Who needs industrialisation?

 

We are generally 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 share of industry in India’s GDP has changed ever so slightly, despite the economy now growing at almost twice the “Hindu rate of growth”, averaging close to six per cent in the last two decades.

 

West Bengal seems to be proving this point. Despite its obviously slack industrialisation in the post reforms period, the state has racked up the fastest rate of economic growth in India. Now juxtapose this fact, evidenced by official statistics put out by the Government of India against the huge investments in industry taking place in Maharashtra, Gujarat and Tamil Nadu. And we are left with a startling picture of a state, whose one time industrial primacy is now a faded memory, is actually ahead of the big industrialising states. But since we cannot grasp what we cannot see, we castigate the CPM-led government for what it has done to Bengal. This is only our perception and not the reality.

 

VS Naipaul once said: “Bengal was the economic and intellectual leader of India till it discovered Marxism. It discovered Marxism and like poor Russia in 1917, committed suicide. The economic lead of Bengal has vanished and so has the cultural lead.” While cultural development cannot be quantified, economic growth can be and the evidence before us suggests that Sir Vidia takes more than just poetic license with the facts. According to data from the Central Statistical Office in the years since 1993-94 Bengal has the highest growth rate of 8.55 per cent with second placed Karnataka’s 7.29 per cent well behind it.

 

Even in terms of growth of per capita income 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 national growth of 4.3 per cent. This is even more revealing when you consider that during this period Bengal was also racking up an average annual population growth of 1.78 per cent, which is much higher than the rate of other high achievers like Tamil Nadu (1.11%). 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 growth. We cannot but surmise that the rise in per capita incomes could have been even higher if there was no influx.

 

Even more interesting is the fact that per capita incomes of Bengal and Maharashtra, after excluding Mumbai and Kolkata, are fairly close. Bengal’s per capita after excluding Kolkata is Rs 12,671 while Maharashtra’s without Mumbai is Rs 13,897. This performance is quite extraordinary when you consider that Bengal ranks third from the bottom in terms of irrigated acreage. 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 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 of a higher order. Then Bengal would have perhaps had a sustained growth rate closer to that of China.

 

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—5369 to 6091. Worse, the numbers employed in the organised industrial sector in Bengal declined by almost half.

 

The effects of partition on the commerce and industry of eastern India are 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 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, giving the engineering industry little incentive to stay around Calcutta.

 

Clearly all has not been well with Bengal and the slackening pace of industrialisation; flight of capital and prolonged industrial unrest has taken its toll. But that doesn’t mean the Communists did badly in Bengal. It only means that Bengal could have done even better.