West Bengal was indeed the industrial and business capital of India during the British period. There were a lot of people who became rich by investing in business and industry and Calcutta became the cultural capital of the country with its many colleges and universities, palatial residences and museums. There were many Bengali intellectuals living in that period and Calcutta acquired perhaps the first modern society in India. However, while all these were going on there were also large scale famines in Bengal where millions died. Communal harmony was often under stress and close to a million died due to communal clashes which broke out during various periods in the first half of the twentieth century. The truth is that the sparkle of Calcutta hid the massive impoverishment of the rural peasantry that went on during the two World Wars. While Calcutta flourished, most of Bengal languished. So we should do better to not over estimate Bengal's past.
Now coming to the present period, Bengal had tackled the problem of rural poverty more or less successfully through land reforms and the Panchayat system. The land ownership has become more equal and lot of landless laborers and small landowners now have sustainable livelihood. This has resulted in sustained agricultural growth and made Bengal one of the leaders in agriculture in the country. Bengal consistently ranks among the top two or three states in terms of rice, fish and vegetable production. Given the comparatively smaller land mass of Bengal it is an impressive feat.
However, rural poverty has been rising again since the last 7-8 years or so and percentage of landless peasants is also rising sharply. This is a signal that employment capacity of the agricultural sector is reaching its limits and the economy needs to be diversified. The number of unemployed in the urban areas has also been rising very rapidly. The only way that such massive number of jobs can be created is through industrialization. Bengal had suffered capital flight through much of 70's and 80's due to various political and economic reasons and that has resulted in de-industrialization. Old industries die out naturally and new industry take their place. But in Bengal new industries did not come up as fast as old industries died. As a result huge rust belts have been created in many districts where you will see hundreds of closed down factories. So industrialization is the answer to Bengal's economic needs.
But the question of industrialization is not a simple one. Land is very scarce in Bengal and most of it is already settled or under cultivation. Also, as there are fewer existing industries in Bengal the economies of scale will not work and he initial cost of setting up new industries will be higher. Bengal also does not have the advantage that states like Maharashtra or Gujarat enjoy for being on the west coast where most of India's oil and gas imports take place. Oil and gas industry form a major part of industries in those two states. Instead, Bengal is close to iron and coal deposits which implies that manufacturing is probably the one which will suit it best.
So before jumping into making industries one needs to look at several issues very carefully.
Land question: Where to get the land for the industries? How much land is needed overall?
The first of the industries will need tax breaks to be profitable. But Bengal already has a small tax base as it is predominantly dependent on agriculture and the service sector. As a result tax revenue from industries is very crucial for Bengal. Low tax collection will mean low government spending on sectors like health and education which will hinder development. So what should be the balance? How much tax breaks should be given so that Bengal remain an attractive destination but at the same time it can increase tax collection with the rise of industries?
What kind of industries should be encouraged? Heavy and sophisticated industries can fetch brownie points from media but in reality generate little employment. Small scale industries on the other hand is capable of creating large scale employment opportunities which is the need of the hour. However, smaller industries generally come up in areas where there are other heavy industries which supply the raw materials for smaller industries. So how to prioritize?
Answers & Comments
West Bengal was indeed the industrial and business capital of India during the British period. There were a lot of people who became rich by investing in business and industry and Calcutta became the cultural capital of the country with its many colleges and universities, palatial residences and museums. There were many Bengali intellectuals living in that period and Calcutta acquired perhaps the first modern society in India. However, while all these were going on there were also large scale famines in Bengal where millions died. Communal harmony was often under stress and close to a million died due to communal clashes which broke out during various periods in the first half of the twentieth century. The truth is that the sparkle of Calcutta hid the massive impoverishment of the rural peasantry that went on during the two World Wars. While Calcutta flourished, most of Bengal languished. So we should do better to not over estimate Bengal's past.
Now coming to the present period, Bengal had tackled the problem of rural poverty more or less successfully through land reforms and the Panchayat system. The land ownership has become more equal and lot of landless laborers and small landowners now have sustainable livelihood. This has resulted in sustained agricultural growth and made Bengal one of the leaders in agriculture in the country. Bengal consistently ranks among the top two or three states in terms of rice, fish and vegetable production. Given the comparatively smaller land mass of Bengal it is an impressive feat.
However, rural poverty has been rising again since the last 7-8 years or so and percentage of landless peasants is also rising sharply. This is a signal that employment capacity of the agricultural sector is reaching its limits and the economy needs to be diversified. The number of unemployed in the urban areas has also been rising very rapidly. The only way that such massive number of jobs can be created is through industrialization. Bengal had suffered capital flight through much of 70's and 80's due to various political and economic reasons and that has resulted in de-industrialization. Old industries die out naturally and new industry take their place. But in Bengal new industries did not come up as fast as old industries died. As a result huge rust belts have been created in many districts where you will see hundreds of closed down factories. So industrialization is the answer to Bengal's economic needs.
But the question of industrialization is not a simple one. Land is very scarce in Bengal and most of it is already settled or under cultivation. Also, as there are fewer existing industries in Bengal the economies of scale will not work and he initial cost of setting up new industries will be higher. Bengal also does not have the advantage that states like Maharashtra or Gujarat enjoy for being on the west coast where most of India's oil and gas imports take place. Oil and gas industry form a major part of industries in those two states. Instead, Bengal is close to iron and coal deposits which implies that manufacturing is probably the one which will suit it best.
So before jumping into making industries one needs to look at several issues very carefully.
Land question: Where to get the land for the industries? How much land is needed overall?
The first of the industries will need tax breaks to be profitable. But Bengal already has a small tax base as it is predominantly dependent on agriculture and the service sector. As a result tax revenue from industries is very crucial for Bengal. Low tax collection will mean low government spending on sectors like health and education which will hinder development. So what should be the balance? How much tax breaks should be given so that Bengal remain an attractive destination but at the same time it can increase tax collection with the rise of industries?
What kind of industries should be encouraged? Heavy and sophisticated industries can fetch brownie points from media but in reality generate little employment. Small scale industries on the other hand is capable of creating large scale employment opportunities which is the need of the hour. However, smaller industries generally come up in areas where there are other heavy industries which supply the raw materials for smaller industries. So how to prioritize?