Bengal didn’t capitalise on liberalisation, Odisha took full benefit of those adjustments to spur progress. Research resembling Ahluwalia’s (2000) and the OECD’s report on India’s regional growth (2014) attribute West Bengal’s decline to coverage inertia, a difficult enterprise surroundings, and inflexible labour legal guidelines. The state, recognized for its traditionally militant commerce unions and restrictive labour rules, deterred non-public funding, particularly in manufacturing and business. Then again, Odisha pursued a sequence of reforms to enhance its enterprise local weather. As famous in a 2019 NITI Aayog report, Odisha made strides in ease of doing enterprise by simplifying rules, enhancing infrastructure, and actively courting international and home buyers.
How Odisha Turned Its Destiny
Odisha’s success could be traced to its give attention to industrial growth, infrastructure funding, and governance reforms, notably after the early 2000s. The state carried out a number of proactive insurance policies to draw funding in sectors resembling mining, metal, and manufacturing. In response to a World Financial institution report on Indian states (2017), Odisha’s authorities centered on creating investor-friendly insurance policies, decreasing pink tape, and modernising its industrial insurance policies, which in flip attracted main gamers like Tata Metal and Vedanta.
These reforms, mixed with enhancements in connectivity and infrastructure, helped Odisha’s financial system develop at a sooner tempo than its friends, together with West Bengal. Odisha’s share in India’s GDP, whereas nonetheless modest, has elevated, and its per capita revenue has grown steadily. West Bengal, in contrast, has seen its industrial base erode, with key industries like jute and textiles failing to modernise, resulting in stagnation in each output and employment.
West Bengal And Odisha: Two Completely different Trajectories
The divergence in financial trajectories between West Bengal and Odisha can also be mirrored in social and human growth indicators. In response to the multidimensional poverty index, Odisha has made vital enhancements in literacy, life expectancy, and poverty discount, pushed by its financial progress and focused welfare programmes. West Bengal, whereas performing comparatively effectively in literacy and well being metrics, has not been capable of convert these into sustained financial positive aspects. Odisha’s give attention to inclusive progress, notably its emphasis on poverty alleviation programmes, has resulted in vital reductions in poverty charges, from 57% in 2004-05 to 32% in 2011-12, as per Planning Fee information. In distinction, West Bengal’s poverty discount has been extra sluggish, with entrenched rural poverty remaining a problem regardless of varied authorities schemes.
The Union authorities might provide you with the headcount ratio as soon as the HCES information is absolutely launched. Nonetheless, within the absence of this information, the Multidimensional Poverty Index presents insights into poverty ranges. A more in-depth examination of the state-wise share level change in headcount ratio between 2015-16 and 2019-21 reveals a stark distinction: Odisha noticed a big decline of 13.68%, whereas West Bengal’s discount was solely 9.41%. This disparity highlights how West Bengal’s progress in decreasing poverty has lagged behind, even when in comparison with Odisha.
Bengal’s Reliance On Agriculture
One of many essential elements in Odisha’s success has been its means to transition from an agrarian financial system to an industrial one, whereas West Bengal has remained overly depending on agriculture. As per the Reserve Financial institution of India’s ‘Handbook of Statistics on Indian States’ (2022), the share of agriculture in Odisha’s Gross State Home Product (GSDP) declined from 37% in 1990-91 to round 16% in 2020-21, whereas the commercial sector’s share elevated correspondingly. This shift in direction of a extra diversified financial system has been essential in driving sustained financial progress in Odisha. West Bengal, alternatively, continues to rely closely on agriculture, which stays susceptible to climatic adjustments and worth fluctuations. Regardless of being an early chief in business, West Bengal’s industrial progress has stagnated, with the state failing to draw vital new funding or develop new sectors past conventional industries like jute and textiles.
The function of governance and political stability can’t be ignored in explaining the contrasting financial trajectories. Odisha has skilled constant political stability, permitting for long-term planning and execution of reforms. The state authorities has been credited with decreasing corruption, enhancing governance, and implementing insurance policies that foster industrial progress and infrastructure growth. In distinction, West Bengal’s political panorama has been extra turbulent, with frequent adjustments in management and governance types.
Odisha’s Strategy To PPP
Furthermore, Odisha’s method to public-private partnerships (PPP) in infrastructure growth has been considerably extra profitable than West Bengal’s. As per the Financial Survey of India (2021-22), Odisha has efficiently leveraged PPP fashions to construct roads, ports, and industrial parks, which have additional fuelled industrial progress. The Paradip Port in Odisha, as an illustration, has turn out to be a serious hub for each home and worldwide commerce, offering a vital benefit for industrial actions within the state. West Bengal, regardless of having the strategic Kolkata Port, has not been capable of replicate such success attributable to inefficiencies, political bottlenecks, and a scarcity of coordinated funding in infrastructure. The state’s incapability to modernise its port and transport infrastructure has additional contributed to its declining financial relevance.
With out significant reforms, state governments threat failing their residents by permitting stagnation and financial decline to persist. West Bengal’s regular fall from an industrial chief to a state with diminishing GDP share and per capita revenue exemplifies the results of coverage inertia and poor governance. In distinction, Odisha’s proactive reforms, improved enterprise local weather, and strategic give attention to infrastructure and industrial progress have pushed its outstanding financial transformation. If states like West Bengal don’t prioritise structural reforms, improve governance, and diversify their economies, they are going to proceed to lag behind, failing to satisfy the aspirations of their folks.
(Bibek Debroy is Chairman, Financial Advisory Council to the Prime Minister, and Aditya Sinha is OSD, Analysis, Financial Advisory Council to the Prime Minister)
Disclaimer: These are the private opinions of the creator