ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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West Bengal : Recipe for Industrial Revival

The report by a group of economists on what ails industry offers an interesting prescription: revitalisation of the small sector following the Chinese model of 'people's capitalism' with a thrust on labourintensive technology throughout the state. Will the new cabinet with a dynamic chief minister pay heed to the voices of reason?

No one can doubt their scholastic credentials. No one can challenge their authenticity and sincerity. No one can have any question about their genuine feeling of agony and anguish looking at West Bengal from afar and from an ambience of achievement and success. They are among the best that the Presidency College, Kolkata and West Bengal could produce in Economics, barring the Sukhomoy-Amartya duo. Staying at Kolkata, one feels happy that they could produce a report1 on such a relevant issue without pride or prejudice, analysing the industrial ills of the state and giving suggestion regarding what needs to be done, according to them, to remedy the situation. 

Ideologically, they have different moorings. Agewise, they span almost a couple of generations, with Maitreesh at one end and Pranab and Mrinal at the other. Yet they could come together, young and not-so-young, mildly Left, liberal and free marketeers, bonded by their common shared concern for the state and empathy for its people, particularly for its young, who are facing a bleak and dismal employment scenario.

They start their clinical diagnosis, by presenting some chilling figures in elegant and prosaic style, which would stun any discerning reader. Some of these data bear repetition: in 1980-81 West Bengal produced 9.8 per cent of the industrial output of India. It reached its nadir in 1995-96, with 4.1 per cent. Since then there has been a marginal improvement, but nothing significant. West Bengal’s share of foreign trade (export-import) was 10 per cent of India’s total in 1985-86, which came down to 4 per cent in 1998-99. “Or to take a measure of vibrancy of trade in 1999-2000, the value of cheques cleared in Kolkata was just 6 per cent of the value in Mumbai, compared with 38 per cent in 1980-81. And from the second largest industrial state in India in the mid-1960s it has slipped down to remain just ahead of UP.” To remain just ahead of UP is cold comfort, if at all.

Curiously, all this happened during a period in which the state enjoyed political stability, with crime rates both in Kolkata and West Bengal being among the lowest in the country.

The report successfully demolishes the labour bogey as the cause of West Bengal’s industrial morbidity. “The cliche about West Bengal, the most familiar story of how things could come to such a pass, is of course poor labour relations – who would invest in West Bengal when they could invest in Maharashtra and Gujarat and buy themselves a much more docile labour force. This is certainly not what jumps out when we turn to evidence on labour disputes” (the report). In fact, West Bengal had one of the lowest incidence of strikes and it had been so historically. Even in those tumultuous days of ‘gherao’ in the late 1960s, lockouts caused much more loss of mandays than strikes. Even gherao was not regarded as the main cause of lockouts and closures as reported by employers in their routine returns of the labour development of West Bengal. The author, as the then labour secretary of West Bengal, conducted a study in 1973, which was published by the West Bengal government under the title Labour Mood in West Bengal. Some clinching figures of those days of labour militancy are given the table to establish the point.

The United Front was in power for several months in 1967 and again in 1969, till early 1970. During these two periods gheraos went up dramatically with 311 in 1967 and 517 in 1969. During the intervening president’s rule it came down sharply. But even in 1969, which witnessed the highest number of gheraos, only one closure was due to gherao as declared by the employers. “If the highest form of labour militancy, that is, gherao, could not induce the management to close down their units in retaliation, as is evident from the figures supplied by them, it is obvious that the so-called labour militancy and unrest had never been not only the primary, but even secondary cause responsible for industrial stagnation in the late 1960s” (Bandyopadhyay, ibid, p 7). Figures of loss of mandays due to lockouts in West Bengal being much higher than those caused by strikes as noted in the report have historical validity.

The traditional industries of Bengal (West Bengal), the big four – jute, coal, tea plantation and heavy engineering – were ‘imperial’ industries. British capital and management owned and ran these industries. Any labour unrest in these industries was looked on as a seditious act and suppressed ruthlessly. The labour movement in the east became a part of the nationalist movement and imbibed elements of a terrorist movement against the raj. On the west coast of India, though Mahatma Gandhi himself led a textile workers’ strike in Ahmedabad for an increase of wages by a couple of annas, there was a deep understanding between the western Indian bourgeoisie and the labourers because they thought that the success of the textile industry in the west coast would badly hurt the British textile industry which was considered to be patriotic. Thus the labour movement in the west coast and the east had two distinct lines of action – one more collaborative and legalistic and the other more adversarial and often militant. Though the British capital in the east was replaced by the Indian capital shortly after independence, the ‘imperialist’ management style still continues, responded to not infrequently by non-legalistic labour action.

While on the issue of labour it would be pertinent to offer a comment on the observation in the report on wages. It states, “Indeed learn from the World Bank-CII report that wages are 25 per cent lower in the poor industrial climate states (which includes West Bengal) compared with the best states.” Even when West Bengal was one of the leading industrial states, its wage level was considerably lower than that in Maharashtra. There is a long historical reason for this. Tea plantations were run by indentured tribal labourers from the Chhotanagpur and central Indian Agency area. They were treated more like slaves than as free wage earners. Wages were pitiably low. In the coal and jute industry labourers used to be recruited and engaged through the sardar system from perennially poverty-stricken districts of Bihar and UP. “This system of recruitment and quasi-feudal management of industries ensured an abominably low level of wages. Later, when the wagon-based heavy engineering industry developed, wages there by and large conformed to the regionwise wage level which was already depressed” (Bandyopadhyay, ibid, p 7). The average annual earnings for workers during 1959-70 in West Bengal (Rs 1,840) was only 73 per cent of that in Maharashtra (Rs 2,520) (ibid, p 2). Even when West Bengal was a leading industrial state its level of wages was 27 per cent lower than that of Maharashtra. From the World Bank-CII report one can take comfort that even though West Bengal has slipped from its position of industrial primacy in the late 1950s and 1960s to that of a ‘poor industrial climate state’ in the 1980s and 1990s, the average wage level has gone up by two percentile points! It was the repressive management style – a hangover from the raj – and secularly depressed wage levels that has been the bane of industrial relations in West Bengal historically.

The report is correct to search for the cause of this great industrial slide elsewhere than labour, and found it in the low profitability of industries in West Bengal. Quoting the World Bank-CII report, the document states that “overregulation, poor infrastructure and lack of skills” are the main causes of this sorry state of affairs in the states that have a poor industrial climate.

Though the members of the secretary of states’ covenanted services (ICS, IP, IES) sitting in the Writers’ Buildings disdained the ‘boxwallahs’ of Clive Street, they all knew and understood that at a pinch the imperial power would have to be behind the boxwallahs. After all, they provided a mechanism of extraction of surplus from the colony. Whatever distance the members of the imperial services might maintain from the ‘boxwallahs’ at any black-tie party, their interests converged in protecting the imperial interest. Imperial services are no longer there. (All-India services do not have to look beyond the border.) ‘Boxwallahs’ are no longer sneered at. On the other hand, the mad rush for IIMs and MBA degrees clearly shows that the erstwhile ‘boxwallahs’ have climbed a number of rungs up the social ladder. Yet the mindset of basic administration in West Bengal is not industry friendly.

Year
1
No of Closures
2
No of Gheraos
3
No of Closures due to Gherao
4
Col 4 as Per Cent of Col 2
5
1967
123
311
4
1.63
1968
140
30
1
0.71
1969
183
517
1
0.55
1970
322
60
1
0.31
1971
143
20
-
-
1972
151
32
-
-
Source : Labour Mood in West Bengal by D Bandyopadhyay, published by Government of West Bengal, Calcutta, 1973, p 6, Table IV.

 

 

Attitude of Bureaucracy

It is not the number of regulations that matters (there is a need for a relook at regulations that no longer serve any social purpose). It is the attitude of the bureaucracy at all levels that is crucial. The general attitude of the bureaucracy even now in West Bengal is how to prevent rather than how to promote. An illustration would perhaps make the point clear. In the early 1990s, an intrepid entrepreneur came up with a project to set up a hi-tech intelligent building complex with two towers and a number of living studios with all ancillary facilities and uninterrupted global connectivity. This was long before Andhra Pradesh thought of the hi-tech city. For this complex he wanted around eight acres of land in the Salt Lake area. It was a well-developed project with drawings and financial tie-ups. The file went up to the chief minister, who promptly approved it. Then the bureaucracy showed its true colours. The formal allotment of land had to come from the urban development department. There, a deputy secretary raised some silly objections regarding the formation of the company about which the Registrar of Companies had no objections. Having been accustomed to raise doubts throughout his life, perhaps he could not be blamed for raising it then, however absurd it might be. But none above him in the hierarchy had the appreciation of the relative importance of having an intelligent building complex, the first in India to attract investment in the IT sector, rather than seeking clarifications on issues not germane to the point. The file went up and down for two years. The government of West Bengal did not allot the land. Meanwhile news travelled outside the state. The entrepreneur was invited to other states where in addition to land other incentives were offered. The West Bengal bureaucracy gleefully committed the foeticide of a hi-tech embryo, and the indifferent and indulgent government showed no concern. It has been reported in newspapers that even now an entrepreneur has to take ‘no objection’ certificates from 35 to 47 organisations starting from the local sanitary inspector to the environment and pollution control agencies. It is only a Captain Courageous who would venture on such a perilous expedition. The bureaucracy has to be judged not by what it prevents but by what it promotes. The message has to come from the very top and implemented unsparingly.

In the infrastructure sector the report pointed to three areas, namely, roads, electricity and communication. The government of West Bengal has to have its own finances in order before it can attract massive multilateral loans for any of these items. The Activity Report 1999-2000 of the comptroller and auditor general of India reveals a sorry state of finances. Inter alia, it states, “plan expenditure (capital) showed a negative growth (-)1.6 per cent (Rs 702 crore in 1994-95 to Rs 691 crore in 1998-99) ...the state’s debt service liability had been as high as Rs 11,030 crore in 1998-99 when its total revenue was Rs 9,387 crore” (p 63). The situation is quite disturbing.

In the road sector, the north-south corridor from Siliguri to Haldia via Kolkata, which has got approval from a multilateral organisation, may come through. If it did, it would certainly have some beneficial impact. It is not enough to have a Roman road straight as an arrow to allow legions to march with ease. Unless this spinal road is well connected with equally good roads to different markets and potential industrial hubs, the return on this investment would not be appropriate. Since the state lacks resources it has to pursue other routes like BOT, BOOT and the like. Of course, there are some ideological barriers to such methods. One has to think seriously what other routes could be used to upgrade both the quality of roads and road density per capita.

The long incumbency of the same ruling group and particularly of one person as its head, has had its deleterious effect in some critical areas. Market economy is for free competition. It has no place for cronyism. Unfortunately, one noticed a growing cronyism from the mid-1980s through the 1990s. So much so that the private electric supply company for Kolkata refuses to pay to the West Bengal State Electricity Board (WBSEB) the money it owes for purchasing power from the latter. It owes nearly Rs 1,000 crore. WBSEB, which also procures power from the DVC and NTPC, is unable to pay them in turn. Thus, there is a domino effect of non-payment and default resulting in interruption in energy supply. Kolkata metropolitan area now witnesses power cuts that remind one of the nightmarish period of ‘load shedding’ from the 1970s up to the late 1980s. This is because the top brass of the private power company happened to be close to the political establishment. Of course, there is a good sign that the current leadership is trying to distance itself from some cronies, but one has to wait and see, since cronyism strikes its pernicious roots deep into the system.

It is not only power generation that is crucial for industrialisation; more importantly, it is proper transmission and distribution that becomes the determining factor. In the districts, the situation is often dire. Not only is there uncertainty of supply of power, but the poor quality (low voltage and fluctuating voltage) also has a devastating effect on industrial plant and machinery, deterring any prospective investors. Moreover, it is reported that there is a fair degree of corruption in giving power connections to new industrial units. Had the state been really surplus in power, supply organisations would have proactively solicited bulk consumers, rather than consumers running after them. Though it is said that individuals do not matter, the absence of Sankar Sen, who brought about the turnaround of the energy situation in the state, is keenly felt. It is rumoured that he was a victim of the cronyism we were talking about. One is not sure whether it is politically feasible, but his reintroduction into the system would make a significant difference in the situation.

The document rightly emphasises the comparative advantage of West Bengal in higher education, with a large number of technical and general graduates. But the demand for quality education far outstrips supply, resulting in large-scale migration of students to the south. During the entrance examination season, the South-Eastern Railways run special trains for aspiring students. This only shows how much the state’s higher education system has receded from the hard reality of demand and supply.

The report makes a good point about treating higher education itself as a profitable industry where investment can be encouraged. One does not have to think of Oxford and Cambridge or Harvard and MIT complexes. Near at hand in Dehradun, which started with the Doon School for boys and Welhams School for girls, there are now about 100 residential and day-boarding schools. Not that all of them are good. However with the Doon, Welhams and Wood Stock as pacesetters, there are many schools affiliated to CBSE, ISC or even IB which are much better than the average run of schools in Kolkata. With the wider catchment area of neighbouring states where the education system has collapsed, if West Bengal could provide quality education in the private sector, there would be no dearth of takers. In fact the whole of Durgapur township, which has undergone severe de-industrialisation, can provide ready-made physical infrastructure for top-class private technical colleges and good schools. If in the backwoods of Tezpur in Assam an industrial house could set up a school that could compete in terms of facilities and quality of teaching with the best in India, there is no reason why given a proactive government policy several educational hubs could not be developed in West Bengal.

 

Restoring Role of Merit

One has to admire the candour and courage of the authors of the report when they say that to create centres of excellence “will require a sharp reversal of the trend in the last two decades towards excessive egalitarianism and politicisation in education”. Institutions of higher learning in the state are now run by party apparatchiks. It is low-level politicking which governs appointment of teachers, principals and vice chancellors. There is hardly a person of high academic distinction who heads any state university. If the new chief minister could take some bold steps to liberate these institutions from the shackles of party politics, he would be doing a good turn to generations of students now and in the future.

The report recommends, “The best way to deal with problems in the education sector is to provide substantially greater autonomy to existing educational institutions by restoring the role of merit and productivity in such institutions and encourage (the) development of an entirely new set of institutions from the private sector. Centres of excellence need to be free of political interference, be guided by the norms of productivity (as evaluated by students and academic peers) and have maximum flexibility with respect to tutions, hiring, salaries evaluation and working conditions. The government needs to woo investment from the private sector and from leading educational institutions elsewhere in the country and abroad, and provide the set-up and facilitating assistance (in the form of land clearance, electricity and water connections and so on and matching grants)... The entry of new institutions could be encouraged at all levels all the way from primary schools to high schools to colleges and research institutes... The role of the state should be limited to providing scholarships to needy students, and to filling in the gaps left by private initiative with respect to establishment of new schools.” I have quoted this recommendation rather extensively only to drive home the point that coming as it does from a set of friends and not foes, the government should pay heed to it and change its current frog-in-well restrictive education policy.

The document strongly advises against single-minded pursuit of hi-tech and heavy industries like Haldia Petrochemicals. In the hi-tech sector the state is a newcomer and there is too much competition from the already advanced states in the field. Top-notchers in the hi-tech sector would any day prefer to locate themselves in Bangalore and Hyderabad because of the existing locational advantage. Moreover, “investment in large-scale industry, such as Haldia Petrochemicals, is also fraught with a number of risks and uncertainties” And lastly, the diffusion effect in terms of employment, and wage growth of such industries, even if they take off, would be limited only to Kolkata and surrounding areas and would not spread evenly throughout the state.

The paper strongly emphasises industrial growth through small units in which the state has certain advantages. Citing the Chinese example of ‘people’s capitalism’ with thrust on labour-intensive technology based throughout the state, it supports the post-reform Chinese model of diffused small-scale route.

The point is well taken. Land reforms, panchayats and other attending market forces have been able to break the century-old stagnation in agriculture in the state. From the early 1980s to now, agriculture has been growing at a much faster rate than the national average. The beneficial effects of this agricultural resurgence are evident from the sharp fall in the rural headcount poverty ratio and a degree of visible prosperity in the countryside. Though poverty remains, ugly signs of destitution are no longer seen. But what happened to the surplus generated in the agricultural sector? Perhaps in the absence of any worthwhile investment opportunities in rural areas, the surplus is being dissipated in conspicuous consumption and ugly urbanisation in mofussil towns and in the fringes of Kolkata.

In 1978, China introduced major reforms in the agrarian sector. It dismantled the rural communes and introduced a responsibility system in agriculture, giving a tremendous boost to farm production. Vast expansion of rural small-scale industries, the products of which are flooding the world market, was the outcome of the investment of private agricultural surplus in this sector. ‘People’s capitalism’ is the route West Bengal should try to follow in re-industrialising the state. It is not an either-or situation between hi-tech and large industry on the one hand and rural-based small industry on the other. It is a question of shifting of emphasis from one side to the other to optimise both economic and social gains.

The document also talks about perpetual institutional credit problems faced by the small industry in the state and makes several suggestions to improve the banking system and to make it more small industry-friendly through state intervention.

The report concludes by saying, “The broad industrial strategy proposed here is based around three critical priorities: infrastructure, education and support for small-scale units specialising in light manufacturing goods. The aim should be to create a facilitating environment for a broad-based and diversified industrial sector of the kind seen in China or in successful East Asian countries. To make it feasible will require a substantial shift in how the government itself functions... Both in industry and in ideas, let a hundred flowers start blooming.”

Having had the opportunity to look at three reports made by highly reputed and equally expensive foreign consulting firms on the industrialisation of West Bengal, I rate this report as much superior to any of them. It is well-argued and elegantly written with forthrightness by a concerned set of friends, and containing suggestions which are within the realm of administrative capability and political feasibility. Some drastic changes in the mindset and style of functioning are called for. With a new and younger chief minister who has already earned the reputation of being a go-getter, it would not be impossible for him to do the things suggested here. This report deserves much wider dissemination to generate public discussion and debate to create public opinion for a new policy initiative by the government. One need not agree with all the points mentioned in it. In fact the authors do not expect that to happen. Their message is to allow a hundred flowers to bloom. Let the government and the public opinion create the environment and ambience where a hundred flowers can really blossom.

Here is a challenge to the Left Front government in West Bengal, which has recently been returned to power for the sixth consecutive term.

 

 

 

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