Millennium Post

Post-colonial Bengal : Prosperity to decline

Post-Independence, the financial fortunes of West Bengal were steadily chipped away by a series of factors — some, internal while others relate to policies of successive Union Governments — that weakened the traditionally robust production capabilities; write Dipankar Dey & Tanushree Dutta

Post-colonial Bengal : Prosperity to decline

The socio-economic contribution of the Indian state of West Bengal, which has been subjected to repeated partitions and transfer of population during the last one hundred and fifty odd years to serve the interest of the colonial and national rulers, is immense. Bengal was one of the wealthiest regions of the Asian subcontinent prior to the invasion of the British East India Company in 1757. In his famous book, 'From prosperity to decline: Eighteenth century Bengal', Sushil Choudhury (1995), described it as one of the major production centers of textiles- both cotton and silk, perfumes, gold and silver jewelers and many other intricate crafts which included materials made out of iron, brass, bell metal, sea shells, wood and ivory. Bengal was also a major producer of agricultural commodities with thousands of varieties of rice and other fruits and vegetables.

Though Bengal faced many odds during the colonial era, nevertheless, it could retain its leadership position in economic performance compared to other parts of the Indian sub-continent. Even after partition, till the early 1950s, West Bengal's industrial contribution was highest among all the states of India. Then the decline started. Figures in Table 1 reveal that between 1950-51 and 2017-18, West Bengal's contribution to India's domestic production had halved from a high of 11.6% to 5.9% and its rank among the States had declined from 2nd to 6th. Table 2 reveals another alarming figure. It shows that during 1972-2018 a huge amount of Bengal's savings, to the tune of INR 76.23 trillion (at the present value), was not utilized within the State by the formal banking sector. During this phase West Bengal's average credit-deposit (C-D) ratio (ref to Table 1) was only 56.9% compared to 100.4% and 83.1% respectively for Tamil Nadu and Maharashtra. This indicates that over 43% of the savings deposits of the residents and organizations based in West Bengal were utilized elsewhere by the commercial banks. More over study also revealed that in 1974, 11.8 percent of the total bank credit sanctioned to West Bengal had migrated to other states![1]

There could be many reasons why banks and entrepreneurs have preferred other regions/states over West Bengal. Few possible reasons, both non-economic and economic, could be

Absence of local 'business communities' in Bengal: Most of the large business families of India have historically belonged to traditional business communities like the Marwaris, Parsees and Gujaratis, writes Thomas Timberg (2014) in his book, 'The Marwaris: From Jagat Seth to the Birlas'. Historian N K Sinha (1967) blamed Vallal Sena ( Ballal Sen), who ruled Bengal in the twelfth century, for the dominance of non Bengali merchants in Bengal. In Sen's canonical establishment of caste precedence in Bengal, he downgraded the Viasha Subarnabanik bankers (gold traders) to Sudra, the lowest Varna in the hierarchy, as they refused to advance him the amount of money he wanted. After marginalizing the Vaishya merchant community, the King created a powerful 'service community' comprising the Brahmins, Kayasthas and Baidyas, that still dominate West Bengal's socio economic space.

(ii) Marginalization of Bengali Bhadralok: The Bengali upper caste 'service community' became more powerful during the British Raj when the colonial rulers trained them with the knowledge of the colonists. These English educated 'Bhadrolok' Bengali had remained a trusted 'service community' to the British government and got accustomed with the British culture which may be categorized as 'low context culture' (In Low-context cultures, information is communicated primarily through language and rules are explicitly spelled out). With the departure of the English traders and administrators, these Bengali Bhadralok 'service community' increasingly felt suffocated in the 'high context culture'(In High-context cultures the rules of communication are primarily transmitted through the use of contextual elements i.e., body language, a person's status, and tone of voice and are not explicitly stated) of traditional business communities and administrators. Moreover, growing use of Hindi language in the country had made these Bhadroloks more uncomfortable pushing them to the margin.

(iii) Bengal centric politics: Jaya Chatterjee (1994) in her seminal thesis ' Bengal Divided: Hindu communalism and partition 1932-47', has explained how in less than thirty years of division of Bengal in 1905 Bhadralok politics had come full circle, moving away from nationalist agendas to more parochial concerns,. In 1905 the Bhadraloks had vehemently protested against the division of Bengal but in mid 1940s these Bhadraloks lobbied for partition of Bengal on religious lines! Till 1920s Bengali Bhadralok remained a political force to reckon with. But in the last decade and a half of the British rule Bengal lost its position of pre-eminence in all India politics and was edged out of the nationalist mainstream. During these years Bhadralok politics tended to draw inwards, focusing increasingly upon narrow provincial concerns. This probably explains why the Communist Party of India (Marxists) did not allow Jyoti Basu and others party leaders to join the Council of Ministers of the Union government.

(iv) The Union government policies: the policies of the Union government had made a substantial contribution to the drain of wealth from West Bengal. Ranajit Roy (1973) in his book 'Agony of West Bengal: a study of Union- State Relations has depicted numerous examples on how the state had declined from prosperity within twenty-five years of independence. Few examples: (a) On the very night of the partition of Bengal (14th August) the Union government slashed West Bengal's share of jute export duty from 62.5 percent to 20 percent. The cotton textile sector of Bombay (Maharashtra and Gujarat) was extended all manner of protection at the cost of Bengal's jute and tea. (b) On the same night of partition West Bengal's share of the divisible pool of income tax was reduced to 12 percent from 20 percent. But the share of Bombay was increased by 1 percent from earlier 20 percent. Similarly Madras's share was also increased from 15 percent to 18 percent. These states got extra money at the cost of Bengal. In 2019-20 West Bengal's share of the tax pool has come down to 7.32 percent. (c) The Mayurakhi Hydro-electric project came to West Bengal as a gift from foreign country. But the money had to be credited to the Union government which then advanced it to the state a loan, imposing the interest burden on the state government. (d) The Industrial Policy of Union government, announced in 1956, equalized the price of iron, steel and coal all over the country thus depriving the locational advantage of West Bengal and other Eastern states in various sectors as this region had huge deposits of iron ore and coal. Subsequent to this, the price of cement was equalized all over the country. As limestone and dolomite, the two major raw materials of cement, were much cheaper in the Southern region, cement firms became more profitable in the southern states. Thus South India emerged as the major production center of cement in India. (d) Industrial licensing and quota policies were also used to deprive west Bengal. One of the major sufferers of these policies was Bengal's pharmaceutical industry. Gujarat became the pharmaceutical hub of India at the expense of West Bengal. In June 1970 B.M Birla held the Government of India responsible for the lack of growth of industries in west Bengal. He alleged that the government did not give license to west Bengal on the plea that the state was already developed. During 1956-67 Maharashtra was given a total of 2741 licenses and West Bengal received 1649 licenses only.(e) Freight equalization policy was adopted by the government of India to facilitate the equal growth of industry all over the country. This meant a factory could be set up anywhere in India and the transportation of minerals would be subsidized by the central government. It was introduced in 1952, and remained in force until 1993.The policy hurt the economic prospects of the mineral-rich states like Bihar (including present-day Jharkhand), West Bengal, Madhya Pradesh (including present-day Chhattisgarh) and Odisha, since it weakened the incentives for private capital to establish production facilities in these areas. As a result of this policy, businesses preferred setting up industries closer to the coastal trade hubs and markets in other parts of the country

These are few factors which have pushed West Bengal to a low level equilibrium trap and the economic decline continued.

Bengal: a colony!

West Bengal, which was the second largest contributor to the domestic product of the nation in 1950-51, was declared a 'backward state' in 1972. The Central Minister Mohan Dharia announced in the Rajya Sabha on May 12, that 'the whole of West Bengal except for Calcutta, Howrah and 24 Parganas districts is now being treated as a backward area'! And after twenty five years of independence, on August 25, 1972, the Minister of Planning, D P Dhar, told the Lok Sabha that West Bengal's industry had 'a colonial base, a colonial orientation'! The ugly truth is not only West Bengal, the whole of Eastern, North- Eastern and Central India continues to be colonially afflicted.

Post colonial India has followed the same model of economic growth with a centralized production system in few power centers of North, West and Southern India at the expense of other zones. Independent India states may be easily divided by the Custom Line which was erected around 1869 primarily to secure the levy of a duty on salt. The Custom Line, the brainchild of A.O. Hume (one of the founders of Indian National Congress!), consisted principally of an immense impenetrable hedge of thorny trees and bushes, extended from the Indus in the North to the Mahanadi in the East, a distance of 2,300 miles and was guarded by nearly 12,000 men. If we look at the map, it become clear that regions to the right of this British Customs Line (fig 2) primarily supply natural resources like minerals; forest produce; coal; oil and gas; savings (fig 1 reveals that North zone's C-D ratio took a marginal dip below the national average due to major decline in credit disbursement since 2014 when political power shifted from Delhi to Ahmedabad), craftsmen, skilled and unskilled labour to the regions situated to the left of the Customs Line. Most of the migrant trains during COVID 19 crisis had moved from the left to right side of the dividing line. Advance states thrive by exploiting this backyard of India- the internal colony of the nation.

Like other adjacent states of N-Eastern, Eastern and Central zones of India, West Bengal has fallen into the dreaded 'low level equilibrium trap' because of continuous drainage of its resources to other regions to the left of the British Customs Line. To break this vicious circle of low income, low demand and low investment, massive programs, both at the local entrepreneurial and political levels, are required. Few suggestions:

It is time to revive and empower the local 'business and karigar communities' who have been socially and economically marginalized and pushed to the periphery by the all powerful 'service communities' of Bengal. The present government of West Bengal has taken few bold steps after coming to power in 2011. Since then Bengal is following a rural centric development model where local knowledge based enterprises and traditional crafts are getting more government patronage.. Thousands of these skill based micro and small enterprises have helped quick turnaround of the sinking economy of West Bengal and during the past decade last couple of years, despite many odds, Bengal has emerged as the leader in terms of its industrial, agriculture and economic growth. Despite this good performance, C-D ratio of Bengal has not improved, rather it has declined (ref table 2) during last few years! The possible reason for this low C-D ratio could be the reluctance of the present captains of Bengal's business to invest in the state. The commendable role played by the Bengal National Chambers of Commerce and Industries (BNCCI), which has completed 133 years of its existence, during Swadeshi movement is nowhere to be seen. In these changed circumstances, a new federation (Banglar Banik o Karigar Sangha) that can represent the needs and aspirations of local entrepreneurs and karigars needs to be formed urgently.

(ii) Banglar Banik o Karigar Sangha: This federation could include, among others, the following: (a) the traditional merchant communities (Baniks), like Swarnabaniks, Kangshabaniks, Sankhabaniks, Gandhabaniks (deal with spices and perfumes), Taulik (betelnut traders), Modak (sweetmeat traders); (b) the Nabasakha group of artisans' communities: Kumbhakar (potter), Karmakar (blacksmith), Malakar (garlander, expert in 'shola' craftsman), Kangsakar/Kanshari, Sankhakar/Sakhari Swarnakar (goldsmith), Sutradhar (carpenter), Chitrakar (artist/painter) and Tantubaya (weaver); (c) local Muslim, Adivashi and Dalit entrepreneurs. Besides articulating the needs of its members, such a federation can also increase the bargaining power of the State vis-à-vis Union government.

The much hyped Cooperative Federalism of India is in total disarray. The Union government has put the last nail in the coffin by proposing the New Education Policy. The State governments are systematically getting relegated to tax collection and programme implementation centers of the Union government, without getting their legitimate share in devolution. At this hour of existential crisis, West Bengal must revive its legitimate demand for more power to the State governments. In its memorandum to the first Finance Commission (1951), the West Bengal government had bitterly commented, "An attempt to build a strong Centre on the foundation of weak States is like an attempt to build a strong building on the foundation of sands. Strength means in this context ability to perform adequately and properly the duties assigned to each." It then quoted the recommendation, of the Constituent Assembly's Expert Committee on the Financial Provisions of the Constitution, which said, "The basic functions of a Federal Government are defense, foreign affairs and the bulk of the national debt"

(iv) The Union Government will not be ready to share power with the States in the periphery unless strong political demand for more autonomy is raised by the States. In this context the old debate on identity politics and sub national identity, in a multicultural and multi-linguistic nation like India, are being revived again. After the fall of Pala dynasty in the twelfth century, this part of Bengal was mostly ruled, till 2011, either by the outsiders or by their representatives. Since 2011 West Bengal has been governed by a political party which has its roots in the state. During the last few years the state has become wealthier and is progressing at a faster pace than the rest of the nation. Once again Bengal has become an attractive place for the outsiders who are eyeing for its wealth and want to recapture the political space again. Apprehending this Chief Minister of West Bengal has assured the state that 'Bengal would not be ruled by outsiders'. She has also sought to stoke Bengali pride, highlighting the harmonious coexistence of people in the state under her rule. "We have three slogans that originated from Bengal – 'Jai Hind', 'Bande Mataram' and 'Joy Bangla'", she said in a virtual rally on July 21, 2020. As an experienced politician and mass leader, she might have rightly realized that reviving the sub-national identity of the state is the only option left with West Bengal to resist further expansion and exploitation of the strong Union government and protect the autonomy and economic interest of the its citizens.

[1] Bank Credit, Output and Bank Deposits in West Bengal and Selected States, Pranab Kumar Das and Pradip Maiti, Economic and Political Weekly, Vol. 33, No. 47/48 (Nov. 21 - Dec. 4, 1998),


[3] Ranajit Ray (1973)

Table 1: The present status of the six major states of India in terms of their NDP contribution in 1950-51

States Contribution (%) to NDP 1950-51 (rank) Contribution (%) to GDP 2017-18 (rank) Population Density per Sq Km 1961 Population Density per Sq Km 2011 Share (%) of state's land to the total national area % of *Migrant Population in the State (2011)### Average C-D ratio (%) during 1972-2018

Uttar Pradesh 16.1 (1) 8.0(3) 251 828 7.4 28 41.0

West Bengal 11.6 (2) 5.9(6) 399 1029 2.7 37 56.9

Maharashtra 11.2 (3) 14.1(1) 129 365 9.4 51 83.1

Tamil Nadu 6.9 (4) 8.6(2) 258 555 4.0 43 100.4

Bihar 6.6 (5) 2.8 (13) 267 1102 2.9 26 32.9

Gujarat 5.8 (6) 7.7 (5) 110 308 6.0 45 56.6

NDP: Net Domestic Product; GDP: Gross Domestic Product; C_D Ratio: Credit Deposit ratio of Commercial Banks; * Includes both intra and interstate migration.

Sources: Ranajit Ray (1971) Agony of West Bengal, Ministry of Statistics and Programme Implementation ,, RBI(, ###

Source: RBI(

Note: 1million =10 lakh, 1 billion= 1000 million, 1 trillion= 1000 billion, #PV calculated by the authors on the basis of RBI data. INR 762672754.3 lakh = INR76267275.43 million= INR 76267.275 billion=INR 76.23 Trillion **a certain percentage of this huge sum was kept with the Banks as per RBI guideline and rest were loaned to creditors in other states.

Table3: Average Credit -Deposit (C-D) Ratio of six Banking Zones of India (1972-2018)

Banking Zone States Average

C-D Ratio

N-East Arunachal, Assam, Meghalaya, Manipur, Nagaland, Tripura, Mizoram, Sikkim 48.4

Eastern Bihar, Orissa, West Bengal, Andaman and Nicobar Islands 49.3

Central Madhya Pradesh, Chhattisgarh, Uttar Pradesh, Uttarakhand 47.0

Northern Haryana, Himachal Pradesh, Punjab, J&K, Delhi, Rajasthan, Chandigarh 65.5

All India 66.7

Western Goa, Daman & Diu, Dadra & Nagar Haveli, Gujarat, Maharashtra 74.6

Southern Andhra Pradesh, Telangana, Tamil Nadu, Kerala, Karnataka, Lakshadweep, Pondicherry 82.1

Source: RBI(

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