Starting anew: Despite Delhi connections, Bengal govt has its task cut out

West Bengal Finance Minister Swapan Dasgupta’s wish for a “big breakthrough” in the form of a “big project” reflects an understandable ambition for economic revival, which is not new. It was a key goal of the Left Front government since 1993 — and was largely unmet. That failure reflects the structural problems embedded in West Bengal’s political economy. As Mr Dasgupta pointed out in his interview to Business Standard, “People are going to wait. They are going to watch. What is the quality of governance?” He itemised some valid legacy issues — law and order problems and the “syndicate and extortion economy”. Given that the vested interests in these systems have shifted allegiance to his Bharatiya Janata Party, managing the process demands hard decision-making and political nous as much as investment-boosting policies such as the plan to scrap the Urban Land Ceiling Act.

 

There is no doubt that West Bengal’s economy performed way below potential, and Mamata Banerjee’s 15 years in power compounded the damage. Having built her power base on protecting local land rights, precipitating the departure of Tata Motors’ project from Singur and stymieing a petrochem project in Nandigram, she followed up with idiosyncratic policies while in power — such as scrapping state industrial incentives with retrospective effect, and moving an Assembly motion opposing foreign direct investment and “monopolistic indigenous capital” in retail. Small wonder, then, that over 6,000 companies left the state in the past decade and a half, many of them shifting to Maharashtra, Delhi and Uttar Pradesh, adding to a steady, three-decade exodus. At nearly 17 per cent, West Bengal has the largest share of informally-run unincorporated manufacturing establishments among states, yet it does not figure near the top three in value creation, pointing to a dearth of opportunities to grow or formalise.

 

As Ms Banerjee’s initial political success demonstrated, land remains a potent issue. The politics of land redistribution, which sustained the Left Front in power for 34 years before that, also played a large role in fostering the political violence that roils the state now, and has lately been accentuated by the divisive politics of competing groups. The “breakthrough” project that Mr Dasgupta seeks demands vast amounts of land. Convincing rural people of West Bengal to part with the security of their meagre acres for uncertain post-ownership livelihoods will be a challenge in a state where employment opportunities are thin on the ground. Clampdowns against land-losers, as in Nandigram, will be counterproductive. With the state reeling from debt, which has grown fourfold since 2012 and accounts for 38 per cent of gross state domestic product, the scope for large compensatory payouts or preliminary assistance for small businesses remains constrained.

 

Potential breakthroughs lie in leveraging the state’s core strengths. One is agri-business. The state is among the largest producers of rice, vegetables, fish, tea and jute. Pepsi’s snack-food manufacturing unit in Howrah illustrates the opportunities. As the presence of information-technology majors in Kolkata during Ms Banerjee’s tenure suggests, this relatively modest presence could be exponentially expanded to make this water- and power-abundant state a dynamic artificial intelligence and data centre hub. Mr Dasgupta rightly says making the state attractive to investment is a monumental project. Despite its links to the Centre, the new government has its task cut out.