The next IT state: New govt can make West Bengal an upscale tech hub

The Bharatiya Janata Party (BJP) has finally won West Bengal but the real test for the party lies in fulfilling its promise of taking the state to its former glory as an industrial and business powerhouse. Doing so entails not just reversing decades of a leftist political economy but also dealing with structural constraints in state policy and finances. Much has been made by the Trinamool Congress about the “poriborton” (change) in the state’s economy during 15 years of Mamata Banerjee’s rule. Chief among these achievements are the sharp reduction in poverty and fivefold growth in gross state domestic product (GSDP). Poverty reduction has been the result of a sustained social-sector focus, especially on schemes for women, which have proven genuinely transformational. The focus on expanding micro, small and medium enterprises (MSMEs), which provide employment to nine million people, has also driven growth.

 

These are not negligible achievements, but they have come at a cost. Heavy social-sector spending has impacted the fiscal situation; at 40 per cent, West Bengal’s debt-to-GSDP ratio is among the highest in the country. The BJP’s promise to implement the recommendations of the 7th Pay Commission for all state employees and pensioners within 45 days can only worsen this position. The focus on MSMEs has not translated into meaningful capital formation, which sustains industrial growth and employment. Compounding this is the agitation over compensation for the land acquired for the Tata Nano project at Singur, which powered Ms Banerjee to chief ministership. The Singur agitation enhanced the state’s image as being innately business-unfriendly, which Ms Banerjee struggled to alter despite high-profile investor summits and overseas visits. Sustained political violence did nothing to encourage investors, either; some 6,600 firms shifted their registered offices from West Bengal to other states during her term. Last year, the state inexplicably scrapped all industrial incentives granted since 1993 with retrospective effect, a move that underlined the state’s poor “ease of doing business” reputation.

 

Despite the BJP’s business-friendly image, the new administration will likely struggle to draw in large manufacturing enterprises. This is mainly because the Centre’s Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act of 2013, which largely reflects West Bengal’s laws, has also made it near impossible to acquire the critical landmass needed for world-class manufacturing. The BJP’s attempts to overturn these provisions when it came to power in New Delhi in 2014 proved unsuccessful and the political climate is such that this is unlikely to change. A workable alternative presents itself in the shape of information technology (IT), for which the state, with its high literacy levels and relatively good quality of life, is in a strong position to sustain. IT does not require mega-land investment. Ms Banerjee understood this and had started the process of attracting IT investment. Her initiative of setting up a 200-acre Bengal Silicon Valley Tech Hub provides a useful building block for the new administration to build on. Most of the marquee Indian names plus global data centres have invested here. The exponential growth of Gurugram as a dynamic IT hub, which enhanced the fortunes of agrarian Haryana, offers an example of the direct and indirect employment potential of IT investment. West Bengal can make a similar transformation.