Hurdles for industrial rejuvenation

KOLKATA: History sometimes is cruel and it is so for the story of the evolution of industries in West Bengal. Considering engineering industry as the sign of industrial strength of a state, Bengal topped the list during Independence, with Maharashtra being a distant second.
In the beginning of 1960s, which coincided with India’s decisive move towards heavy industries (including the infrastructure related sectors like coal, steel, power, aluminium etc), Bengal commanded 1/5th of industrial output in India.
The twin cities of Kolkata and Howrah reverberated with the noise of metal-based industries and the sirens of jute mills. Tea industry flourished in the Hills, Terai and Dooars, Tangail and silk sarees of Nadia and Murshidabad were simply exquisite. Handicrafts from Bankura, Birbhum and Nadia were wonderful; iron and steel and other mineral-based industries boasted their proud presence in Burdwan, Midnapore and Purulia districts.
Alas, Bengal’s industrial evolution proceeded in a peculiar linearity whereby all industries started becoming dwarfs in comparison to what India saw in the last 30 years or so. One is naturally prompted to ask how and why? And then one searches for some light at the end of the tunnel.
The decline of Bengal’s industries started with the dramatic decline of railway investment during the plan holidays of mid-60s. The whole engineering industry, which flourished to a large extent on railways demand, was given a body blow resulting in a steady decline of the largest employer among industries in Bengal.
It was accompanied by political short-sightedness at that time resulting in directionless trade unionism which had a catalytic effect on the organized sector industries in Bengal.
It was followed by a decline in the jute industry which was a mixture of falling demand in international market, unimaginative planning in the face of onslaught from synthetic substitutes and flawed central government policies in the 70s and the 80s.
The tea industry suffered due to neglect of owners who neither planted new bushes nor upgraded the obsolete machines, losing markets to new players from Sri Lanka, Kenya and China. The handicraft industry faced problem of marketing and finance, showing absence of forward looking policies of the state government.
Now, Bengal’s economy is dominated by service sector, followed by a stagnant industrial sector and a declining agricultural sector. The industrial sector is dominated by the unorganized segment and Bengal claims the top spot in terms of employment in that sector with a share of 15.08% of 36.4 crore people working in there in 2005-06.
This also amounts to about 90% workers among all workers in Bengal. However, per enterprise value added in this sector in Bengal is one of the lowest in the country. It follows that in terms of per capita net state domestic product at 2004-05 prices, Bengal, with its figure of Rs 30,504 in 2009-10 is at the 20th position. This suggests, our state may not provide a strong local market advantage for many products compared to other major states.
However, the major hurdle for industrial rejuvenation of the traditional sectors where Bengal had an advantage seems to be the poor state of infrastructure on one hand and inefficiency in decision making processes on the other.
Studies have shown Bengal’s physical infrastructure has not improved over time in the last two decades. A report by Central Statistical Organisation (CSO) on Infrastructure in 2010 shows that per capita energy consumption in KW hours in Bengal in 2007-08 was 321.4 which was 27th among 35 states and UTs. In 2009 Kolkata’s tele-density at 8.97 was lowest among the 4 metro cities. In 2008, percentage of surfaced roads in total road length in Bengal was 23.19 which put West Bengal at 26th position among 28 states.
In 2011, credit deposit ratio for Bengal’s scheduled banks was a mere 64% against India’s average of 75%. To add to it, inefficiency in decision making was highlighted by “Doing Business” study of the World Bank in 2009, which puts Kolkata at 10th rank among 17 cities in India for starting a business, 16th in paying taxes and getting construction permits while putting 13th rank for the category registering property and enforcing contracts.
So obviously need of the hour is rapid strides towards improvement in roads, power, communications, banking etc across the state. Given the precarious situation of state finance, one may welcome PPP models, but this requires case by case details regarding stages of private participation.
It is true that the government has made much of its dealing with the business online, but the perception towards Bengal will only change after the improvements become more credible.
Lastly, effort to introduce 17 clusters for development of gems and jewellery, leather, textile, handicrafts and electronics is commendable, but such an approach must go hand in hand with infrastructure development, building knowledge about local economies and reducing transaction costs of setting up as well as running a business. The new land bill passed recently hopefully will ameliorate in last issue to some extent.
(The writer is professor and coordinator, Centre for Advanced Studies, Department of Economics, Jadavpur University)