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The Economy of West Bengal

Even after 30 years of Left Front rule in West Bengal, the state has lagged behind in a few economic indicators, this, despite better performance in agriculture. Agricultural growth rates have however declined in the last decade or so, the reasons for which have been elaborated upon. A gradual movement towards unorganised labour has characterised working patterns in the state and the phenomenon is studied, along with the conditions of living. In this context, the new economic policy of the Left Front government is critiqued. It is suggested that a policy that favours inclusive growth with greater emphasis on small enterprises should be followed by the government if it wants to sustain the gains made and address the shortcomings in the state.


The Economy of West Bengal

Ratan Khasnabis

Even after 30 years of Left Front rule in West Bengal, the state has lagged behind in a few economic indicators, this, despite better performance in agriculture. Agricultural growth rates have however declined in the last decade or so, the reasons for which have been elaborated upon. A gradual movement towards unorganised labour has characterised working patterns in the state and the phenomenon is studied, along with the conditions of living. In this context, the new economic policy of the Left Front government is critiqued. It is suggested that a policy that favours inclusive growth with greater emphasis on small enterprises should be followed by the government if it wants to sustain the gains made and address the shortcomings in the state.

An earlier version of this paper was presented in the seminar “India Rising”, held in Turin University, Italy (8-10 November 2007). Thanks are due to the participants of the seminar for helpful comments on the earlier draft. I am grateful to Abira Roy for able research assistance. The usual disclaimers apply.

Ratan Khasnabis ( is with the Department of Business Management, University of Calcutta.

Economic & Political Weekly

december 27, 2008

n West Bengal, a coalition of the leftist political parties known as the Left Front (LF) rules the state since 1977. This is unprecedented in the political history of India. In no other province, such a phenomenon has prevailed. The coalition has faced seven general elections based on universal adult suffrage and in each election, it has won with thumping majority. In the assembly, t oday the LF has the support of 234 elected representatives in a house of 294 members.

Political stability notwithstanding, the state has not performed well in the economic front during the last 30 years. This is r eflected in almost every measure of the economic prosperity. In terms of per capita state domestic product (SDP), West Bengal had been the richest state in India in 1960. By the end of the last m illennium, the SDP (per capita) rank of the state declined to 9. In 1947, the share of the state in the total industrial production of the country had been 24%. By the time the LF came to power, it had already reduced to 11.9%. Next 30 years registered a further decline and the state which was known as the most industrialised state of India, contributes now only 4.6% in the industrial output of India. It is true that West Bengal performed well in agriculture during the left regime. But then, the agricultural growth rate is also declining now in the state. Moreover, the productivity of West Bengal agriculture is rather low. The productivity of principal crop (rice) in West Bengal is much lower than that in Punjab or Andhra Pradesh.

In terms of other indicators of prosperity as well, the situation in West Bengal is not promising. The Human Development Index (HDI) score of the state is 0.305, which places the state in the 10th position among 17 major states of India. In rural West Bengal, only 32% of the households have access to electricity (rank 13). In terms of access to safe drinking water, the scenario is somewhat better1, the literacy rate is also somewhat good.2 But then the mean years of schooling in West Bengal is only 4.4 years which places it just above Bihar which ranks last in this regard, among the major states of India. One may add that mean years of schooling in the state is low because the school dropout rate at primary level is phenomenally high in West Bengal.3 The rural inequality in West Bengal is low (rank 5); but then, the spending power per capita is also low in the state. Rural Punjab or rural Kerala is much more prosperous than rural West Bengal.

It is quite evident that in terms of various indicators of wellb eing, the LF-ruled West Bengal failed to perform well. Why is it that the anti-incumbency factor could not play a significant role in the West Bengal elections?4 We submit that the issue is not as simple as one might infer from the performance of the state in terms of crude indicators of well-being. The support base of the left is in rural West Bengal. Rural West Bengal experienced a moderate economic growth due to better performance of agriculture and small industries; growth was coupled with distributive justice that garnered a strong political support for the left. This was reflected in the results of the successive general elections in rural West Bengal. It is true that the urban support base of the LF became weak as crisis was mounting in organised industry. But then, it could hardly affect the overall electoral results.

In sum, the ruling LF could succeed to retain popular support even when the crisis was mounting in organised industry. This was achieved by carefully promoting the cause of small peasantbased agriculture and the small enterprise-based industry in the state. In the pages that follow, we elaborate this point. As we a rgue in this paper, this policy could have continued further if the rural economy could maintain its growth. But then, there developed an agrarian impasse in West Bengal since the mid1990s. This was largely due to the neoliberal policy of the government of India that discouraged state support for the small peasant. For the small peasants, agriculture is now becoming unremunerative and a sizeable section of the rural workforce is being pushed out from agriculture. The small enterprises could hardly absorb the surplus labour even when the wage rate remained depressed. The economy is thus facing a crisis and the ruling LF government is trying to meet this crisis by encouraging investment from both national and international corporate capital.

The paper concludes that an industrial resurgence is quite possible for West Bengal if the LF government follows the new policy. This is so because the economic fundamentals are favourable to rapid reindustrialisation of the state. However, the political cost of the new policy might be very high for the left, because the new policy is expected to deny the very rationale of a left rule in the state.

1 Agriculture in West Bengal

In order to elaborate this theme, we shall consider first the p erformance of agriculture in West Bengal. According to Census 2001, cultivators and agricultural labourers still account for 44.15% of main and marginal workers of the state. Not less than 24.86% of the net SDP originates from agriculture. West Bengal which accounts for only 3.88% of total agricultural holdings in India is one of the leading rice producing states in India.5 The agrarian economy of West Bengal is basically an economy of small and marginal farmers. In the major agricultural states in India, such as Punjab, Haryana, Gujarat and Maharashtra, the area under marginal farms is quite low and that under largeand medium-sized farms is considerably high (Table 1). Thus, in Punjab, marginal farms account for only 4.07% of the operational area of the state and the share of medium and large farms in the total operated area is about 67%. In West Bengal, the scenario is different. The share of the small and marginal farms in total

o perated area is as high as 66.44% in West Bengal. The share of the small farms itself is 36.49%, which is much higher than the all-India average (14.87).

Land Reforms: The preponderance of small farms in West B engal is basically the consequence of land reforms that enabled the state to acquire the ceiling surplus land from the land-rich h ouseholds and distribute such holdings among a large number of landless

104 and land-poor households in rural areas, so that the distribution of landholdings in West Bengal could tilt in favour of the small and marginal farmers. This becomes apparent as one considers the fact that West Bengal, which is a small state that possesses about 3.88% of total agricultural holdings in India, a ccounts for as high as 16.94% of total ceiling surplus land in the country. In West Bengal the land reforms covered 7.92% of the net cropped area of the state; the comparable all-India percentage is only 1.79.

The basic objective of land reforms was to redistribute the holdings in favour of the landless and land-poor families by i mposing a ceiling on ownership holding. The reforms also a ddressed the issue of security of tenure for the sharecroppers. The Estate Acquisition Act (1953) and the subsequent Land Reforms Act (1955) enacted by the then Congress government initiated the process of land reforms in West Bengal. The success of the Congress government on this score was rather poor. Estates under zamindari were of course acquired by the state and the direct r elation between the ryots and the state was established. But landlords still ruled the roost in rural West Bengal. Acquiring the surplus land and getting them redistributed among the landless and land-poor households did not make much progress up to the end of late 1960s. This was basically due to the lack of political will on the part of the ruling party that did not desire to disturb the rural power structure that developed after the abolition of the zamindari system.6 For all practical purposes, the effective land reforms measures were taken up first by the United Front governments of late 1960s which mobilised the landless and the land-poor families for forcefully occupying the illegally transferred (benami) lands of the land-rich families.

The next Congress government which came to power in 1971 did not try to reverse the process. On the other hand, the Land Reforms Act was amended in 1973 so as to bring down the ceiling of agricultural holdings to 17.29 acres for a family in the irrigated areas of the state. It also made a legal provision for a fair share of

Table 1: Percentage Distribution of Area Operated by Various Size Classes in Major States of India

States Marginal Small Semi-medium Medium Large All Groups
(in ‘000 hec)
Andhra Pradesh 16.38 19.55 25.17 26.12 12.78 14,461
Assam 18.98 24.08 27.65 15.22 14.08 3,161
Bihar 30.31 17.15 23.80 21.04 7.70 10,897
Gujarat 4.75 13.05 24.43 38.91 18.86 10,293
Haryana 7.94 12.46 25.54 34.98 19.08 3,716
Himachal Pradesh 21.50 22.49 25.74 20.41 9.86 1,014
Jammu and Kashmir 34.22 26.82 26.04 10.65 2.27 1,014
Karnataka 8.70 18.73 25.97 30.60 16.00 12,322
Kerala 48.81 21.16 14.10 6.27 9.66 1,801
Madhya Pradesh 6.37 12.59 21.88 35.15 24.01 22,112
Maharashtra 7.73 19.04 28.10 32.77 12.37 20,925
Orissa 19.73 26.93 29.48 19.11 4.76 5,296
Punjab 4.07 8.13 20.88 40.22 26.71 4,033
Rajasthan 3.46 7.01 14.41 30.21 44.93 20,970
Tamil Nadu 28.34 24.00 22.57 17.41 7.68 7,474
Uttar Pradesh 31.43 24.41 23.38 16.91 3.86 17,987
West Bengal 36.49 29.95 22.44 7.53 3.59 5,656
All-India 14.87 17.33 23.16 26.20 18.44 1,65,617
Size class as in Table 2.
Source: CMIE, Agriculture, November 2000.
december 27, 2008 Economic & Political Weekly

the produce (75:25 for lessee: lessor) for the tenant farmers who are known as bargadars (sharecropper) in West Bengal. All these were done because of the political compulsion that developed during this period. But again, since this was done because of compulsion and not due to any genuine political will, like the previous Congress governments of 1950s and 1960s, this government also did not try to mobilise the potential beneficiaries for realising the goal. Land reforms again turned to a bureaucracy-led reform programme and like the previous one, this also failed. The first LF government that came to power in 1977 implemented basically the provisions of 1973 Act.7 However, they had the political will to mobilise the potential beneficiaries, first through the peasant organisations and subsequently through the institution of

Table 2: Percentage Distribution of Ownership Holdings and Owned Areas in West Bengal (1971-72 – 1991-92)

1971-72 1982 1992 Size Class Percentage of Percentage Percentage of Percentage Percentage of Percentage Ownership of Owned Ownership of Owned Ownership of Owned Holdings Area Holdings Area Holdings Area

Marginal 77.62 27.08 81.6 30.33 85.88 41.29

Small 12.64 25.69 11.5 28.77 9.48 28.11

Semi-medium 7.3 27.72 5.54 27.23 3.94 22.98

Medium 2.39 18.61 1.28 12.12 0.71 7.62

Large 0.05 0.7 0.08 1.54 0 0

Marginal: Holding less than 1.01 hectare. Small: Holding between 1.01 hect and 2.00 hectares. Semi-medium: Holding between 2.01 hectares and 4.00 hectares. Medium: Holding between 4.01 hectares and 10.00 hectares. Large: Holding greater than or equal to 10 hectares. Source: National Sample Survey, 26th, 37th and 48th Rounds.

elected panchayats. This made a sea change in the rural scenario and to a large extent the programme attained success.8

Quantitative information on the performance of two United Front governments in the late 1960s and that of the subsequent LF governments in implementing land reforms has been documented elsewhere9 and we do not find it necessary to discuss it here. One may, however, note that by mid-1990s the amount of ceiling surplus land that was distributed among the landless and land-poor families was about 1.04 million acres. The total number of beneficiaries was about 2.5 million households. Over 55% of the beneficiaries belonged to the scheduled caste and scheduled tribe. Security of tenure was extended to 1.6 million bargadars who were given permanent and heritable rights to cultivate the sharecropped land. Registered sharecroppers now cultivate a t otal of 1.1 million acres of land which is 8.2% of the cultivable land of the state.

Admittedly, there are weaknesses in the land reforms p rogramme of the LF government. It may be argued that the LF did not take any legislative measure to lower the ceiling of agricultural holding so that more land could be declared as surplus. The ceiling remains the same as it was fixed by the Congress government.10 It has also been argued that contrary to what has been claimed by the ruling party, a sizeable section of the sharecroppers of West Bengal is yet to get security of tenure (Mukarji and Bandyopadhyay 1993: 22-23). Again, the security of tenure has remained confined to only one crop and the tenants are not getting legally stipulated crop share in large number of cases for which the contracts have been legalised (Khasnabis 1986, 1994).

But then, the achievement of the state on land reforms is never small. The old kind of landlords and intermediaries have been

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december 27, 2008

disempowered. The distribution of holdings has definitely tilted in favour of small and marginal farmers. In 1971-72, when the r eforms were yet to take place, the owners of marginal and small holdings accounted for 52.77% of total landholdings of the state. By 1982, their share increased to 59.1%. In 1992, when the land reforms was almost over, the owners of the small and marginal holdings were accounting for 69.4% of the agricultural holdings of the state. Share of the medium and large farms, the target of land reforms, declined sharply during this period (Table 2).

What is the scenario today? According to the National Sample Survey Organisation (NSSO) (61st round, 2004-05), in rural West Bengal, 8% of the households still remain landless. 84.3% of the households possess less than one hectare land per household. Small farmers (land size 1-2 hectare) account for 6% of rural households in West Bengal. The rest, 1.7% to be exact, constitute the families with the semi-medium and large holdings. West B engal agriculture is now basically an economy of marginal farmers and as we discuss below, this economy performed very well following the land reforms.

Performance of West Bengal Agriculture: West Bengal is basically a rice producing state. Among other cereals, the state produces wheat, barley, jowar, maize and even small millets. But the contribution of these crops is quite insignificant both in terms of area and the volume of production. According to the Crop Statistics, Government of West Bengal (2000-01), the cropped area u nder cereals had been 5,918.6 thousand hectares in this state. Non-rice cereals accounted for only 8.17% of this area.

Monsoon-fed aman is still the major rice crop of the state. In 2000-01, the area under aman was about 67% of the total area under rice production. The contribution of aman in the total

o utput of rice was about 58%. The state, however, registered

Table 3: Average of Point-to-Point Growth Rates of Major Crops in West Bengal (in %)

Average Growth Food- Rice Wheat Total Total Total Rapeseed Potato Sugar Jute
Rate for Periods grains Cereals Pulses Oilseeds and Cane

1959-69 4.9 4.5 46.5 5.1 1.6 6.6 8.2 2.5 9.4 18.1

1970-79 0.8 0.4 8.8 0.9 -0.9 6.5 5.0 14.5 -3.9 3.6

1980-89 6.9 8.4 0.1 7.3 -2.3 18.8 22.7 9.3 2.2 6.3

1990-99 2.4 2.5 4.4 2.5 -3.0 0.03 -0.8 6.4 14.2 5.0

1959-99 3.7 3.9 14.9 4.0 -1.1 8.0 8.8 8.2 5.5 8.2

1986-87-1994-95 4.42 5.03 0.42 4.67 -6.33 9.77 9.62 8.44 4.98 -0.46

1995-96-1999-2000 2.30 2.4 3.0 2.34 2.01 0.08 0.02 8.49 27.74 5.83

Source: Prepared from the Data of Bureau of Applied Economics and Statistics, Government of West Bengal.

t remendous progress in the production of irrigation-fed winter crop (boro) which now covers 25.79% of the gross-cropped area under rice. The productivity of boro being much higher than11 that of aman, it contributes to a higher percentage (33.35) to the volume of output, compared to its relative share in the grosscropped area under rice production in this state.

Among other crops, West Bengal produces oilseeds (cropped area being 594.92 thousand hectare) and jute (612.994 thousand hectare), both of which have registered impressive progress in production during the LF rule. The other important point to be noted is that the vegetables and fruits are now being produced in the state at a noteworthy level. West Bengal now produces vegetables (excluding potato) in 850 thousand hectares of land and the volume of production of vegetables as recorded in Crop Statistics, 2000-01 is 10,625 thousand tonnes. Fruits are being produced in 150 thousand hectares of lands in the state and the volume of production is 1,800 thousand tonnes.

There is a lot of controversy as regards the extent and nature of quantitative growth in West Bengal agriculture. While the rates of growth, as calculated by different experts had been debated, the central issue in this debate is whether there was a structural break in the trend growth after the LF came to power in the state.

Table 4: Trend (semi-log) Growth Rates for Principal Crops in West Bengal

Food- Rice Wheat Total Total Total Rapeseed Potato Sugar Jute grains Cereals Pulses Oilseeds and Cane Mustard

Trend growth rate (1959-99) 2.67 2.79 7.67 2.85 -2.85 7.08 7.12 7.01 -1.09 2.78

Trend growth rate (1979-99) 4.04 4.46 1.38 4.18 -3.46 5.89 6.96 6.91 2.15 3.20

Trend growth rate (1959-78) 2.88 2.15 2.52 3.09 -0.84 3.55 1.04 6.18 0.83 1.46

Trend Growth of Wheat and Some Other Crops for Two Periods

Trend Growth Rate Wheat Total Oilseeds Rapeseed and Mustard Potato

1970-71-1999 -.68 8.23 9.33 7.31

1970-71-1977-78 3.99 5.41 .93 12.11

Source: Prepared from the Data of Bureau of Applied Economics and Statistics, Government of West Bengal.

Using the time-series data on total foodgrains production in West Bengal for the period 1965-1990, Saha and Swaminathan (1994) observed that there were “changing trajectories of agricultural growth in West Bengal from the beginning of 1980s”. The annual growth rate, according to Saha and Swaminathan (1994) was 6.3% for the period 1981-82 to 1991-92; which was the highest in India for that period. Bhalla and Singh (1997) also found evidences of an acceleration in the agricultural growth in West Bengal in 1980s. A positive break in the trend growth of total foodgrains production in West Bengal in 1981-82 was also reported by Sen and Sengupta (1995) who performed the exercise on the basis of the cost of cultivation of principal crops (CCPC) data of the g overnment of India. Fitting a semi-log trend on the data for a longer period, Rawal and Swaminathan (1998) observed that West Bengal experienced an

government came to power, we considered the relevant data for a 40-year period (1959-60 to 1999-2000) divided roughly equally between the pre-LF and LF regime. The choice of the period is rather deliberate. We wanted to work with a long data set that gives equal weightage to two different regimes so that the f eatures of both the regimes could be brought to a sharper focus in terms of growth statistics. The production of total foodgrains had been our main area of enquiry. However, we also analysed the relevant data for pulses and cereal (and separately for rice and wheat), oilseeds, rapeseed and mustard, potato, sugar cane and jute.

Coming now to the growth rates, we describe the situation first in terms of point-to-point growth rates. Between 1959-60 and 1999-2000, the foodgrains production in this state increased, on an average by 3.7% per year on the basis of point-to-point growth rate. The average calculated over 40 years does not capture the reality that there was much variation in the point-to-point growth rates over this period. As one gets from Table 3 (p 105), the growth rate in the foodgrains production was 6.9% per year during the 1980s, which was much higher than the overall growth rate for 40 years. Again, the growth rate was only 0.8% per year in the 1970s which was lower than the trend growth rate. Among all the d ecadal growth rate, the highest was recorded in the 1980s. The d ecade that preceded it recorded only a 0.8% growth rate per year. However, the situation had not been as bad in the 1960s, as it was in the 1970s. In fact, next to the 1980s, the highest average growth rate of foodgrains in the state was recorded in the 1960s. The important point to be noted is that the growth rate declined to 2.4% per year in the 1990s. In the last five years of the last century, the average growth rate was even lower.

The impressive growth rate in foodgrains in 1980s was mainly due to a high growth rate of rice which increased by 8.4% per year. The growth rate of total cereals was lower (7.3%) than that of rice. This was due to a poor growth of wheat (0.1%) during this decade. Wheat, which registered a poor growth rate in 1980s had contributed much to the growth of both total cereals and total foodgrains in 1960s when the growth rate of rice had been lower

Table 5: Trend Growth with a Structural Break at 1979-80

acceleration in the growth of

Coeffi- Food- Rice Wheat Total Total Total Rapeseed Potato Sugar Cane Jute agricultural production in cients grains Cereals Pulses Oilseeds and Mustard

1980-81. The rate of growth, b 8636.479* 7006.402* 1188.527* 8299.909* 336.538* 86.567* 42.973 1778.063* 1842.174* 344.398*


as experienced in 1980s was

b -1780.033* -1136.915* -593.537* -1710.923* -69.603* 93.756* 71.21* -185.968 -941.17* 281.453


about 6% for foodgrains and b 189.62* 121.798* 68.909* 192.269* -2.843* 2.24 .401 71.216* 12.307 41.096


the high growth rate was b 228.163* 293.135* -60.565* 230.664* -3.895* 12.909* 10.760* 213.488* 17.511 132.571*


The Model: Yi = b + bD+bt + bDt + ui, Where, D=1 for period 1979-80 and above = 0, Otherwise.


n oticeable in most of the

* Significant at 5% level of significance.

m ajor crops in the state. These findings have somewhat been contested by Chattopadhyay than the growth rate of total cereals and that of foodgrains as et al (1993). Performing an econometric analysis on the data on well. In sum, the unprecedented growth in foodgrains in 1980s foodgrains production, pertaining to all the states in eastern was essentially due to a high rate of growth of rice. In 1960s, the I ndia for the period 1950-51 to 1987-88, the authors did not find growth was partly due to wheat also. any statistical evidence in support of a structural break in total In 1990s, wheat was growing at the rate of 4.4% per year. Even foodgrains production of the state during this period. then, the growth rate of total cereal (2.5%) and foodgrains (2.4%)

We reopen the issue and perform a statistical exercise on the plummeted. This was due to the fact that the acreage under basis of the data set published by the Bureau of Applied Economics wheat has declined over last 30 years. Boro, the winter rice crop and Statistics, Government of West Bengal. In order to check was replacing wheat and the growth rate of every variety of rice whether there was trend break in the growth rate after the LF crop including boro was declining in the 1990s.

december 27, 2008

Table 3 indicates that 1980s had in- Table 6: Dynamics of Output and Cost Per Hectare in 1990s. The growth rate of foodgrains
deed been the decade of high growth for every crop except wheat and pulses. West Bengal Agriculture Crop: Paddy Revenue 1991-92 1996-97 Change(%) in West Bengal, calculated on pointto-point basis declined from 6.9%
During this decade potato registered Yield per hectare (quintals) 35.06 37.2 6.10 per year in the 1980s to 2.4% per
a growth of 9.3% per year. The aver- Value of main product (Rs) 9666.61 15897.40 64.46 year in the 1990s. Rice, the most im
age growth rate of oilseeds had been Value of by-product/hectare (Rs) 2355.47 3191.91 35.51 portant crop of the state that came
as high as 18.8%. Even the production Value of total product (Rs) 12022.08 19089.31 58.79 under the green revolution technol
of jute increased by 6.3% per year, on Cost of cultivation (Rs) ogy in 1980s was now growing only
an average, during this decade. The growth rate did decelerate ItemsOperational cost 1 Human Labour 1991-92 6247.05 1996-97 10890.37 Change(%) 74.33 at the rate of 2.5% per year. This rate was higher than the average growth
during the next decade. But if we take Casual 2192.52 3073.22 40.17 rate of rice in 1970s. But, as Table 5
1979-80 as the beginning of a new Attached 127.35 83.69 -34.28 indicates, the average growth rate of
political rule in the state, and consider Family 1108.01 3091.38 179.00 rice in West Bengal in 1990s was
the trend growth for the entire period Total 3427.88 6248.29 82.28 lower than the growth rate that it
of 1979-99 and compare it with the trend growth in pre-1979 period, we get an interesting result. The exercise12 is done in Table 4 (p 106) where we 2 Bullock labour Hired Owned Total 3 Machine labour 162.41 779.21 941.62 172.22 1104.17 1276.39 6.0441.7035.55 had recorded during 1960s, i e, during the period when the rice crop of the state was yet to switch over to the green r evolution technology.
fit a semi-log trend that captures the Hired 91.42 238.90 161.32 Production of pulses declined at
interactive process of data set in bet Owned 39.30 19.97 -49.19 the rate of 3% per year during 1990s.
ter way as it replaces the additive pro Total 130.72 258.87 98.03 Oilseeds recorded a growth, but the
cess of averaging point-to-point growth 4 Seed 281.20 441.08 56.86 growth rate was as low as 0.03% per
rate with a logarithmic process. The fitted semi-log trends reveals 5 Fertiliser and manure Fertiliser Manure 599.71 356.60 1069.62 463.33 78.3629.93 year. Rapeseed and mustard recorded a negative growth rate during this
that the underlying growth rate in Total 956.31 1532.95 60.30 period. Only crops in which the per
e very crop except pulses had been 6 Insecticides 80.60 143.48 78.01 formance was somewhat presentable
p ositive and often they were quite high 7 Irrigation charges 273.00 750.11 174.77 were potato, sugar cane and jute in
during the post-1979 period. In case of 8 Int on working capital 155.73 236.33 51.76 which the average growth rates were

most of the major crops, the underlying growth rates had been higher than those of pre-LF period (Table 4). This endorses the view that the situation changed for the better in the 1980s.

Was there a structural break in the data set during the left rule? We performed an econometric exercise on this issue and examined the possibility of getting a structural break at 1979-80

9 Miscellaneous Fixed costs 0.00 3450.90 2.87 6039.26 287.0075.01
Total cost 9697.95 16929.63 74.57
Surplus over total cost 2324.13 2159.68
Rate of surplus (1) 23.97 12.76
Rate of surplus (2) 92.44 75.29

Holdings in sample: 580 in 1991-92 and 591 in 1996-97, rate of surplus (1) is percentage of surplus over total cost, rate of surplus (2) is percentage of surplus over operational cost Total cost= Operational Cost + Fixed Cost. Source: Cost of Cultivation of Principal Crops in India, February 2000, Government of India, Ministry of Agriculture.

6.4%, 14.2% (with much fluctuation) and 5% per year, respectively.

The performance in rice production was generally poor in 1990s. Further, it appears that the performance was worse in the last five years of the decade. The official data indicate that the growth rate of rice during the last five years of 1990s was lower than the average growth rate

with change in both the intercept and the slope of the trend line. The technique of dummy variables was applied and results are summarised in Table 5 (p 106). As one gets from the table, the estimated coefficients are mostly significant at 5% level (i e, the estimated values are likely to be the true values in 95% of the cases) and e xpected signs have mostly been realised. This indicates that there was indeed a structural break at the beginning of 1980s with r espect to almost every crop including cereals (and rice, the major component of cereals produced in this state). The data indicate that agriculture in West Bengal did receive a big push at that time so much so that the entire growth trajectory changed for a higher one for every crop in the state. Technically this is captured in terms of change in intercept as well as the slope of the trend line in the expected direction in case of most of the crops including foodgrains (and its major component, i e, cereals) after 1978-79.

Agrarian Impasse in 1990s: As we have already observed, the agricultural growth rate in West Bengal has decelerated in the

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december 27, 2008

of the decade (2.5%); it was then increasing only at a rate of 2.4% per year. The growth rate of wheat was also lower in the late 1990s compared to the decadal average. Consequently, the growth rate of total foodgrains recorded a performance of 2.3% per year during 1995-96 – 1999-2000 which was lower than the decadal average growth rate of 2.4% per year. There was thus an indication that the deceleration in the production of major food

crop in the state was yet to be arrested. The small peasant economy of the state might be facing some problem which is not transitory in nature. The severity of the problem can be appreciated if one considers the fact that

Table 7: Percentage Distribution of Main and Marginal Workers in West Bengal

Rural Urban
1991 2001 1991 2001
Main worker 51.18 46 49.34 50.61
Marginal worker 0.91 8.3 0.31 3.47
Non-worker 47.91 45.7 50.36 45.93
Main worker 8.74 8.87 5.79 8.82
Marginal worker 4.33 11.83 0.41 2.31
Non-worker 86.93 79.3 93.79 88.87
Source: Censuses 1991 and 2001.

technological revolution notwithstanding, the rice producing economy of the state now fails to attain even a modest growth rate, not to speak of attaining a growth rate that it recorded d uring 1960s, when there was neither reform nor the new technology for rice production.

The problem is

Table 8: Sectoral Distribution of Main Workers in West Bengal

rooted in the eco-

Sector Male Female nomics of farm pro
1991 2001 1991 2001 duction. In order to
Farmer 30.2 20.8 16.2 13.8 elaborate this point
Agricultural labour 22.7 22.6 37.9 32.4 we consider here the
Cottage and small industry 2.8 4 11.3 18 economics of cost
OthersSource: Census 1991 and 2001. 44.3 52.7 34.7 36.2 and output of an
a verage farm in West

Bengal in the decade of 1990s. The necessary data were collected from the ministry of agriculture, government of India.13 The summary of what we get from the official information on revenue and cost of cultivation of an average West Bengal farm during 1990s has been presented in Table 6 (p 107) of this paper. We have summarised the information for two different years; the first is for 1991-92, i e, the second year of the decade and the second is for 1996-97, i e, the seventh year of the decade. The choice of the years is largely constrained by the data availability. The data on CCPC were available only for four different years of 1990s. We have taken the first and the last available CCPC data for the state. The idea was to study the changes that have taken place in various cost components (as well as in the components of revenue) in an average farm in West Bengal between the early 1990s and the mid-1990s.

We calculated the rate of surplus in paddy production in an average farm of the state. The last two rows of Table 6 contain the results. If we define rate of surplus as the excess of revenue over cost calculated as percentage over total cost, which is operational cost added to fixed cost, the rate of surplus is found to be 12.76% in 1996-97. The rate of surplus was 23.97% in 1991-92. There was thus a decline in the rate of surplus in paddy cultivation by 11.21 percentage points within a span of five years. A declining trend is also visible in the alternative calculation where we consider the surplus over the operational cost only. The declining trend in the rate of surplus is chiefly due to the increase in the element of paid-out cost of the farm. As a result, a typical farmer in 1990s find it discouraging to opt for better farm practices.

A major component of the paid-out cost is the material cost, particularly the irrigation cost and the fertiliser cost which i ncreased heavily during this period. Irrigation and fertiliser (also insecticides, the cost of which increased by 78.01% between 1991-92 and 1996-97) being the basic ingredients of the new technology that has been adopted by the farmers, the peasants have hardly any choice in reducing these items of paid-out cost. The market determined costs of these inputs have to be borne by the peasants. The increase in the cost of these inputs could be neutralised if the value of the output would increase by the same proportion. However, the output value did not increase equi-proportionally.

The elements of paid-out cost particularly the irrigation cost and the fertiliser cost depend on such forces of the market on which the peasants hardly have any control. Getting a higher price for the output that the peasants produce also depends on the market forces, both national and of late international, thanks to the opening up of the economy to the global market. An intervention on the part of the state might have helped the peasants tide over this crisis. But the state, under the new dispensation of economic liberalisation is not in the mood of making any intervention in favour of the peasants. Intervention in the form of

o ffering support prices is still there. But then the role of such a support programme is gradually declining in the economy. Given such a scenario, the peasants can hardly absorb the price shocks in the output and the input market. Consequently, the crisis is mounting and the agrarian economy is facing a deceleration. It is unlikely that such a deceleration can be arrested by a state g overnment which can seldom play a role in shaping the policy at the national level. With the economy opening up for the global market, the crisis is likely to deepen and the economy of the small peasants is likely to lose viability. This is a major threat to the agriculture of West Bengal and agriculture is the sector from which 44.15% of the workforce directly earns their livelihoods. Many of the livelihood-related problems that the state faces is due to the crisis in its agricultural sector.

2 Changing Pattern of Livelihood in Post-Reforms West Bengal

Work Participation and Nature of Job: Since agriculture is b ecoming unremunerative in the state, the livelihood pattern in rural West Bengal is changing nowadays. For a substantial percentage of rural workforce, agriculture is no longer the mainstay of living. As we shall discuss below, the livelihood pattern in urban West Bengal is also changing, thanks to decline in organised i ndustry. In order to elaborate this point, we shall consider first the changing pattern of workforce distribution in West Bengal, as reflected in the decennial census data.

As Table 7 (p 107) reveals, between 1991 and 2001, the work participation has in fact increased in urban and rural West Bengal with respect to both male and female population. The data however indicates that the increase was due to the increase in the percentage of marginal workers across gender and across the r ural-urban areas of the state. The percentage of main workers has declined from 51.18 to 46 between 1991 and 2001 for rural male. For the urban male, the relevant percentage increased

Table 9: Percentage Distribution of Unorganised Workers among All Non-Agricultural Workers in Industry Group (2004-05)

Sector West Bengal India Gujarat Maharashtra
Mining, electricity, public administration 3.9 8.3 9.1 4.0
Manufacturing 78.6 71.2 45.6 55.1
Construction 75.4 75.6 68.1 65.6
Trade, etc 96.5 95.5 97 93.3
Hotel restaurant, etc 87.6 86.7 85.2 71.1
Transport 81.8 75.9 78.3 64.4
Finance and real estate 56.1 52.7 57.2 45
Education 57.9 26.9 8.9 18.6
Health, social work 51.6 44.2 38.8 46.1
Other services 85.3 88.2 90.6 81.6
Private household 99.1 98.7 100 99
Total 77.6 71.6 61.3 62.4

Source: NSSO 61st Round; as in Report on Conditions of Work and Promotion of Livelihood in the Unorganised Sector, GoI, August 2007.

december 27, 2008

marginally. The decline in the percentage of non-workers among urban male was mostly due to the increase in the percentage of marginal workers (from 0.31 in 1991 to 3.47 in 2001). For the f emale, the work p articipation increased due to increase in the percentage of both main and marginal workers in urban as well as in rural West Bengal. In sum, the increase in work participation rate during this period in the state is largely due to the i ncrease in marginal workers, i e, the workers who do not get regular employment.14 The Census data also indicates that the women are joining the labour force at a higher rate.

Table 10: Estimated Unorganised Manufacturing Units and Employment Therein (West Bengal, Uttar Pradesh and All-India) in Hundred

1994-1995 2000-2001 Rural Urban Total Rural Urban Total

West Bengal Units 15,312 3,778 19,090 21,237 6,474 27,711

Employment 33,697 10,096 43,793 44,161 14,521 58,682

Uttar Pradesh Units 18,359 6,789 25,148 16,313 6,588 22,901

Employment 41,518 17,810 59,328 36,826 17,210 54,036

All-India Units 1,04,971 40,070 1,45,041 1,19,346 50,895 1,70,241

Employment 2,21,260 1,10,767 3,32,027 2,39,857 1,30,951 3,70,808

Source: NSSO 51st and 56th Round.

Although the work participation rate is increasing, the importance of agriculture as a source of livelihood has declined during 1990s in West Bengal. This is true for both male and female main workers. A large number of workers are now being driven to nonagricultural sector which includes, in the main, small industries and small enterprises.15 As Table 8 (p 108) reveals, the majority of the male workers in the state is now being driven to non-agricultural activities. In fact, in six districts of the state around Calcutta, a griculture as a source of livelihood has lost importance to a large extent. While it is natural that the workforce would gradually be shifted from agriculture to non-agricultural activities in course of economic development, the dynamics of sectoral distribution of workforce in West Bengal should be interpreted carefully. With economic development, the workforce usually shifts to organised industry and modern tertiary activities, as it happened in course of economic development in the developed countries of the world. In this particular case, however, the shifting of the workforce from agriculture to non-agriculture is largely associated with the growth of activities in the unorganised sector which hardly p rovides a decent livelihood to the people.

That the employment in the organised sector is declining in West Bengal is reflected in the information contained in Figure 1. Thus, the employment in the organised sector, which was 2.664 million in 1980, has declined to 2.230 million by 2004. A sharp decline in employment in the organised private sector took place in 1980s and early 1990s; and then it almost stagnated at about

0.75 million. There had been some increase in the public sector employment between 1980 and 1985. During 1990s, however, it stagnated at about 1.6 million. By the beginning of this century there had been a declining trend in the employment in public sector. Although there had been somewhat improvement in the employment in organised private sector in this period, the overall scenario was not promising. If the work participation increased during this period, new jobs must have been created mostly

o utside the organised sector of the economy.

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december 27, 2008

Employment in Unorganised Sector: According to NSSO 61st Round (2004-05) data, 85.4% of the workers in West Bengal find their livelihoods in the unorganised sector16 (which includes u norganised agriculture). The percentage of unorganised workers17 is higher (91.2%) than workers in unorganised sector because a sizeable section of the workers in the organised sector does not get employment/social security benefit. The scenario is marginally better than the all-India scenario. At the all-India level, the percentage of workers in the unorganised sector is 86.3, the percentage of unorganised workers being 92.4. But then one should mention that the scenario in West Bengal is much worse than a nother left-run state, namely Kerala where the comparable p ercentages are 63.4 and 81.3 respectively. A sizeable section of this workforce in West Bengal (about 40%) belongs to agriculture and allied agricultural activities. The rest earn their livelihoods from various non-agricultural activities.

The importance of unorganised workers among all nonagricultural workers in various industry groups has been described in Table 9 (p 108). At the very outset, we should point out that 77.6% of the non-agricultural workers in West Bengal are unorganised workers. The percentage is higher than all-India average (Table 9). One may add that the incidence of informalisation of the workforce in non-agricultural sector is much lower in G ujarat (61.3%) and Maharashtra (62.4%), two major industrialised states in I ndia. In construction, trade, hotel and restaurant and private household sectors, the percentage of unorganised workers in West Bengal does not differ much from the all-India pattern. However, the data indicates that the percentage of unorganised workers is very high in the manufacturing sector of West Bengal. While at the all-India level the percentage of unorganised workers in the manufacturing sector is 71.2%, in West Bengal the percentage is

78.6. In Gujarat and Maharashtra, the percentage of unorganised workers in manufacturing sectors had been 45.6 and 55.1 respectively. The implication is that the small manufacturing units a ccount for a higher percentage of workforce in the manufacturing sector than the average at all-India level. Again, in the major industrialised states of India the incidence of employment in u norganised manufacturing sector is not as high as in West B engal. As we argue below, this indicates a particular pattern of manufacturing activities in West Bengal.

Figure 1: Employment in Organised Sector in West Bengal (1980-2004) (Million)




Public Sector
0.5 1 2 3 4 5 Private Organised Sector Year: 1980, 1985, 1990, 1996, 2001, 2002, 2003, 2004 Not according to scale in X axis Source: Economic Review, 2004-05, Government of West Bengal. 6 7 8
Registered Factories

West Bengal accounts for the highest number of manufactur-sector. Unorganised labour contributes to a large extent in other ing units in the unorganised sector in India. In terms of employ-enterprises as well. Thus, 94.8% of the sales jobs are in unorganment also the state ranks first among all the major states in India. ised sector. In transport and related activities 80.4% of the jobs are Let us consider first the estimated number of unorganised manu-in unorganised sector. In unorganised non-agricultural sector, 91% facturing units in the state, as given in NSSO 51st Round (1994-95) of the enterprises are own account enterprises (OAE), i e, enterprises and 56th Round (2000-01). In 1994-95, the estimated number without hired workers, 8% are non-directory establishments (NDE)

(employing 2 to 5 workers) and the residual, only 1% belongs to di-

Figure 2: Estimates of NSDP of West Bengal from Registered and Unregistered Manufacturing Units at 1993-94 Constant Prices (Rs in million) rectory establishments (DE) (employing 6 to 9 workers). This is


Unregistered Factories consistent with the average scenario in the country as a whole. One 700

may, however, point out that in Kerala, the situation is different. The percentage of OAE is 77.4 in Kerala. A very high percentage of


the enterprises (20.4) in Kerala engage 2 to 5 workers per unit.


The percentage of DE (6 to 9 workers) is also higher (2.3%) in Kerala. In West Bengal, the small enterprises are usually OAE where the


family runs the enterprise without engaging outside labour. Need


less to say, the scale of operation is quite low in these enterprises

1 2 3 4 5 6 7 8 9 Year: 1993-94, 1995-96, 1997-98, 1998-99, 2000-01, 2001-02, 2002-03, 2003-04. and these enterprises run on a small capital base. And such enter-Source: Economic Review, Government of West Bengal, 2004-05.

prises play a very important role post-land reforms in West Bengal. of such units had been 19,09,000 in West Bengal, 15,31,200 of which had been in rural West Bengal. The leading state in that Output and Employment in Organised Industry: While West year was Uttar Pradesh where the estimated number of such units Bengal is doing well in unorganised non-agricultural sector, the had been 25,14,800. By 2000-01, West Bengal surpassed Uttar relative position of the state in the organised industry of India is Pradesh as the information contained in Table 10 indicates. becoming bad to worse. At the time of independence, the contri-

In terms of employment also West Bengal surpassed Uttar bution of West Bengal in industrial output in organised sector of Pradesh by 2000-01. West Bengal now accounts for 15.82% of the the country had been 24%. It then declined almost monotonically workforce in India that earns livelihood from employment in over next 30 years. By the time the LF came to power, the share of u norganised manufacturing units. The other point that one might the state in total industrial output from organised sector in India note is that in West Bengal, the number of workers in unorgan-had already declined to 11.9%. ised manufacturing had been much higher than the number of The successive LF ministries could not arrest the decline. The workers in organised manufacturing. In West Bengal, the aver-share of West Bengal in total ex-factory value of industrial output age daily number of employees in registered factories had been in the country went on declining further. By 2001-02, West 8,72,000 in 2000-01.18 Some of the workers in registered facto-B engal was accounting for only 4.6% of total industrial output in ries do belong to the unorganised sector. Even if we assume that the country (Figure 3, p 111). It is not true that the contribution of all the workers in registered factories are organised sector work-West Bengal declined in absolute terms. In fact, the ex-factory ers, the number of workers in unorganised manufacturing units19 value of output was increasing in absolute terms in West Bengal in West Bengal (58,68,300) remains much higher than the organ-as well. However, the growth rate here was much lower than what

ised workers in manufacturing sector of the state. The manufacturing sector in West Table 11: Ex-Factory Value of Output in West Bengal and India (Index with base 1980-81=100) was realised at all-India level (Table 11). The reason for such a phenomenal decline in
B engal is largely a sector with unorganised workers and unorganised units. In the net state domestic product (NSDP) of Year 1980-811985-86 Percentage Share of West Bengal 9.8 7.9 West Bengal 100 159.2 India 100 196.7 the share of West Bengal in organised industrial production is often stated to be the militant trade union movement in the state. However,
the state, the contribution of the unregistered 1990-91 6 271.8 442.9 this is not evidenced by the published data on
units is persistently higher than the contribu 1994-95 5 432.5 848 the incidence of industrial disputes in West Ben
tion from the registered factories (Figure 2). 1999-2000 3.9 581.7 1,470 gal. During the LF regime, mandays lost due to
Time series data on NSDP by industry of origin 2001-02 4.6 732.8 1,575.6 strikes by the trade unions had been quite insig
measured at constant (1993-94) prices captures this reality (Figure 2). In 1993-94, estimated NSDP from registered factories had been Rs 3,550.4 Source: Economic Review, Government of West Bengal, 2004-05, p 108. Table 12: Mandays Lost Due to Strikes and Lockouts in West Bengal (in million) nificant compared to the number of mandays lost due to lockouts. The information contained in Table 12 reveals the reality.
million. The contribution of the unregistered Year Strikes Lockouts Total The possible reason might be that the
units in the same year had been Rs 4,111.1 mil 1980 1.48 4.7 6.18 p otentiality of organised industry has declined
lion. By 2003-04, the contribution from regis 1985 0.2 15.11 15.31 in West Bengal and the increased incidence
tered units increased to Rs 5,840 million. How 1990 0.32 20.69 21.01 of lockouts is the response to that. In the
ever the unregistered units contributed still 1995 1.25 5.25 6.5 a bsence of a rigorous research on this issue,
higher a value (Rs 7,255.8 million). 2000 3.11 16.06 19.17 we should not draw a firm conclusion. One
In West Bengal, the unorganised units thus play a very important role in the manufacturing 2004 1.77 25.87 27.64 Source: Economic Review, Government of West Bengal, 2004-05, p 110. may, however, point out that the productivity in organised industry in West Bengal has

december 27, 2008

d eclined over time, which, inter alia, might have reduced the profit rates in West Bengal industries.20 As the profit rate declines, incentive for investment declines and the decline in growth rate of output and employment takes place. This might be what has happened in the organised industry of West Bengal.

Notwithstanding the crisis in organised industries, the left could garner sufficient political support to retain its rule over successive general elections. This was largely due to the fact that a substantial section of the rural people were benefited due to land

Figure 3: Share of West Bengal in Ex-Factory Value of Output in India (percentage)

10 8 6 4

1980-81 1985-86 1990-91 1994-95 1999-2000 2001-02 Source: Economic Review, Government of West Bengal, 2004-05, p 108.

reforms in the first place. The economic consequence of the d ecline in organised industry was also partially offset by the growth of enterprises, particularly manufacturing enterprises in the unorganised sector of the state. These enterprises were generating employment in the rural as well as in the urban areas ( particularly the small towns) of the state. In these enterprises, wage rates were low, output growth rates were moderate. But the growth was “inclusive” in nature because the technology was l abour intensive and the capital requirement was low in these enterprises. Our hypothesis is that the effect of such developments on income and poverty had been such that the left did not have to face any popular discontent that might have dislodged them from power, even though there had been a secular decline in organised industry of the state. In order to test this hypothesis, we shall now discuss the trend of income and poverty in West Bengal.

Income and Poverty in West Bengal: We shall consider first the spending power of an average person in West Bengal and in some of the leading states of India. Nominal monthly per capita consumption expenditure (MPCE) in rural West Bengal21 had been Rs 279 in 1993. It increased to Rs 454 in 1999-2000. The results of the 61st round survey of the NSSO reveal that MPCE was Rs 562 in rural West Bengal in 2004-05 (Table 13). In urban West Bengal, MPCE was consistently higher than the all-India average.

The rate of increase in nominal MPCE in three successive quinquennial surveys had been higher in West Bengal than many of the states, so much so that between three successive rounds of NSSO survey, the relative position of West Bengal has improved. In the previous two rounds, the MPCE in rural West Bengal had been lower than the all-India average (which had been Rs 281 and Rs 486 in 1993-94 and 1999-2000, respectively). In 2004-05, the nominal MPCE in rural West Bengal was above the all-India average (which was Rs 559). The scenario of rural West Bengal had always been worse, compared to more prosperous states of India, such as Kerala, Haryana and Punjab. But its rank was not much below the ranks of Maharashtra and Gujarat, two leading industrialised states of India. The scenario remained unchanged in 2004-05 as well, as the NSSO data indicates. In urban West

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december 27, 2008

Bengal, as we have already pointed out, the MPCE had been consistently higher than all-India average in all of these rounds of survey. Again, the relative position of urban West Bengal vis-à-vis other state has improved over time (Table 13).

Did West Bengal gain in terms of real MPCE as well? From T able 14, one understands that West Bengal did gain in terms of real MPCE as well, over this period, both in its rural and urban segments. By 2004-05, rural West Bengal had better real MPCE than rural Maharashtra. West Bengal is much below rural Kerala, Punjab or Haryana in terms of real MPCE. But it is not much behind rural Gujarat as Table 14 indicates. This is quite striking particularly for a state which lost its edge over others in organised m anufacturing industries since 1960s.

In terms of per capita income West Bengal is still below all-India average, as Figure 4 (p 112) indicates. One should, however, note that the state is catching up the all-India average level of per c apita income. In 1993-94, as one gets from Table 15 (p 112), the income gap (per capita) between West Bengal and all-India average had been Rs 935. By 2004-05, the gap has reduced to Rs 120 (measured at

Table 13: Nominal Per Capita Consumption Expenditure: West Bengal and Selected States (in Rs)

Nominal MPCE (Rural) Nominal MPCE (Urban)
Year 1993-94 1999-2000 2004-05 1993-94 1999-2000 2004-05
West Bengal 279 454 562 474 866 1,124
Kerala 390 766 1,013 494 932 1,291
Haryana 385 714 863 474 912 1,142
Punjab 433 742 847 511 899 1,326
Maharashtra 273 497 568 530 973 1,148
Gujarat 303 551 596 454 892 1,115
All India 281 486 559 458 855 1,052

Source: NSSO, 50th, 55th, and 61st rounds; taken here from Himanshu (2007).

constant 1993-94 prices). The implication is significant. In spite of the fact that the share of the state in output in organised manufacturing sector had remained very poor, the performance of the state had not been as poor as one would expect in terms of per capita income. Consider another indicator, viz, decadal growth rates of NSDP in West Bengal vis-à-vis other states. In 1960s and 1970s, the SDP growth rate in West Bengal had been as low as 2.28% and 3.23%, respectively. There had been a turnaround in 1980s and by the end of 1990s, it surpassed all states except K arnataka in terms of NSDP growth rate (Table 16, p 112)). The implication is that the performance of the economy was not bad in spite of the setback that it suffered in the organised industry.

Conditions of Living in West Bengal: To what extent has the condition of living improved for various segments of people in

Table 14: Real Monthly Per Capita Consumption Expenditure (MPCE): West Bengal and Selected States (in Rs)

Real MPCE (Rural) Real MPCE (Urban) Year 1993-94 1999-2000 2004-05 1993-94 1999-2000 2004-05

West Bengal 279 290 326 474 504 600

Kerala 390 492 582 494 548 648

Haryana 385 470 493 474 560 584

Punjab 433 485 489 511 547 739

Maharashtra 273 298 296 530 593 567

Gujarat 303 348 334 454 548 601

All India 281 306 318 458 526 548

Source: NSSO, 50th, 55th, and 61st rounds; taken here from Himanshu (2007).

Figure 4: Per Capita Income: West Bengal and India (at 1993-94 prices in Rs) 14,000 India

12,000 10,000 8,000 West Bengal


1 2 3 4 5 6 7 8 9 10 Years: 1993-94, 1995-96, 1996-97, 1997-98, 1999-2000, 2000-01, 2001-02, 2002-03, 2003-04, 2004-05. Source: Economic Review 2006-07, p 32.

West Bengal? The mainstay of West Bengal’s economy is agriculture and small enterprise. Results of the 59th Round of NSSO survey (2003)22 indicate that the average income of a marginal farmer in West Bengal is Rs 519 (all-India Rs 435). Average income of a small farmer household in India is Rs 1,578. In West Bengal, the average monthly earning of a small farmer household is Rs 7,225. It appears that in spite of recent impasse in agriculture, small and marginal farmers can enjoy a better living, compared to an average Indian farmer in this category. Wage rate (per day) in West Bengal was Rs 85 in 2005, according to the findings of the same survey. All-India average being Rs 70, one may infer that the c onditions of the rural labour households are also relatively b etter in West Bengal.

One may add that the incidence of poverty among unorganised non-agriculture workers is also not very high in West Bengal. Among the unorganised non-agricultural sector workers, the i ncidence of poverty is lower in West Bengal compared to Maharashtra and Karnataka (Figure 5). The average scenario at all-India level also appears to be worse than that in West Bengal.

On general poverty and inequality in the state, we reproduce below the relevant information from Himansu (2007). On the

Table 15: Per Capita Income: West Bengal and India (at 1993-94 prices in Rs)

the rural poverty is high in the state. It is true that severity and depth of poverty is declining in West Bengal (Tables 17B and 17C, p 113). It is also true that inequality has also declined in West Bengal during 1983 and 1993-94 (Table 17D, p 113).23 But then the fact remains that the severity and depth of poverty in rural West B engal is not much less than all-India average even in 2004-05, i e, after about 30 years of LF rule. The reality is that the economy is failing to create sufficient jobs so that the incidence of poverty could not decline at a more rapid pace. This in fact is the problem that the LF is now facing. The recent policy reversal should be examined in this perspective.

Figure 5: Poverty Ratios in Unorganised Non-Agricultural Sector (2004-05) 60







Casual Regular Self-All

Labour Employed Source: 61st round (2004-05); quoted here from RCWPLUS, GoI.

3 New Policy and the Left

Economy of the Petty Producers: Growth with Distributive Justice: In order to analyse the recent policy reversal of the left we would discuss first the salient features of the economic p rogramme that the left pursued during first 25 years of its rule over West Bengal.

The LF government implemented a

West Bengal Maharashtra Karnataka All-India

programme of land reforms that

Year 1993-94 1995-96 1996-97 1997-98 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05

West Bengal 6,755.95 7,491.86 8,407.58 8,813.76 9,319.70 9,796.33 10,380.20 10,950.95 11,611.70 12,294.54 Growth rate -10.89 12.22 4.83 5.74 5.11 5.96 5.50 6.03 5.88

changed the rural scenario to a large extent. The West Bengal agriculture is

India 7,690 8,489 9,244 9,650 10,071 10,308 10,754 11,013 11,799 12,414 now basically an economy of small and

Growth rate -10.39 8.89 4.39 4.36 2.35 4.33 2.41 7.14 5.21 marginal farmers and this economy

Source: Economic Review 2006-07, p 32.

b asis of the head count ratio, the scenario in rural West Bengal remained worse than the all-India average during the early period of the LF rule. The reduction in rural poverty was phenomenal in West Bengal during 1983–1993-94 when the ratio of head count poverty in West Bengal declined to 37.35% from 61.56% in 1983. By 1993-94, West Bengal was very near to the all-India a verage. The reduction rate slowed down in the next decade. However, the poverty ratio was now just above the all-India average. The situation was somewhat better in urban West Bengal (Table 17A, p 113) where the poverty on headcount ratio remained l ower than all-India urban average during the entire period.

How can one explain the higher incidence of poverty in rural West Bengal when the other results indicate that the sectoral poverty had been lower in the state? This is firstly due to the fact that incidence of unemployment and underemployment is higher in West Bengal. The large majority of the unemployed and the underemployed workforce live in rural West Bengal which is why

performed very well during 1980s. The agricultural base of the economy is still quite robust, even though the profitability of agriculture has declined after the advent of the neoliberal economic policy which was adopted by the union government at Delhi in 1991.

During the first 25 years of LF rule, West Bengal also experienced a decline

Table 16: Average Growth Rate of Net Domestic Production:

in organised in-

West Bengal and Other Selected States of India

dustry in which Year 1961-62 to 1971-72 to 1981-82 to 1991-2001-02 1971-72 1980-81 1990-91

it used to play a

Punjab 5.67 4.64 5.4 4.61

leading rule in

West Bengal 2.28 3.23 4.24 6.75

I ndia since the

Maharashtra 2.95 4.51 6.12 5.74

late colonial

Gujarat 4.83 4.31 5.99 6.34

p eriod. But then,

Andhra Pradesh 3.11 3.46 6.58 5.52

the adverse econo-

Karnataka 4.36 3.38 5.09 7.51

mic consequence

Kerala 4 2.3 3.34 5.74

of decline in orga-

Tamil Nadu 2.59 2.1 5.71 6.25 nised industries Source: WB Human Development Report, UNDP, 2004, Jayati Ghosh.

december 27, 2008

was partially counterbalanced by the growth of enterprises, par considered as uneconomic holding. The rise in income gave rise
ticularly manufacturing enterprises, in the unorganised sector of to better saving and better purchasing power. Rural market ex
the state. These enterprises were developing in the rural as well panded due to better purchasing power of the rural people. Again
as urban areas, the small towns in particular,24 of the state. the surplus could be invested in agriculture and non-agricultural
Due to the emergence of a small peasant economy and small sector. Since the economy was dominated by petty producers,
enterprise based non-agricultural sector there had been a signifi the volume of surplus per unit had been low. This surplus could
cant change in the very orientation of the society in West Bengal. e ither be invested as small savings that would generate a small
The society became more egalitarian in the first place. Secondly, interest income, or else, this could be invested in small economic
this changed the occupational pattern of the society in such a v entures. Both these took place in West Bengal. In small savings,
way that the adverse impact of the secular decline in organised West Bengal is a leading state of India (first among the Indian
industry on the livelihood of the people could be neutralised to a states in 2003-04).25 In small economic ventures, particularly
large extent. As we explained in Section II of this paper, this in small manufacturing, West Bengal is now the leading state
economy of petty producers established its viability. The purchas (Table 10, p 109) in India.
ing power of the people increased; inequality was reduced and
contrary to what was expected by the critics of the LF, the growth The New Policy – The Left at Crossroads: This model of eco
rate of the economy was also maintained at a commendable nomic development, the model that targets growth with distribu
level. That the left could retain its support base in spite of a tive justice come under serious threat as the neoliberal ideology
decline in organised industry can largely be explained by these established its sway over the policymaking process at the centre
developments. of political power in India, namely, the union government at New
The economic implication of this course of development is Delhi. The viability of the small peasant economy was threatened
quite deep. Organised manufacturing industries are associated as the control over input prices was withdrawn. West Bengal
with high value products, products in which the average output agriculture also suffered as public investment in agriculture, par
per labour is higher than that in unorganised economic activities ticularly investment in state-sponsored irrigation started declin
(including unorganised agriculture). As the organised manufac ing. In West Bengal, the irrigation network is weak; the coverage
turing activities develop, the growth rate of per capita output of regular irrigation is as low as 40% of the net cropped area of
i ncreases at a higher rate which is immediately reflected in the the state. The second crop in paddy (boro) needs intensive irriga
growth rate of per capita GDP. As the per capita GDP accelerates, tion. As the state has failed relatively to provide irrigation facili
the economy prospers. That the neoliberals insist on increasing ties, there has developed a private water market. The small
investment in organised sector that would produce high value p easant economy can hardly maintain its viability under such a
products, is largely explained in terms of this economic rationale.
In India also, the received wisdom nowadays is that this is the Table 17A: Decadal Trend in Poverty in West Bengal and India
only way to build up a prosperous India. The experience of West 1983 1993-94 2004-05
Bengal, however, indicates that an economy can achieve an West Bengal Rural 61.56 37.35 28.49
a cceleration in GDP growth rate even when the organised industry Urban 31.5 23.24 18.5
is on the wane, by following a different course of development, a All-India Rural 45.76 37.26 29.18
course of development in which the small and marginal farmerbased agriculture and small enterprise based manufacturing play Urban 42.27 32.56 26.02 West Bengal Rural + Urban 53.60 33.45 25.67 All India Rural + Urban 44.93 36.02 28.27
the leading role. The growth under such a dispensation would
take care of the issue of distributive justice – an issue which is Table 17B: Poverty Gap (Severity of Poverty) in West Bengal and India
hardly addressed under alternative dispensation that insists on 1983 1987-88 1993-94 2004-05
capital intensive and thus labour displacing technological West Bengal Rural 21.06 11.58 8.3 5.4
progress. Instead of growth by exclusion, this course of development is based on the principle of “inclusive” growth as it concen Urban 9.29 7.4 4.5 2.6 All-India Rural 10.2 9.29 8.5 5.8 Urban 11.4 10.2 8 6.2
trates on labour intensive “low value product”. An inclusive
growth by its very nature addresses the issue of distributive jus- Table 17C: Squared Poverty Gap (Depth of Poverty) in West Bengal and India
tice in a better way. In fact, this is what had taken place in West 1983 1987-88 1993-94 2004-05
Bengal under LF rule. Thanks to land reforms, asset inequality in rural West Bengal has decreased. The small and marginal farmer West Bengal Rural 9.46 3.99 2.45 1.42 Urban 3.2 2.4 1.4 0.6 All-India Rural 4.87 3.23 2.84 1.76
based economy could perform well since a large section of the Urban 4.4 3.8 2.9 2
peasants had been endowed with the ownership of the piece of
land that they cultivate. With the ownership right they could now practise better monitoring over input selection, production and marketing. The labour was also applied to the maximum extent Table 17D: Gini (Measure of Inequality) in West Bengal and India 1983 1987-88 1993-94 2004-05 West Bengal Rural 30 25.8 25.4 27.4 Urban 33.5 34.6 33.9 38.3
(limit of which is the point where marginal productivity of All-India Rural 30.4 29.9 28.6 30.5
labour is zero). As a consequence, agricultural output and income Urban 33.9 35 34.4 37.6
could increase even on the small piece of land which is usually Source: Himansu (2007).
Economic & Political Weekly december 27, 2008 113

d ispensation, as the water price remains high in the private water market which is oligopolistic in nature. The LF failed to find any answer to this problem and in course of time it gave in to the p olicy of the central government. The small peasants are now b eing advised to tie up with the multinationals and take up c ontractual farming.

Small enterprises, particularly the small manufacturing units are now facing stiff competition from the big capital as the economy is being opened up. The policy of providing state support to small units is now being discouraged and in the name of providing “level playing ground”, the state is now virtually encouraging big capital to grab the market of the small units. Even in retail trade, the small enterprises now face serious threat from the big capital. This is an all-India phenomenon and West Bengal is no exception.

West Bengal had to bear the brunt of the new policy, because the fulcrum of its economy, the small peasant-based agriculture and small enterprise-based manufacturing, had been the particular target of this policy. The LF could hardly cope with this development. In a state in which the unemployment rate is very high and the incidence of under-employment is rampant, there is always a compulsion to adopt a policy that would address the pro blem of unemployment and under-employment. Choices under the new dispensation being limited, the LF had to give in to the new policy that would encourage a big capital-led development.

One may observe that the economic fundamentals for private investments by corporate capital are also strong in the state, thanks to the development that has already taken place here. The per capita SDP of West Bengal is near the national average and the per capita spending power is above the national average. There is therefore a market that can be exploited by big capital. The infrastructure is still poor. But West Bengal is a power surplus state and it has 58,635 km of highways which is quite large,


1 84% of the households in the state have access to safe drinking water. The all-India average is 64%.

2 The literacy rate is 68.64%; the rank is sixth among 17 major states.

3 Dropout rate in West Bengal is 49%; all-India a verage is 39%.

4 The opposition claims that the LF rigs the elections in West Bengal. This appears to be untenable inasmuch as the office of the election commission in India is run by the central government which was never under the control of the LF.

5 West Bengal contributes more than 15% to the t otal rice production in India.

6 A new class of rural landlords was developing in Bengal even during the zamindari system. Known as jotedars, they used to exercise control over the rural economy chiefly on the basis of their proprietary right over land. Forms of exploitation had been rack renting, usury and employment of tied and untied labour. After the abolition of the z amindari system, this class of landlords became the power centre of rural Bengal. The target of land reform in West Bengal had been this class of exploiters who were known as feudal and semifeudal landlords in Marxist parlance.

7 The only new provision of the Act that the first Left Front government introduced was a section

given that the geographical area of West Bengal is small compared to the big states like Maharashtra. The railway network is also quite good in the state. West Bengal has a considerable number of urban centres with Calcutta as a traditional metropolis which is second largest in India. Above all, the political stability of the state is at the phenomenal level. It is ruled by a coalition which is retaining power since 1977. There is massive popular mandate behind this coalition. All this would work as favourable factors for the new course of development.

The problem, however, is that the left enjoys popular support because of a definite policy of the left that empowers people and promotes an alternative course of economic development which attempts to realise growth with distributive justice. If the new policy were followed, the growth would accelerate. But this would take place at the cost of distributive justice. It is true that the income growth will have a trickle-down effect. But big capitalled growth usually promotes inequality in income distribution. Again, the major problem, the problem of job creation might not be addressed properly since the policy of “exclusive growth” u sually promotes jobless growth.

The political cost of the new policy might be very high for the left, unless the employment scenario improves in near future. Since the new policy is expected to enhance jobless growth, it is quite likely that the left front will not be able to achieve the target of job creation at a high rate with this policy of industrialisation. However, the economy has a great prospect in small industrybased development strategy if the left addresses the problems of the small industry properly. A policy that does not discourage private investment from big business but places more emphasis on the small enterprises that might meet the immediate need of job creation in a better way should be adopted by the state government. But this needs an ideology that promotes inclusive growth. It appears that the left is fast losing its ideology and thereby the very rationale of its existence.

of the Tenancy Act (clause 19A) that made the eviction of a bona fide tenant difficult.

8 It seems that some of the experts missed this point while evaluating the role of the Left Front government in implementing the land reforms programme. See, for example, Rogaly et al (1999), Introduction where a paragraph (in p 29) was d evoted to establish that the role of the first Left Front government was very little in realising the land reforms in the state. The authors, however, missed to note the political role of this government (and also that of the United Front governments) in mobilising the potential beneficiaries. The act of mobilisation added a new dimension to the programme of land reforms in West Bengal that was crucial for its success. That the mobilisation of the potential beneficiaries is key to the success of land reforms is a much discussed issue. One may note that mobilisation also played a crucial role in realising the goal of the land reform programme in Kerala, the only other state of India (except Jammu and Kashmir) where the land r eforms had been successful. For the role of the peasant mobilisation in Kerala land reforms, see Oommen (1985).

9 See, for example, Surjit (1992).

10 See for example the criticism in Mallick (1993). While arguing for lowering the ceiling, Mallick quotes a judgment of the Supreme Court where it observes “the ceiling limit of 17.29 acres of irrigated lands in case of a family in the Gangetic plains of West Bengal is not small by any standard” (Mallick 1993: 43-44). P Sundarayya, former secretary of the Communist Party of India (Marxist) also argued for lowering the ceiling to five acres for a family in the irrigated area of rural West Bengal.

11 Yield (rice) per hectare was 3,240 kg for boro and 979 kg for aman in the state in 2000-01 (Crops Statistics, Government of West Bengal, 2000-01).

12 The point-to-point growth rate also reveals that the average growth rate of last two decades of the previous century was higher than that of the average of the growth rates in 1960s and 1970s.

13 Cost of Cultivation of Principle Crops in India; February 2000, Ministry of Agriculture, Government of India. Sample size had been 580 in 199192 and 591 in 1996-97.

14 This is also true for India as a whole, as the Census and the NSSO data (50th, 55th and 61st Rounds) indicate.

15 Not captured fully in the Census data. The importance of small enterprises as the source of livelihood has been revealed in the NSSO quinquennial surveys on Employment and Unemployment. This issue has been discussed in the subsequent part of this paper.

16 We follow the definition of National Commission for Enterprises in the Unorganised Sector according to which “the unorganised sector consists of all unincorporated private enterprises owned by

december 27, 2008

individuals or households engaged in sale and production of goods and services operated on a proprietary or partnership basis and with less than ten total workers” (Government of India (August 2007), para 1.10).

17 “Unorganised workers consist of those working in the unorganised enterprises or households, excluding regular workers with social security benefits and the workers in formal sector without any employment/social security benefits provided by the employers” (Government of India, August 2007); para 1.13.

18 Government of West Bengal (2005), p 34.

19 Most of the unorganised manufacturing units are unregistered units as well.

20 This theme has been discussed by many. In a research in progress (A Tale of Two States: Maharashtra and West Bengal: Amartya Lahiri and K-Mu Yi, nd) the authors have performed an empirical exercise on productivity differential between West Bengal and Maharashtra. Historically, these two were the most industrialised states of India. Over time, however, these two states experienced two different growth trajectories, particularly in the organised manufacturing sector where the share of Maharashtra increased and that of West Bengal declined over time. As the authors observe this was largely due to the difference in Total Factor Productivity (TFP). The TFP in manufacturing had been much higher in Maharashtra.

21 Under uniform reference period for 1993-94 and 2004-05 and unadjusted reference period for 1999-2000.

22 NSSO: Situational Assessment Survey of Farmer Households. Report No 497a, GoI, 2005.

23 Inequality has increased during 1993-94 and 2004-05, i e, during the period when the LF was gradually adopting the neoliberalism policy.

24 In this context, one may point out that the importance of Calcutta in the urban map of West Bengal has declined between 1991 and 2001, according to the Census data.

25 Economic Review, Government of West Bengal, 2004-05, p 192.


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November 29, 2008
Third National Family Health Survey in India: Issues, Problems and Prospects Sibling-Linked Data in the Demographic and Health Surveys Religious Differentials in Fertility in India Premarital Sex in India: Issues of Class and Gender Violence against Women in India: Is Empowerment a Protective Factor? Household Deprivation and Its Linkages with Reproductive Health Utilisation Reflections on Wealth Quintile Distribution and Health Outcomes –S Irudaya Rajan, K S James –Sonia Bhalotra –Manoj Alagarajan, P M Kulkarni –Lekha Subaiya –Leela Visaria –K Srinivasan, S K Mohanty –Udaya S Mishra, T R Dilip
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