Indefatigable growth march

Bengal, once considered a 'sinking economy', has bounced back with vengeance. Now policy analysts have coined a new term 'Bengal model of governance' to distinguish it from the much-hyped 'Gujarat model' which refers to a period from 2002-03 to 20011-12 during which Gujarat experienced a quantum jump in its growth rate. This piece tries to identify the salient features of these two models and the observable outcomes of the same. But before that let us discuss the historical context of the two Indian states, Gujarat and West Bengal, which have followed two distinct development paths in their respective states.

Context

Gujarat is a state on the western coast of India with a coastline of about 1,600 km (990 mi) – the longest in the country, and a population of 60.4 million. It is the fifth-largest Indian state by area and the ninth-largest state by population.

Contrary to this, West Bengal is a state in the eastern region of India along the Bay of Bengal. This state was created after the partition of Bengal province in 1947 when India got Dominion status from the ruling British empire. With over 91 million inhabitants, it is the fourth-most populous state and the fourteenth-largest state by area in India. As West Bengal shares over 4,000 km of international borders with neighbouring countries, it is prone to trans-border migration and associated political disturbance. Citizenship issues, a curse of partition, still haunts the Bengali-speaking people in India. The recently enacted Citizenship Amendment Act (CAA) is a case in point.

Bengal was the epicentre of India's struggle for independence. But leaders from Bengal got increasingly marginalised after MK Gandhi — a Gujarati lawyer who joined active politics after World War I. The 'father of the nation' had forced CR Das to resign from Congress and later Subhas Bose also faced the same fate. With the marginalisation of true leaders of Bengal, it was an easy task for Patel, Jinnah, Nehru, Gandhi and his disciple GD Birla to initiate the partition of Bengal and Punjab.

Though India has got two Gujarati Prime Ministers, one deputy Prime Minister, and dozens of important cabinet Ministers for the state, Bengal has not got a single Prime Minister till now. Maybe the iconoclastic trait of the Bengali common man has deprived them of their due share in the governance and economic resources of the country. As early as 1957, commenting on the future course of India's governance, historian Arnold Toynbee said, 'Bengal with her wings broken, by partition, may resign herself to being eclipsed'. According to him, 'the Gujarati industrialists are the British Sahib's principal heir… the twentieth-century winner is Gujarat with his business sense'.

Since its birth after partition in 1947, West Bengal has been facing serious political and economic discrimination. A study by this author and Tanushree Dutta (2020) revealed that from 1972 to 2018, a huge amount of Bengal's savings, to the tune of Rs 76.23 trillion (at the present value), was not utilised within the state by the formal banking sector. During this phase, West Bengal's average credit-deposit (C-D) ratio was only 56.9 per cent compared to 100.4 per cent and 83.1 per cent respectively for Tamil Nadu and Maharashtra. This indicates that over 43 per cent of the saving deposits of the residents and organisations of West Bengal were utilised elsewhere by the commercial banks.

Ranajit Ray (1973) in his book 'Agony of West Bengal: A study of Union-State Relations' has depicted numerous examples of how the state had declined from prosperity within 25 years of independence. Few examples: (i) 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 per cent to 20 per cent. The cotton textile sector of Bombay (Maharashtra and Gujarat) was extended all manner of protection at the cost of Bengal's jute and tea. On that very night, West Bengal's share of the divisible pool of income tax was reduced to 12 per cent from 20 per cent. (ii) The Industrial Policy of the Union government, announced in 1956, equalised 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. After this, the price of cement was equalised all over the country. But cotton, as an essential raw material for the garment industry, was kept outside the purview of the government. (iii) 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. (iv) Freight equalisation policy was adopted by the Government of India to facilitate equal growth of industry all over the country. 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. (v) Compared to Bengali refugees, refugees from West Pakistan got all kinds of government assistance in their proper rehabilitation in Punjab and other adjoining states.

We have to analyse Gujarat and Bengal development models from the above perspective.

Major features of the Gujarat and Bengal model

The Gujarat model had three major components: a quantum jump in infrastructure to facilitate the inflow of corporate investment; a quantum jump in governance to address the requirements of corporate units; and an unprecedented rise in incentives and subsidies on investments in the corporate sector to attract investments. Infrastructure development focused on roads, airports and power. The incentives to corporate investment included mainly sales tax subsidies till 2006-07 (till the Centre banned it). Forty per cent of the revenue from sales tax – the main source of revenue for state governments – was forgone.

Thereafter, the government introduced subsidies on capital, interest, and infrastructure as well as heavy subsidies on land, water supply and natural resources. The rates of subsidies were larger for larger investments. For mega industries, there was no fixed rate and each case was assessed separately. For example, Tata Nano got a total of Rs 30,000 crores subsidies (like Suzuki, Hyundai etc). Land was acquired from common grazing land, denitrified protected areas, and national parks and from irrigated fertile lands.

Unlike the Gujarat model which followed the 'race to the bottom approach' to lure corporates, Bengal followed a completely different, 'beauty contest approach' to attract investment by making the state more beautiful and attractive. Instead of offering hefty subsidies, Bengal preferred to construct basic infrastructure in the rural sector, allocated more funds for schools, healthcare, sports, micro-entrepreneurs, traditional craftsmen, and artists, and introduced a plethora of welfare schemes for marginalised people and women. A few flagship schemes are Sabuj Sathi, Kanyashree, Swastha Swathi, Lakhir Bhandar, Student's credit card etc. In brief, the Bengal model of development is characterised by its inclusiveness, the dominance of micro-small and medium enterprises (MSME), rural and women-centric programs, decentralised governance, and reliance on knowledge and skill-based karigar economy.

In 2017, West Bengal had the highest number of MSMEs in the country with 52,69,814 units. Out of these total numbers, around 95 per cent were micro-enterprises. Bengal accounted for 11.62 per cent of micro, small and medium enterprises, the most among the top 10 states of the country. Nearly 1.1 crore (11 million) people are employed in the MSME sector of West Bengal. Since her first year in power, Mamata Banerjee has remained focused on rural development. State Plan Expenditure in Agriculture & Allied Services observed growth of about six times within a span of nine years. It grew from Rs 3,029.39 crore in 2010-11 to Rs 18,603 crore in 2019-20. Due to this focussed approach, food grains production in Bengal had increased to 198.65 LMT in 2019-20 compared to 148.1 LMT in 2010-11. West Bengal sustains its leadership in rice production in India. Total rice production has increased to 165.03 LMT in 2019-20 from 133.9 LMT in 2010-11.

The most significant feature of the Bengal model of development is its women-centric development philosophy. Women play a significant role in Bengal culture. Decentralised governance is another important feature of the Bengal model of development. The latest initiative 'Duare Sarkar and Paray Samadhan' (government on the doorstep and solution in the locality) has revolutionised the concept of governance and brought it literally to the grass-root level.

The other most important feature of the Bengal model is its dependence on local and intermediate technology

The Bengal government has followed the 'Trickle up' not 'trickle down' approach for poverty reduction, social equity and inclusive development. The trickle-down approach, as followed by most of the industrial states of India, has ended up in jobless growth. But Bengal, which had 1.85 crore people living below the poverty line in 2012, has uplifted 35 lakh people to reduce the below poverty line population to five per cent in 2020, from 20 per cent in 2011.

Consequences

It is too early to quantify and assess the outcome of the Bengal model as it is still in the early phase of implementation. Socioeconomic changes take time to be visible. But few early indications clearly indicate changes for the better. Here are a few examples:

While Gujarat is the 5th largest contributor to India's GDP, Bengal is the 6th largest contributor. A preliminary study by this author (2020) suggested that instead of GSDP if one considers the State's Composite Productivity Index (SCPI), which is the average of the (i) the ratio between the state's GSDP share and land share (Effective Land Utilisation Score — ELUS) and (ii) ratio between state's GSDP share and population share (Human Skill Utilisation Score — HSUS), the ranking of the states changes. For example, Bengal with an SCPI score (based on 2017-18 GSDP) of 1.47 ranks 3rd compared to its 6th rank in terms of GSDP share. In 2020-21 when India's GDP as a whole shrunk by nearly eight per cent, Bengal's GSDP has grown even during the worst pandemic. Bengal's share in Nation's GDP has increased to 5.59 per cent from 5.85 per cent three years ago. Compared to this Gujarat GSDP eroded by over Rs two lakh crores in 2020-21.

On the Human Development Index, the HDI scores of Gujarat and Bengal are not substantially different. In 2019, their respective HDI were 0.672 and 0.641 respectively. In 2009, the corresponding figures were 0.596 and 0.562. During one decade the gap has been marginally reduced. With the introduction of Swastha Swathi (universal free medical service) for all and Lakhir Bhandar scheme (direct monthly cash transfer to the senior-most woman of each family) HDI score of Bengal is bound to increase in the coming years.

In West Bengal, 78.9 per cent of the households have bicycles, the highest in the country, as per the National Family Health Survey (NFHS-5). The national average is 50.4 per cent. Till May 11, 2022, 1,03,97,444 students have received bicycles in West Bengal under the 'Sabuj Sathi' scheme.

According to the 9th edition of India Skills Report (ISR) 2022, Bengal ranks 4th in terms of high employability score of 63.8 per cent. The other top rankers are: Maharashtra (1st), Uttar Pradesh (2nd), Kerala (3rd) and Karnataka. (5th).

Recently, The SKOCH Group has released the SKOCH Governance Report Card for 2021, ranking the states according to their performance in various projects at the state, district and municipal levels. Andhra Pradesh bagged the number one spot for the second consecutive year, followed by West Bengal, Odisha, Gujarat and Maharashtra.

Conclusion

It is apparent that despite various political and financial challenges, during the last decade, Bengal has improved on almost all socio-economic indicators of development. Its debt-GSDP ratio is also under control at around 35 per cent, lower than over 40 per cent a decade ago. The state is on the verge of 'take off'. However, everything now depends on how Mamata Banerjee handles her political opponents and unruly party cadres. This third term of her government is very critical for the future of the Bengal model she has created.

Views expressed are personal