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ECONOMIC REVIEW
      WEST BENGAL
Project Report submitted as part of EEP course
                  (Term2)




                    12/16/2012
                                                Submitted by

                                       Group 10 Section D
                                          Arpit Jain (12P189)

                                 Girish Chandra Joshi(12P199)

                                     Kumar Abhinav(12P209)

                                       VarunChopra(12P219)

                                   SantoshGarbham(12P229)

                                            VikashV(12P239)
ECONOMIC REVIEW WEST BENGAL                            2



                            Acknowledgement
We would like to express our gratitude to all those who made it possible for us to conduct this
analysis.

We would especially like to thank Prof. Sunil Ashra for providing us with an opportunity to work on
this topic thereby helping us gain valuable insights about the economy of West Bengal, as well as for
providing us guidance and support with respect to our project.

We are also grateful to our college for providing us with the infrastructure which served to be a
useful aid and would like to thank the library staff for rendering significant cooperation towards the
same.

We would also like to thank our friends who helped us with suggestions and encouragement
throughout our course of analysis




Group 10 Section D                                                                                Page 2
ECONOMIC REVIEW WEST BENGAL                            3



Contents
   1. Growth performance of West Bengal………………………………..5



   2. Inflation………………………………..………………………………..…….…23



   3. Sector-wise contribution to GSDP…….…………………..…………25



   4. Sector wise contribution to Employment.……………….………34



   5. Debt situation in West Bengal………………….………………………38



   6. Fiscal Deficit.......................................................................40



   7. Conclusion………………………………………………….……………………41



   8. References………………………………………………….……………………42




Group 10 Section D                                                                              Page 3
ECONOMIC REVIEW WEST BENGAL     4




Group 10 Section D                                 Page 4
ECONOMIC REVIEW WEST BENGAL                              5



ECONOMIC REVIEW OF WEST BENGAL
This report is a comprehensive study of various macroeconomic parameters of West Bengal state. It
analyzes data qualitatively and quantitatively since 1970s in various parameters like GSDP, inflation,
sector-wise distribution of GSDP, employment, analysis of various sectors and the financials of the
state.


1. Growth performance of West Bengal
1.1 Current Position:
West Bengal is the fifth largest state in terms of GSDP as a percentage of GDP after Maharashtra,
Uttar Pradesh, Tamil Nadu and Andhra Pradesh. It is the third largest contributor in agricultural
sector of real GDP. In services sector also, it’s fifth largest contributor to GDP. Area wise it ranks 12th.
But it’s ranked fourth in terms of population. As a result despite its spectacular contribution, per
capita GDP is not high. It’s a densely populated state with rich natural resources. As a result, the
primary sector output is always on a high in West Bengal. A comparative analysis with some major
states is shown in graphs below.

The data is taken from Table 1.1


                              Real GSDP (in absolute values)
       West Bengal                                33,35,831.80
      Uttar Pradesh                                      42,00,165.10
        Tamil Nadu                                       41,65,494.10
          Rajasthan                      21,54,535.80
       Maharashtra                                                                        80,50,313.20
    Madhya Pradesh                      20,29,708.70
              Kerala                    20,84,681.90
         Karnataka                             29,16,614.80
    Andhra Pradesh                                      40,76,110.00
                       0.00      20,00,000.00      40,00,000.00     60,00,000.00   80,00,000.00

                                                GSDP( Rs.million)




Group 10 Section D                                                                                  Page 5
ECONOMIC REVIEW WEST BENGAL                                         6



                           Real GSDP (%ge contribution)
      West Bengal                                       6.41
     Uttar Pradesh                                               8.07
       Tamil Nadu                                                8.01
         Rajasthan                         4.14
      Maharashtra                                                                                   15.47
   Madhya Pradesh                         3.90
             Kerala                       4.01
        Karnataka                                 5.61
   Andhra Pradesh                                              7.83
                      0.00     2.00   4.00       6.00      8.00       10.00     12.00    14.00   16.00      18.00

                                             as a %ge of Real GDP



                                  GDP per capita (real)
              India                                                           46,555
      West Bengal                                                 37,070
     Uttar Pradesh                            20,708
       Tamil Nadu                                                                          61,531
         Rajasthan                                        31,468
      Maharashtra                                                                                    70,885
   Madhya Pradesh                                       27,850
             Kerala                                                                       60,063
        Karnataka                                                               48,789
   Andhra Pradesh                                                              47,848
                       0      10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

                                               Per Capita GSDP


It’s compared in nominal terms in the graphs below.


                                             GSDP Nominal
      West Bengal                                       54,15,855.60
                                                                68,78,362.80
       Tamil Nadu                                            63,90,246.00
                                               36,83,195.20
      Maharashtra                                                                                           1,24,84,528.00
                                           31,53,866.60
            Kerala                          32,66,928.90
                                                   45,89,027.40
   Andhra Pradesh                                             67,57,980.00
                     0.00    20,00,000.00
                                        40,00,000.00
                                                   60,00,000.00
                                                              80,00,000.00
                                                                        1,00,00,000.00
                                                                                   1,20,00,000.00
                                                                                              1,40,00,000.00

                                                        in Rs.million


Group 10 Section D                                                                                                  Page 6
ECONOMIC REVIEW WEST BENGAL                                      7



                                       GSDP Nominal
       West Bengal                                          6.58
                                                                       8.35
        Tamil Nadu                                                  7.76
                                             4.47
      Maharashtra                                                                                           15.16
                                        3.83
            Kerala                       3.97
                                                    5.57
   Andhra Pradesh                                                        8.21
                     0.00    2.00    4.00         6.00            8.00          10.00      12.00   14.00    16.00

                                                as a %ge of GDP




1.2 Contribution to Agriculture, Industry and Service sectors:
The data below reveals that major contribution to Indian GDP from West Bengal comes from
agricultural sector. At next stands the tertiary or services sector. The manufacturing industry output
is very low compared to the GSDP output of this state in other sectors. The sources for this is data
are Table 1.1 and Table 1.2.


              Percentage Contribution to Nominal GDP in
                             Agriculture
      West Bengal                                                               9.13
     Uttar Pradesh                                                                                         14.86
       Tamil Nadu                                     5.82
         Rajasthan                                                 7.48
      Maharashtra                                                                9.38
   Madhya Pradesh                                          6.15
             Kerala                  3.22
        Karnataka                                5.17
   Andhra Pradesh                                                                       10.35
                      0.00   2.00     4.00          6.00          8.00          10.00      12.00   14.00    16.00

                                       As a %ge of GDP agriculture




Group 10 Section D                                                                                          Page 7
ECONOMIC REVIEW WEST BENGAL                                         8



              Percentage Contribution to Nominal GDP in
                               Industry
      West Bengal                             4.59
     Uttar Pradesh                                          7.00
       Tamil Nadu                                                    8.84
         Rajasthan                            4.84
      Maharashtra                                                                                               17.60
   Madhya Pradesh                         4.16
             Kerala                   3.20
        Karnataka                                    5.79
   Andhra Pradesh                                                   8.56
                      0.00   2.00     4.00      6.00        8.00      10.00    12.00        14.00    16.00   18.00      20.00

                                               As a %ge of GDP industry



              Percentage Contribution to Nominal GDP in
                               Services
      West Bengal                                             6.76
     Uttar Pradesh                                               7.38
       Tamil Nadu                                                   7.95
         Rajasthan                       3.54
      Maharashtra                                                                                             15.41
   Madhya Pradesh                      3.15
             Kerala                             4.54
        Karnataka                                      5.57
   Andhra Pradesh                                                  7.53
                      0.00   2.00      4.00          6.00       8.00        10.00      12.00        14.00    16.00      18.00

                                                As a %ge of GDP services



                             Sectoral Contribution to GDP
      West Bengal                      9.13                                  4.59                        6.76
     Uttar Pradesh                       14.86                                       7.00                   7.38
       Tamil Nadu              5.82                                8.84                                 7.95
         Rajasthan                      7.48                                        4.84                      3.54
      Maharashtra            9.38                             17.60                                   15.41
   Madhya Pradesh                      6.15                                         4.16                     3.15
             Kerala             3.22                           3.20                                  4.54
        Karnataka                5.17                              5.79                                  5.57
   Andhra Pradesh                   10.35                                    8.56                          7.53
                      0%     10%      20%       30%         40%        50%      60%         70%       80%     90%       100%

                             GSDP agriculture           GSDP industry           GSDP Services



Group 10 Section D                                                                                                    Page 8
ECONOMIC REVIEW WEST BENGAL                           9


1.3 Growth Performance in 2011-12:
The growth performance of West Bengal has outperformed India’s growth in agricultural sector. The
agricultural sector saw a growth of 19.95% (nominal) while India’s average was at around 9.45%. But
in real terms, we didn’t see so much of growth in this sector. That can be attributed to high food
inflation in the country. But still as per RBI Economic review for 2011-12, West Bengal, Bihar and
Jharkhand registered significant increase in yield, production and cultivated area. Bengal is the
largest producer of rice in the country. Though there is spectacular growth in agriculture, the growth
in other sectors was below average. A look at table below reveals that. The complete data can be
found in the annexure in Tables 1.3 and 1.4.

Growth in SDP
At current prices : India : 2011-12 : % change per annum
                    GSDP      NSDP     Per capita Per capita GSDP        GSDP     GSDP services
                                       GSDP         NSDP     agriculture industry
West Bengal          15.87 15.92 14,80              14,86         19.95     14.68         15.04
India                15.02 15.06 13,86                              9.45    12.02           17.6


Growth in SDP
At constant prices : India : 2011-12 : % change per annum
                   GSDP NSDP Per capita Per capita GSDP                  GSDP     GSDP
                                       GSDP         NSDP  agriculture    industry services
 West Bengal          6.55      6.66 5,57           5,67             3.6     3.71         8.37
India                 6.48      6.48 5,43                           3.05     3.38         8.91




1.4 Historic Growth Performance of West Bengal:
Methodology: Data is available with base years at 1970-80, 1980-81, 1993-94 and 2004-05.
Converting from one base to another base is not a straight methodology. This is so because when
data is converted, the individual components would vary drastically if only composite figures are
taken. Similarly if individual components are converted individually, the composite values change.
Also, long term doesn’t reflect the performance effectively. So the methodology followed here is as
follows:
     1. Series wise absolute values are taken and growth rates are analysed for real GSDP
     2. As the values of GSDP are not available in 1970 series, NSDP values are analyzed
     3. As the current values can be easily converted, the long term evolution is analyzed on the
         basis of current values of GSDP.
     4. As growth percentage remains constant irrespective of bases, real GDP growth rate is also
         analysed for long run




Group 10 Section D                                                                            Page 9
ECONOMIC REVIEW WEST BENGAL                                                                            10


1.4.1 Growth Performance (1970 series):
The following graph shows the growth rate for the data available in 1970-71 series for NSDP. (Refer
Tables 1.5)




                                        1970-71 series NSDP
 6,00,000.00
 5,00,000.00
 4,00,000.00
 3,00,000.00
 2,00,000.00
 1,00,000.00
          0.00
                 1970-71
                            1971-72
                                      1972-73
                                                1973-74
                                                          1974-75
                                                                    1975-76
                                                                              1976-77
                                                                                        1977-78
                                                                                                  1978-79
                                                                                                            1979-80
                                                                                                                      1980-81
                                                                                                                                1981-82
                                                                                                                                          1982-83
                                                                                                                                                    1983-84
                                                                                                                                                              1984-85
                                                                                                                                                                        1985-86
                                                                                                                                                                                  1986-87
                                                                                                                                                                                            1987-88
           NSDP in Rs.lakh                                NSDP                          Agriculture                                  Industry                             Services




                                        1970-71 series NSDP
  40.00
  30.00
  20.00
  10.00
   0.00
 -10.00
 -20.00

                           NSDP Y-o-Y Growth                                                             NSDP Y-o-Y Growth
                           Agriculture Y-o-Y Growth                                                      Industry Y-o-Y Growth
                           Services Y-o-Y Growth


The growth rate of real NSDP is highly fluctuating during the year 1980 and 1983. From the data on
the net state domestic product andits components, it would appear that NSDP growth ratespicked
up in the 1980s, the main contributor to thatacceleration being agriculture.As pointed by planning
commission report of 2010 on West Bengal, many analysts havefound, the land reforms carried out
by the Government of West Bengal, combined with the operationalization of theelected Panchayati
Raj Institutions provided bothresources and incentives to the small and marginalpeasants and
thereby helped raise the rates of agriculturalgrowth to a historic high.



Group 10 Section D                                                                                                                                                                                    Page 10
ECONOMIC REVIEW WEST BENGAL                    11


Regression analysis for NSDP across three sectors would reveal how economy was heavily driven by
agriculture in those days and that also shows why West Bengal was a major state due to strength of
its natural resources then. So, primarily it can be seen that the state was agrarian economy during
1970s.


Dependent Variable: GROWTH
Method: Least Squares
Date: 12/15/12 Time: 13:42
Sample (adjusted): 1971 1987
Included observations: 17 after adjustments

          Variable       Coefficient       Std. Error     t-Statistic       Prob.

           AGRI           0.404200         0.008469       47.72795          0.0000
           INDU           0.285490         0.021646       13.18885          0.0000
           SERV           0.292710         0.024128       12.13174          0.0000

R-squared                 0.997641        Mean dependent var             3.522371
Adjusted R-squared        0.997304        S.D. dependent var             5.639742
S.E. of regression        0.292844        Akaike info criterion          0.540428
Sum squared resid         1.200603        Schwarz criterion              0.687466
Log likelihood           -1.593642        Durbin-Watson stat             1.788920




1.4.2 Growth Performance (1980-81 series):
The constant GSDP for real values is analyzed in the graphs below. (Refer Table 1.6)


                        GSDP 1980-81 series
 30,000

 25,000

 20,000

 15,000

 10,000

  5,000

      0




            GSDP       GSDP agriculture         GSDP industry           GSDP services




Group 10 Section D                                                                        Page 11
ECONOMIC REVIEW WEST BENGAL                        12



                           GSDP Growth 1980-81 series
  30.00
  25.00
  20.00
  15.00
  10.00
   5.00
   0.00
  -5.00
 -10.00
 -15.00

                            GSDP Y-o-Y Growth           Agriculture Y-o-Y growth
                            Industry Y-o-Y Growth       Services Y-o-Y Growth



Dependent Variable: GSDPGE
Method: Least Squares
Date: 12/15/12 Time: 17:12
Sample (adjusted): 1981 1997
Included observations: 17 after adjustments

          Variable       Coefficient    Std. Error     t-Statistic     Prob.

      GSDPAGE             0.289911       0.008816      32.88348        0.0000
      GSDPIGE             0.310889       0.028730      10.82099        0.0000
      GSDPSGE             0.384527       0.020359      18.88776        0.0000

R-squared                 0.992884     Mean dependent var            5.366823
Adjusted R-squared        0.991867     S.D. dependent var            2.943956
S.E. of regression        0.265489     Akaike info criterion         0.344300
Sum squared resid         0.986784     Schwarz criterion             0.491338
Log likelihood            0.073447     Durbin-Watson stat            1.640075


Here it can be seen that agriculture is predominant and 1981-82 was the golden year for West
Bengal. This is true but as 1990 approaches we can see a gradual shift increase the services sector of
the state. The transportation services are a major contributor in this state.

In the above graph we see an interesting situation. This is stage when West Bengal gradually
transformed from being an agrarian state to a service sector dominated state. If we look at 1996-
97, towards the end of the graph, the state has a healthy services sector growing at a rate of 10.46%
whereas agriculture sector was growing at a dismal 1.87%. Nonetheless the state’s primary output
has more than doubled in two decades cumulatively.



Group 10 Section D                                                                           Page 12
ECONOMIC REVIEW WEST BENGAL                        13


There exists a problem with manufacturing sector. The state has a good manufacturing sector during
1960s and it remained stagnant since. It again started growing mid 1990s. Strong trade unionism in
West Bengal is often allegedas a major cause for industrial slowdown in the state.Labour militancy
reached a peak in the late 1960s andcontinued for several years thereafter, particularly in
WestBengal. But probably that militancy was an expression ofthe workers’ anger against the massive
labourdisplacement. The sharp fall of employment, especially inthe late 1960s, led to acute labour
agitations in WestBengal. Sometimes strikes were provoked or evenengineered by the management
of firms as an excuse fordeclaring lockouts.

When we compare the growth of the state with the country’s growth, we see that the economy
hasn’t performed at the rate at which the country is growing. But post 1990, we can see that West
Bengal’s growth rate has outperformed India’s growth rate. But in spite of a growing industry, the
contribution to GDP by West Bengal has declined over the two decades.



                                      GSDP vs GDP
 14.00
 12.00
 10.00
  8.00
  6.00
  4.00
  2.00
  0.00
  -2.00
  -4.00

                  GSDP Y-o-Y Growth        GDP Growth Rate         GSDP as %ge of GDP




Group 10 Section D                                                                       Page 13
ECONOMIC REVIEW WEST BENGAL                            14



                                   GSDP as a %ge of GDP
 8.60
 8.40
 8.20
 8.00
 7.80
 7.60
 7.40
 7.20
 7.00
 6.80
            1   2    3       4    5     6   7      8    9       10   11   12   13    14   15   16    17

                                                GSDP as %ge of GDP




1.4.3 Growth Performance(1993-94 series):
Refer Table 1.7 for data.


                          GSDP 1993-94 series
 1,20,000
 1,00,000
   80,000
   60,000
   40,000
   20,000
        0




            GSDP         GSDP Agriculture       GSDP Industry        GSDP Services




Group 10 Section D                                                                                  Page 14
ECONOMIC REVIEW WEST BENGAL                 15



                     GSDP Growth 1993-94 series
  20.00

  15.00

  10.00

   5.00

   0.00

  -5.00

 -10.00

                     GSDP Y-o-Y Growth              Agriculture Y-o-Y growth
                     Industry Y-o-Y Growth          Services Y-o-Y Growth



Dependent Variable: GSDPGE
Method: Least Squares
Date: 12/15/12 Time: 18:26
Sample (adjusted): 2 12
Included observations: 11 after adjustments

          Variable          Coefficient       Std. Error     t-Statistic       Prob.

      GSDPAGE                0.281882         0.022021       12.80086          0.0000
      GSDPIGE                0.180011         0.038815       4.637721          0.0017
      GSDPSGE                0.527229         0.023120       22.80377          0.0000

R-squared                    0.669082        Mean dependent var             7.066391
Adjusted R-squared           0.586353        S.D. dependent var             0.530530
S.E. of regression           0.341213        Akaike info criterion          0.914378
Sum squared resid            0.931408        Schwarz criterion              1.022895
Log likelihood              -2.029082        Durbin-Watson stat             2.571900




The regression analysis above reveals the fact that GSDP is now predominantly dependent on
services sector. Agriculture sectors coeff and the other got interchanged. The manufacturing sector
is declining towards early 2000. But there was a steep rise in services sector performance. The
contribution of the services sector to the WestBengal’s GDP has been increasing rapidly during the
post-reformperiod. Within this sector trade-related activitiesare growing faster in West Bengal. In
the countryside ofthe state, transport-related activities under own accountservice enterprises
accounted for the highest share. But inurban areas, ‘education’ accounts for the largest numberof
own account service enterprises.




Group 10 Section D                                                                        Page 15
ECONOMIC REVIEW WEST BENGAL                  16


The state outperformed the country’s growth rate and its contribution to GDP has increased over
the last decade.


                               GSDP vs GDP
 9.00
 8.00
 7.00
 6.00
 5.00
 4.00
 3.00
 2.00
 1.00
 0.00




                         GSDP Y-o-Y Growth       GDP growth



                         GSDP as %ge of GDP
 8.60
 8.40
 8.20
 8.00
 7.80
 7.60
 7.40
 7.20
 7.00
 6.80
 6.60
         1     2     3     4     5     6     7   8     9      10   11   12

                                 GSDP as %ge of GDP




Group 10 Section D                                                                     Page 16
ECONOMIC REVIEW WEST BENGAL                         17


1.4.4 Growth Performance (2003-04 series):
In recent years, West Bengal’s manufacturing and agricultural sector performance have come down
drastically. But its services sector still plays a major role. In fact this sector did well during the years
of recent global slump also. In the years before 2007-08, India was growing at a very fast pace. But
West Bengal was not able perform at that pace. This can be attributed to the government that is
there for 33 years in rule. As a result we can also see that the its overall contribution to GDP has
come down. Refer Table 1.8.


                             GSDP 2003-04 Series
 4,00,000
 3,50,000
 3,00,000
 2,50,000
 2,00,000
 1,50,000
 1,00,000
   50,000
          0
               2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

              GSDP          GSDP Agriculture       GSDP Industry       GSDP Services



                     GSDP Growth 2003-04 Series
 12.00
 10.00
   8.00
   6.00
   4.00
   2.00
   0.00
  -2.00       2004-05     2005-06   2006-07     2007-08   2008-09   2009-10     2010-11
  -4.00

                        GSDP Y-o-Y Growth            Agriculture Y-o-Y Growth
                        Industry Y-o-Y Growth        Services Y-o-Y growth



Dependent Variable: GSDPGE
Method: Least Squares
Date: 12/15/12 Time: 19:19
Sample (adjusted): 2 8
Included observations: 7 after adjustments



Group 10 Section D                                                                                 Page 17
ECONOMIC REVIEW WEST BENGAL               18


         Variable        Coefficient      Std. Error      t-Statistic      Prob.

         GSDPAGE          0.203125        0.030212        6.723275         0.0025
         GSDPIGE          0.217931        0.026177        8.325392         0.0011
         GSDPSGE          0.574328        0.013253        43.33435         0.0000

R-squared                 0.981310       Mean dependent var              6.937639
Adjusted R-squared        0.971965       S.D. dependent var              1.111892
S.E. of regression        0.186171       Akaike info criterion          -0.226777
Sum squared resid         0.138638       Schwarz criterion              -0.249958
Log likelihood            3.793720       Durbin-Watson stat              0.428481




                        GSDP 2003-04 Series
 12.00

 10.00

  8.00

  6.00

  4.00

  2.00

  0.00
           2004-05   2005-06   2006-07    2007-08    2008-09     2009-10   2010-11

                      GSDP Y-o-Y Growth             GDP Y-o-Y Growth



                      GSDP as a %ge of GDP
 7.20

 7.00

 6.80

 6.60

 6.40

 6.20

 6.00
          2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

                                  GSDP as %ge of GDP




Group 10 Section D                                                                   Page 18
ECONOMIC REVIEW WEST BENGAL                       19


1.4.5 Growth Performance Long Term:
In WestBengal, the overall economic growth rate improved in the1980s, and accelerated further in
the 1990s compared tothe performance in the 1970s. The rate of growth of thestate economy after
the 1980s (1991-2006) had beennearly double the rate prevailed in the 1970s.

During late 1970s and early 1980s West Bengal rate of growth rates were rapid though they were in
accordance with country’s growth rate. The rapidity shows greater contribution to GDP and heavy
dependence on primary sector. This table shows how WB growth rate has varied on a compounded
on 5-yearly basis. It shows West Bengal was doing well in during periods 1970-75, 1980-85, 1990-
2000 and again 2005-2012. Refer Table 1.9


             CAGR          GSDP WB       GDP

             1970-1975            3.14         2.82

             1975-1980            2.45         2.86

             1980-1985            4.03         3.75

             1985-1990            3.82         4.37

             1990-1995            5.03         4.31

             1995-2000            6.96         4.54

             2000-2005            5.69         5.64

             2005-2010            7.13         6.51

             2010-2012            6.89          4.9




The economy performed at a much better pace during early 1990s. Of late it can be seen that the
economy was slower that India’s growth pace during 2004-08 period.




Group 10 Section D                                                                       Page 19
ECONOMIC REVIEW WEST BENGAL                         20



                                    GDP vs GSDP WB
 14.00
 12.00
 10.00
  8.00
  6.00
  4.00
  2.00
  0.00
  -2.00
  -4.00
  -6.00
  -8.00

                                  GDP growth rate        WB GSDP growth




West Bengal performed better in agriculture since theearly 1980s. According to a planning
commission report, the state started to lose its prominence inmanufacturing growth since the mid-
1960s. But it can be seen that the rate ofmanufacturing growth increased after the mid-1990s.



In WestBengal, the overall economic growth rate improved in the1980s, and accelerated further in
the 1990s compared tothe performance in the 1970s. The rate of growth of thestate economy after
the 1980s (1991-2006) had beennearly double the rate prevailed in the 1970s. It went up from 3% to
almost 6%.

The graph below shows how sector-wise contribution to GSDP varied over time. It is clear that
agriculture sector prominence has declined. However, it’s disheartening that manufacturing sector is
also now healthy given its natural resources. The major contributor is Services sector clearly.

Agriculture in West Bengal marked the end of‘impasse’ in the 1980s.

Manufacturing in West Bengalgrew at around the rates of 2 per cent and 3 per cent,respectively
during the 1970s and 1980s and the rateimproved to 6.6 per cent during 1991-2006. The
growthperformance of this sector turned better after the mid-1980s compared to the period of state
control.

Industrial growth in West Bengal, as in otherconstituent states in India, has largely been determined
bythe stance of economic policy adopted by the Centralgovernment, the allocation of central public
investment inindustry and infrastructure, the allocation of credit bybanks and term lending
institutions under the control ofthe Central government and the general attitude of largebusiness
houses and multinational corporations towardsinvestment in that particular state.


Group 10 Section D                                                                          Page 20
ECONOMIC REVIEW WEST BENGAL                      21


The slow growth of manufacturing inthe eastern part of the country, particularly in WestBengal, was
a damaging consequence of the license permitraj. The policy ofequalising the prices of coal and steel
led to the loss of comparative advantage of resource-rich states such asWest Bengal, Bihar, Orissa
and Madhya Pradesh as reported by Planning Commission survey.



               Percentage Sectoral Contribution to GSDP
  70


  60


  50


  40


  30


  20


  10


   0




                                 Agriculture      Industry       Services




The growth of the services sector isa subjectof much discussion. Income from the services sector has
been growingat a faster rate since the early 1990s. A careful observation at component break-up of
GSDP shows that the higher growthof services income is largely due to the rapid growthincome from
trade-related activities followed by bankingand financial services.

The graph below reveals that West Bengal is not performing at the pace of its other major states in
recent years. Its GDP contribution has come down over the years from around 8% to little more than
6% of late.




Group 10 Section D                                                                          Page 21
ECONOMIC REVIEW WEST BENGAL                       22



                         GSDP %ge of GDP
 9.00
 8.00
 7.00
 6.00
 5.00
 4.00
 3.00
 2.00
 1.00
 0.00




                                GSDP as a %ge of GDP


Note that Tables 1.5 to 1.9 are computed from Tables S7, S9, S8 and S11.

Tables S1 – S14 give complete data about West Bengal and India in terms of GSDP(Constant,
Current), NSDP(Constant, Current), GDP(Constant, Current) NDP(Constant, Current) respectively.




Group 10 Section D                                                                        Page 22
ECONOMIC REVIEW WEST BENGAL                             23



    2. INFLATION:
Since CPI WPI is not available for every year, the deflator method for inflation was done for both
West Bengal and India. The graph below shows that the price levels are consistent with the country’s
price levels. They are relatively on a little higher side historically. A clearer picture can be revealed by
year on year inflation as shown in the next graph.

Refer table 2.1for data. It is computed from S14 and S7-S12.

S15, S16, S17 give data for CPI, WPI(India) and CPI WB.




                                GSDP vs GDP Deflator
 180
 160
 140
 120
 100
   80
   60
   40
   20
    0
        1980-81
        1981-82
        1982-83
        1983-84
        1984-85
        1985-86
        1986-87
        1987-88
        1988-89
        1989-90
        1990-91
        1991-92
        1992-93
        1993-94
        1994-95
        1995-96
        1996-97
        1997-98
        1998-99
        1999-00
        2000-01
        2001-02
        2002-03
        2003-04
        2004-05
        2005-06
        2006-07
        2007-08
        2008-09
        2009-10
        2010-11
        2011-12



                                     GSDP Deflator      GDP Deflator




Group 10 Section D                                                                                 Page 23
ECONOMIC REVIEW WEST BENGAL                           24



                                WB vs India Inflation
 16
 14
 12
 10
  8
  6
  4
  2
  0
       1980-81
       1981-82
       1982-83
       1983-84
       1984-85
       1985-86
       1986-87
       1987-88
       1988-89
       1989-90
       1990-91
       1991-92
       1992-93
       1993-94
       1994-95
       1995-96
       1996-97
       1997-98
       1998-99
       1999-00
       2000-01
       2001-02
       2002-03
       2003-04
       2004-05
       2005-06
       2006-07
       2007-08
       2008-09
       2009-10
       2010-11
  -2


                                    WB Inflation     India Inflation


This shows that historically WB is more than that of the country. However it got stabilized in early
2000s but still it is often more than the country’s average.




Group 10 Section D                                                                             Page 24
ECONOMIC REVIEW WEST BENGAL                           25




    3. Sector-wise Contribution to GSDP
3.1 Agriculture Sector
The Agriculture Sector consists of the following

                       Agriculture
                       Forestry and Logging
                       Fishing




In West Bengal, productivity growth in agriculture, particularly in food grain production, contributed
significantly to overall economic growth of the state since the early 1980s.

There has been a growing concern in recent years about the deceleration of agricultural output in
most of the agricultural states in India since the early 1990s. The positive impulse of the fast growing
yield rate to output growth of the major crops as observed in the 1980s have been petered out in
the phase of neo-liberal reforms in India. In the context of agricultural growth in India, a significant

Group 10 Section D                                                                             Page 25
ECONOMIC REVIEW WEST BENGAL                            26


fall in public sector capital formation in agriculture was a major constraint on productivity growth in
agriculture. Declining trend in the supply of institutional credit in the post-reform period in India has
also been responsible for near stagnation in yield levels.

West Bengal which took up the implementation of Establishment of an Agency for Reporting of
Agricultural Statistics (EARAS) scheme in 1980-81 on a pilot basis has been able to cover a sample
size of about 14 percent only. Efforts are underway to increase the sample size adequately in the
current year. Kerala which had modified the sampling design with effect from 1987-88 have also
been advised to follow the stipulated pattern.




With reference to Table 3.1, Total food grain production in West Bengal was roughly 16 million
tonnes contributing 7.4 per cent of the country’s total food grain output and ranked 4 th among the
major states in India in 2006-07. With rice output of 14.51 million tonnes in 2006-07, the state led all
the major states in production of rice and contributed nearly 16 per cent of the country’s total rice
output. The share of the state in food grains production has been increasing steadily during the past
two and a half decades.




Group 10 Section D                                                                              Page 26
ECONOMIC REVIEW WEST BENGAL                         27




In line with the changing trend across the country, West Bengal has experienced a structural shift in
output front as the share of agriculture in the State’s GDP is recorded to have come down from
about 33 % in 1999-2000 to about 25 percent in 2007-08. However, increasing trends of real wages
in the latter half of the 1980s were not sustained in the subsequent years. The decline in wage rate
has been observed in the first half of the 1990s. The latter half of the decade started with recovery
of the wage rate but again declined in the beginning of the 2000.


3.2 Industrial Sector
The Industry Sector consists of the following

                       Mining and Quarrying
                       Manufacturing
                       Construction
                       Registered Services
                       Unregistered Services




Group 10 Section D                                                                          Page 27
ECONOMIC REVIEW WEST BENGAL                         28


West Bengal, over the past three decades. In India,different regions have been growing at uneven
rates. Theregional disparities in growth have been highly associatedwith unequal incidence of
industrial development.




Capital intensity in registered manufacturing increased during 1981-2002, but it is much lower in the
factory sector in West Bengal. Labour productivity measured by value-added per employee in this
sector in the state also increased, but emolument per employee remained at the same level during
this period as surveyed by Planning Commission.




Group 10 Section D                                                                          Page 28
ECONOMIC REVIEW WEST BENGAL                        29




With reference to Table 3.2, In West Bengal, the manufacturing sector has not performed as an
engine of growth over the past three decades in a causal sense. The rate of growth of labour
demand is given by the excess of the rate of growth of output over the rate of growth of labour
productivity. Output growth in the manufacturing sector has played an insignificant role in
promoting employment growth in the state. Also there were several criticisms of the country's
industrial policy framework, mostly on the regime of licensing, for regional diversities in growth.




Group 10 Section D                                                                        Page 29
ECONOMIC REVIEW WEST BENGAL                          30




Many studies have documented a mismatch between output growth and employment growth in
Indian manufacturing in the 1980s, leading to virtually jobless growth. The situation has been no
different in West Bengal. Industrial output grew up consistently with some fluctuations, but the level
of employment in registered industries declined in the 1980s followed by a stagnating or rising
phase in the earlier decade.




Group 10 Section D                                                                           Page 30
ECONOMIC REVIEW WEST BENGAL                           31


3.3 Service Sector
The Industry Sector consists of the following

                       Electricity,Gas and Water supply
                       Transport,Storage and Communication
                       Railways
                       Transport by other means
                       Communication
                       Trade,Hotels and Restaurants
                       Banking and Insurance
                       Real Estate,Ownership of Dwellings and Business Services
                       Public Administration
                       Other Services




In West Bengal, the responsiveness of the growth of the services activities to the growth of the
commodity sector (agriculture and allied activities and manufacturing) and to the growth of real
income of the rest of the economy is found to be more than proportional in such sub-sectors as
trade, banking and transport. Growth in sectors like real estate and public administration was less
than proportional to the growth in the rest of the state’s economy.

As per capita income rises, demand shifts away first from the agricultural commodities and, then,
even from industrial goods; more and more demand is created for services such as education,
health, tourism, etc. Thus, an increasing share of national/state income originates in the services. If
the labour productivity remained unchanged, the services sector also generates relatively more
employment.

Group 10 Section D                                                                            Page 31
ECONOMIC REVIEW WEST BENGAL                         32




With reference to Table 3.3, the size of the tertiary sector—comprising transport and
communication, trade, hotels and restaurant, banking and insurance, real estate and ownership of
dwelling and business services, public administration, other service in terms of share of NSDP at
constant prices, has been larger than either the primary or the secondary sector in the state.


In the urban, ‘education’ accounts for the largest number of own account service enterprises. This
was followed by ‘other transport and related activities’. Of the urban services establishments, the
largest is ‘restaurants’, in numbers. In terms of employment, however, ‘education’ is the leading
sub-sector within the rural ‘own account service enterprises’, this was followed by ‘other community
social and personal services’. The highest share of employment in rural service establishments was
that of ‘mechanised’ road transport’.




Group 10 Section D                                                                         Page 32
ECONOMIC REVIEW WEST BENGAL                         33




All the above factors collected from various reports show how the contribution of services sector to
GSDP has increased over years.




Group 10 Section D                                                                         Page 33
ECONOMIC REVIEW WEST BENGAL                              34



    4. Sector wise Contribution to
       Employment:
The fluctuation in employment or unemployment has tocome to terms with the periodic instability
of the growthprocess. The trend in employment, in fact, is the‘outcome’ of the changing
combinations of capital,technology and the labour market institutions. This is state is predominantly
a rural state with most of them dependent on agriculture. Of late, services started contributing
more. However, there is a steep decline in manufacturing sector. A comparative analysis between
1999 and 2002 shows this.



            Industry-wise Employment in Organised Sector in West Bengal
                                          (1990 and 2002)
                                                                                              (In lakh)
                                                              Public      Private           Total
Industry                                                    1990   2002 1990 2002         1990   2002
Agriculture and Allied                                        0.3    0.22   2.05   1.77    2.35     1.99
Mining and Quarrying                                         1.78    1.65                  1.78     1.65
Primary Sector                                               2.08    1.87   2.05   1.77    4.13     3.64
Manufacturing                                                2.82    1.81   5.14   3.89    7.96      5.7
Electricity & Gas                                            0.43     0.4   0.16   0.17    0.59     0.57
Construction                                                 0.54    0.61   0.04   0.04    0.58     0.65
Secondary Sector                                             3.79    2.82   5.34    4.1    9.13     6.92
Wholesale and Retail Trade/
Hotels and Restaurants                                       0.12    0.12   0.21   0.23    0.33     0.35
Transport, Storage and Communication                         3.58     3.3   0.08   0.06    3.66     3.36
Finance, Insurance & Real Estate                             0.95    1.02    0.2   0.17    1.15     1.19
Services                                                     6.33    7.26   1.02   1.14    7.35      8.4
Tertiary Sector                                             10.98    11.7   1.51    1.6   12.49     13.3
Total                                                       16.85   16.39   8.9    7.47   25.75    23.86


The growth is happening predominantly in services sector while the other two sectors declined with
time. A more detailed break-up of the employment is given in the annexure.




Group 10 Section D                                                                                Page 34
ECONOMIC REVIEW WEST BENGAL                           35


This is the growth rate between 2000 and 2005 and it is very clear that the tertiary sector in rural
areas is growing at a rapid pace. The above table is taken from Economic Review 2009-10 of west
Bengal by state government.




It is seen from above table, that daily employment increased between 2002 and2008 in all major
industry groups like Rice, Tea, Printing and Allied, Rubber & RubberProducts, Chemical and Chemical
Products, Glass & Glass Products, Engineering, Electricity and for all industries as a whole. the

Group 10 Section D                                                                             Page 35
ECONOMIC REVIEW WEST BENGAL                        36


growth of the State Domestic Product atconstant prices from the tertiary sector has registered
significant growth in recent years.

The growth of employment in the tertiary sector has been quiteimpressive. The rapid growth of
employment in shops, commercial establishments,cinemas, theatres and other establishments of
public entertainment in the State conform tothis observation revealed from NSS data. The total daily
employment in theseestablishments increased to 7.82 lakh on 30th September, 2009 from 6.83 lakh
on 30thSeptember, 2007. This is evident from table below that in spite of the adverse effect
ofrecession the employment in these establishments increased considerably.




Data is taken from S18for the next two figures.




Group 10 Section D                                                                         Page 36
Axis Title                                                                                                    per 1000 persons




                                                                                                                                                                                                                                                      0%
                                                                                                                                                                                                                                                                                                                                                                                      0%




                                                                                                                                                                                                                                                    100%
                                                                                                                                                                                                                                                                                                                                                                                    100%




                                                                                                                                                                                                                                                     20%
                                                                                                                                                                                                                                                     30%
                                                                                                                                                                                                                                                     40%
                                                                                                                                                                                                                                                     50%
                                                                                                                                                                                                                                                     60%
                                                                                                                                                                                                                                                     70%
                                                                                                                                                                                                                                                     80%
                                                                                                                                                                                                                                                     90%
                                                                                                                                                                                                                                                                                                                                                                                     10%
                                                                                                                                                                                                                                                                                                                                                                                     20%
                                                                                                                                                                                                                                                                                                                                                                                     30%
                                                                                                                                                                                                                                                                                                                                                                                     50%
                                                                                                                                                                                                                                                                                                                                                                                     60%
                                                                                                                                                                                                                                                                                                                                                                                     70%
                                                                                                                                                                                                                                                                                                                                                                                     80%
                                                                                                                                                                                                                                                                                                                                                                                     90%




                                                                                                                                                                                                                                                     10%
                                                                                                                                                                                                                                                                                                                                                                                     40%
                                                                                                                                                                                                                          July 1987-June 1988                                                                                                             July 1987-June 1988
                                                                                                                                                                                                                         July 1989 -June 1990                                                                                                            July 1989 -June 1990




Group 10 Section D
                                                                                                                                                                                                                          July 1990-June 1991                                                                                                             July 1990-June 1991
                                                                                                                                                                                                                         July-December 1991                                                                                                              July-December 1991
                                                                                                                                                                                                                           January-December…                                                                                                               January-December…
                                                                                                                                                                                                                            January-June 1993                                                                                                               January-June 1993
                                                                                                                                                                                                                          July 1993-June 1994                                                                                                             July 1993-June 1994
                                                                                                                                                                                                                          July 1994-June 1995                                                                                                             July 1994-June 1995
                                                                                                                                                                                                                         July 1995 -June 1996                                                                                                            July 1995 -June 1996
                                                                                                                                                                                                                           January-December…                                                                                                               January-December…
                                                                                                                                                                                                                            January-June 1998                                                                                                               January-June 1998
                                                                                                                                                                                                                          July 1999-June 2000                                                                                                             July 1999-June 2000
                                                                                                                                                                                                                          July 2000-June 2001                                                                                                             July 2000-June 2001




                                                                                                                                                                                                                                                                                                                              India
                                                                                                                                                                                                                                                                                                                                                                                                                                                 India




                                                                                                                                                                                                                         July 2001 -June 2002                                                                                                            July 2001 -June 2002
                                                                                                                                                                                                                         July-December 2002                                                                                                              July-December 2002
                                                                                                                                                                                                                           January-December…                                                                                                               January-December…
                                                                                                                                                                                                                            January-June 2004                                                                                                               January-June 2004
                                                                                                                                                                                                                          July 2004-June 2005                                                                                                             July 2004-June 2005




                                                                                                          to improve manufacturing sector for a better economic development.
                                                                                                                                                                                                                          July 2005-June 2006                                                                                                             July 2005-June 2006
                                                                                                                                                                                                                          July 2007-June 2008                                                                                                             July 2007-June 2008
                                                                                                                                                                                                                          July 2009-June 2010                                                                                                             July 2009-June 2010




                     S19 gives recent distribution of employment across various sectors in West Bengal.
                                                                                                                                                                                                                                                                                                                                                                                                                                Sector wise employee distribution of Rural




                                                                                                                                                                                                                                                                                                            Sector wise employee distribution of Urban
                                                                                                                                                                                                                                                                                                                                                                                                                                                                             ECONOMIC REVIEW WEST BENGAL




                                                                                                                                                                                                                                                                             tertiary sector
                                                                                                                                                                                                                                                                                                                                                                                                              tertiary sector




                                                                                                                                                                                                                                         primary sector
                                                                                                                                                                                                                                                                                                                                                                         primary sector
                                                                                                                                                                                                                                                                                                                                                                                                                                                                               37




                                                                                                                                                                                                                                                          secondary sector
                                                                                                                                                                                                                                                                                                                                                                                          secondary sector




                                                                                                          rural areas also. As a result of its services sector, its economy is doing well. But there is a lot of scope
                                                                                                          change much in its share whereas in West Bengal the tertiary sector is growing at a rapid pace in




Page 37
                                                                                                          A sharp change in trend between west Bengal and India is the tertiary sector in rural India didn’t
ECONOMIC REVIEW WEST BENGAL                          38



    5. Debt Situation in West Bengal
The fiscal situation of West Bengal is characterized by the fact that it has the Debt/ GSDP ratio of
42.5 % which is the second highest amongst the non special category states in India. Another fact is
that West Bengal has own tax revenue(OTR)/ GSDP ratio of 4.1%, which is the lowest for any non
special category state. These are two reasons for the huge debt of West Bengal.

Problem of High Debt/GSDP ratio in West Bengal:




On analysis of the Debt/ GSDP Ratio of all the states from the above figure, we can conclude that the
Debt/ GSDP ratio of all the states have increased from 1997 onwards and started to decline from
2003-2004. But in West Bengal the ratio started to decline from 2005-2006. Moreover the Debt/
GSDP ratio was higher for West Bengal as compared to all the other states of India.

One of the main reason for the rise of Debt/ GSDP ratio of all the states can be attributed to the
features of the State Government Finances of India. One of the key features of the Federal
Government has been that the resources are mostly concentrated in the hands of Central
Government with the states having limited power to collect taxes and mobilise resources. In addition
to it all the development work is done by the state government which adds to the expenditure of the
State Government. This asymmetry in relations leads to the dependence of State Government on
the Central Government in order to carry out their expenditure responsibilities. Against this
backdrop, the following features of state government finances can be ascertained:

       Revenue Receipts:

        The revenue receipts of the states, as we know, consist of not only its own revenue receipts,
but also revenue transfer from the centre in the form of grants and shares in the central taxes. Since
the level of revenue transfers remains outside the purviewof the states' own economic policies, the
determination of total revenue receipts also becomes exogenous to the state government


Group 10 Section D                                                                           Page 38
ECONOMIC REVIEW WEST BENGAL                          39


        Interest Rate

        The interest rate is determined exogenously by the Central Government             depending
on the monetary policy of the country. In India it is determined by       RBI. For all the states the
RBI has constitutional power to determine both the         extent and the terms of borrowing from all
the resources.



During the liberalization of the economy the interest rate has a tendency to rise. If the rate of
increase of interest rate is more than the rate of increase of GSDP the debt/ GSDP ratio will increase
which happened with all the states in India from 1997 onwards.

The Debt/ GSDP ratio for West Bengal is higher than other states because of the fact that the
revenue receipts of WB is lower than the other states and the effective rate of interest is higher for
WB compared to other states. The effective rate of interest for WB is higher mainly because of the
composition of liabilities of WB having a higher share of NSSF loans. States have to compulsorily
borrow a fixed portion of NSSF funds that they collect. Since WB has a much higher proportion of

NSSF loans, it has to borrow more from this pool. The higher interest rate on these loans in turn
increases the interest burden of WB.




But if we analyze the relationship between Debt and GSDP of West Bengal, it is evident from the
above graph that their GSDP has increased at a higher rate as compared to the Debt.

Data is taken from table 5.1.




Group 10 Section D                                                                           Page 39
ECONOMIC REVIEW WEST BENGAL                            40




    6. FISCAL DEFICIT




 The Fiscal Deficit of West Bengal has steadily increased over the past 25 years. As evident in the
graph the fiscal deficit of West Bengal is above 8 % of the total fiscal deficit since 1999 till now which
is a major concern of the West Bengal Government.




Group 10 Section D                                                                               Page 40
ECONOMIC REVIEW WEST BENGAL                         41




    7.        CONCLUSION
The economy of West Bengal had a history of outpacing the India's growth rate and be a major
contributor to the country's GDP. A major shift from agriculture to services sector was observed
throughout this time period. But manufacturing was always stagnant. Though it ranks in top 5 states
in GSDP output, it doesn’t figure even in top 10 for per capita GSDP. This is because of its dense
population. But beyond population growth, proper resource utilization was not there in many
sectors. So, we would conclude that given the natural resources and human capital of West Bengal,
it has a prospect of growing at a faster rate with a proper policy to revive manufacturing sector and
consolidate other areas.




Group 10 Section D                                                                          Page 41
ECONOMIC REVIEW WEST BENGAL                   42




   8. REFERENCES
www.statesofindia.cmie.com
www.indiastat.com
Domestic Product of States of India by EPW Research Foundation
www.rbi.org
Economic Review 2009-10
West Bengal Human Development Report -Development and Planning Dept, Govt of WB
West Bengal Development Report - Planning Commision of India 2010
Transforming West Bengal by BibekDebroy and LaveeshBhandari




Group 10 Section D                                                                Page 42

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West Bengal Economic analysis

  • 1. ECONOMIC REVIEW WEST BENGAL Project Report submitted as part of EEP course (Term2) 12/16/2012 Submitted by Group 10 Section D Arpit Jain (12P189) Girish Chandra Joshi(12P199) Kumar Abhinav(12P209) VarunChopra(12P219) SantoshGarbham(12P229) VikashV(12P239)
  • 2. ECONOMIC REVIEW WEST BENGAL 2 Acknowledgement We would like to express our gratitude to all those who made it possible for us to conduct this analysis. We would especially like to thank Prof. Sunil Ashra for providing us with an opportunity to work on this topic thereby helping us gain valuable insights about the economy of West Bengal, as well as for providing us guidance and support with respect to our project. We are also grateful to our college for providing us with the infrastructure which served to be a useful aid and would like to thank the library staff for rendering significant cooperation towards the same. We would also like to thank our friends who helped us with suggestions and encouragement throughout our course of analysis Group 10 Section D Page 2
  • 3. ECONOMIC REVIEW WEST BENGAL 3 Contents 1. Growth performance of West Bengal………………………………..5 2. Inflation………………………………..………………………………..…….…23 3. Sector-wise contribution to GSDP…….…………………..…………25 4. Sector wise contribution to Employment.……………….………34 5. Debt situation in West Bengal………………….………………………38 6. Fiscal Deficit.......................................................................40 7. Conclusion………………………………………………….……………………41 8. References………………………………………………….……………………42 Group 10 Section D Page 3
  • 4. ECONOMIC REVIEW WEST BENGAL 4 Group 10 Section D Page 4
  • 5. ECONOMIC REVIEW WEST BENGAL 5 ECONOMIC REVIEW OF WEST BENGAL This report is a comprehensive study of various macroeconomic parameters of West Bengal state. It analyzes data qualitatively and quantitatively since 1970s in various parameters like GSDP, inflation, sector-wise distribution of GSDP, employment, analysis of various sectors and the financials of the state. 1. Growth performance of West Bengal 1.1 Current Position: West Bengal is the fifth largest state in terms of GSDP as a percentage of GDP after Maharashtra, Uttar Pradesh, Tamil Nadu and Andhra Pradesh. It is the third largest contributor in agricultural sector of real GDP. In services sector also, it’s fifth largest contributor to GDP. Area wise it ranks 12th. But it’s ranked fourth in terms of population. As a result despite its spectacular contribution, per capita GDP is not high. It’s a densely populated state with rich natural resources. As a result, the primary sector output is always on a high in West Bengal. A comparative analysis with some major states is shown in graphs below. The data is taken from Table 1.1 Real GSDP (in absolute values) West Bengal 33,35,831.80 Uttar Pradesh 42,00,165.10 Tamil Nadu 41,65,494.10 Rajasthan 21,54,535.80 Maharashtra 80,50,313.20 Madhya Pradesh 20,29,708.70 Kerala 20,84,681.90 Karnataka 29,16,614.80 Andhra Pradesh 40,76,110.00 0.00 20,00,000.00 40,00,000.00 60,00,000.00 80,00,000.00 GSDP( Rs.million) Group 10 Section D Page 5
  • 6. ECONOMIC REVIEW WEST BENGAL 6 Real GSDP (%ge contribution) West Bengal 6.41 Uttar Pradesh 8.07 Tamil Nadu 8.01 Rajasthan 4.14 Maharashtra 15.47 Madhya Pradesh 3.90 Kerala 4.01 Karnataka 5.61 Andhra Pradesh 7.83 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 as a %ge of Real GDP GDP per capita (real) India 46,555 West Bengal 37,070 Uttar Pradesh 20,708 Tamil Nadu 61,531 Rajasthan 31,468 Maharashtra 70,885 Madhya Pradesh 27,850 Kerala 60,063 Karnataka 48,789 Andhra Pradesh 47,848 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Per Capita GSDP It’s compared in nominal terms in the graphs below. GSDP Nominal West Bengal 54,15,855.60 68,78,362.80 Tamil Nadu 63,90,246.00 36,83,195.20 Maharashtra 1,24,84,528.00 31,53,866.60 Kerala 32,66,928.90 45,89,027.40 Andhra Pradesh 67,57,980.00 0.00 20,00,000.00 40,00,000.00 60,00,000.00 80,00,000.00 1,00,00,000.00 1,20,00,000.00 1,40,00,000.00 in Rs.million Group 10 Section D Page 6
  • 7. ECONOMIC REVIEW WEST BENGAL 7 GSDP Nominal West Bengal 6.58 8.35 Tamil Nadu 7.76 4.47 Maharashtra 15.16 3.83 Kerala 3.97 5.57 Andhra Pradesh 8.21 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 as a %ge of GDP 1.2 Contribution to Agriculture, Industry and Service sectors: The data below reveals that major contribution to Indian GDP from West Bengal comes from agricultural sector. At next stands the tertiary or services sector. The manufacturing industry output is very low compared to the GSDP output of this state in other sectors. The sources for this is data are Table 1.1 and Table 1.2. Percentage Contribution to Nominal GDP in Agriculture West Bengal 9.13 Uttar Pradesh 14.86 Tamil Nadu 5.82 Rajasthan 7.48 Maharashtra 9.38 Madhya Pradesh 6.15 Kerala 3.22 Karnataka 5.17 Andhra Pradesh 10.35 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 As a %ge of GDP agriculture Group 10 Section D Page 7
  • 8. ECONOMIC REVIEW WEST BENGAL 8 Percentage Contribution to Nominal GDP in Industry West Bengal 4.59 Uttar Pradesh 7.00 Tamil Nadu 8.84 Rajasthan 4.84 Maharashtra 17.60 Madhya Pradesh 4.16 Kerala 3.20 Karnataka 5.79 Andhra Pradesh 8.56 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 As a %ge of GDP industry Percentage Contribution to Nominal GDP in Services West Bengal 6.76 Uttar Pradesh 7.38 Tamil Nadu 7.95 Rajasthan 3.54 Maharashtra 15.41 Madhya Pradesh 3.15 Kerala 4.54 Karnataka 5.57 Andhra Pradesh 7.53 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 As a %ge of GDP services Sectoral Contribution to GDP West Bengal 9.13 4.59 6.76 Uttar Pradesh 14.86 7.00 7.38 Tamil Nadu 5.82 8.84 7.95 Rajasthan 7.48 4.84 3.54 Maharashtra 9.38 17.60 15.41 Madhya Pradesh 6.15 4.16 3.15 Kerala 3.22 3.20 4.54 Karnataka 5.17 5.79 5.57 Andhra Pradesh 10.35 8.56 7.53 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% GSDP agriculture GSDP industry GSDP Services Group 10 Section D Page 8
  • 9. ECONOMIC REVIEW WEST BENGAL 9 1.3 Growth Performance in 2011-12: The growth performance of West Bengal has outperformed India’s growth in agricultural sector. The agricultural sector saw a growth of 19.95% (nominal) while India’s average was at around 9.45%. But in real terms, we didn’t see so much of growth in this sector. That can be attributed to high food inflation in the country. But still as per RBI Economic review for 2011-12, West Bengal, Bihar and Jharkhand registered significant increase in yield, production and cultivated area. Bengal is the largest producer of rice in the country. Though there is spectacular growth in agriculture, the growth in other sectors was below average. A look at table below reveals that. The complete data can be found in the annexure in Tables 1.3 and 1.4. Growth in SDP At current prices : India : 2011-12 : % change per annum GSDP NSDP Per capita Per capita GSDP GSDP GSDP services GSDP NSDP agriculture industry West Bengal 15.87 15.92 14,80 14,86 19.95 14.68 15.04 India 15.02 15.06 13,86 9.45 12.02 17.6 Growth in SDP At constant prices : India : 2011-12 : % change per annum GSDP NSDP Per capita Per capita GSDP GSDP GSDP GSDP NSDP agriculture industry services West Bengal 6.55 6.66 5,57 5,67 3.6 3.71 8.37 India 6.48 6.48 5,43 3.05 3.38 8.91 1.4 Historic Growth Performance of West Bengal: Methodology: Data is available with base years at 1970-80, 1980-81, 1993-94 and 2004-05. Converting from one base to another base is not a straight methodology. This is so because when data is converted, the individual components would vary drastically if only composite figures are taken. Similarly if individual components are converted individually, the composite values change. Also, long term doesn’t reflect the performance effectively. So the methodology followed here is as follows: 1. Series wise absolute values are taken and growth rates are analysed for real GSDP 2. As the values of GSDP are not available in 1970 series, NSDP values are analyzed 3. As the current values can be easily converted, the long term evolution is analyzed on the basis of current values of GSDP. 4. As growth percentage remains constant irrespective of bases, real GDP growth rate is also analysed for long run Group 10 Section D Page 9
  • 10. ECONOMIC REVIEW WEST BENGAL 10 1.4.1 Growth Performance (1970 series): The following graph shows the growth rate for the data available in 1970-71 series for NSDP. (Refer Tables 1.5) 1970-71 series NSDP 6,00,000.00 5,00,000.00 4,00,000.00 3,00,000.00 2,00,000.00 1,00,000.00 0.00 1970-71 1971-72 1972-73 1973-74 1974-75 1975-76 1976-77 1977-78 1978-79 1979-80 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 NSDP in Rs.lakh NSDP Agriculture Industry Services 1970-71 series NSDP 40.00 30.00 20.00 10.00 0.00 -10.00 -20.00 NSDP Y-o-Y Growth NSDP Y-o-Y Growth Agriculture Y-o-Y Growth Industry Y-o-Y Growth Services Y-o-Y Growth The growth rate of real NSDP is highly fluctuating during the year 1980 and 1983. From the data on the net state domestic product andits components, it would appear that NSDP growth ratespicked up in the 1980s, the main contributor to thatacceleration being agriculture.As pointed by planning commission report of 2010 on West Bengal, many analysts havefound, the land reforms carried out by the Government of West Bengal, combined with the operationalization of theelected Panchayati Raj Institutions provided bothresources and incentives to the small and marginalpeasants and thereby helped raise the rates of agriculturalgrowth to a historic high. Group 10 Section D Page 10
  • 11. ECONOMIC REVIEW WEST BENGAL 11 Regression analysis for NSDP across three sectors would reveal how economy was heavily driven by agriculture in those days and that also shows why West Bengal was a major state due to strength of its natural resources then. So, primarily it can be seen that the state was agrarian economy during 1970s. Dependent Variable: GROWTH Method: Least Squares Date: 12/15/12 Time: 13:42 Sample (adjusted): 1971 1987 Included observations: 17 after adjustments Variable Coefficient Std. Error t-Statistic Prob. AGRI 0.404200 0.008469 47.72795 0.0000 INDU 0.285490 0.021646 13.18885 0.0000 SERV 0.292710 0.024128 12.13174 0.0000 R-squared 0.997641 Mean dependent var 3.522371 Adjusted R-squared 0.997304 S.D. dependent var 5.639742 S.E. of regression 0.292844 Akaike info criterion 0.540428 Sum squared resid 1.200603 Schwarz criterion 0.687466 Log likelihood -1.593642 Durbin-Watson stat 1.788920 1.4.2 Growth Performance (1980-81 series): The constant GSDP for real values is analyzed in the graphs below. (Refer Table 1.6) GSDP 1980-81 series 30,000 25,000 20,000 15,000 10,000 5,000 0 GSDP GSDP agriculture GSDP industry GSDP services Group 10 Section D Page 11
  • 12. ECONOMIC REVIEW WEST BENGAL 12 GSDP Growth 1980-81 series 30.00 25.00 20.00 15.00 10.00 5.00 0.00 -5.00 -10.00 -15.00 GSDP Y-o-Y Growth Agriculture Y-o-Y growth Industry Y-o-Y Growth Services Y-o-Y Growth Dependent Variable: GSDPGE Method: Least Squares Date: 12/15/12 Time: 17:12 Sample (adjusted): 1981 1997 Included observations: 17 after adjustments Variable Coefficient Std. Error t-Statistic Prob. GSDPAGE 0.289911 0.008816 32.88348 0.0000 GSDPIGE 0.310889 0.028730 10.82099 0.0000 GSDPSGE 0.384527 0.020359 18.88776 0.0000 R-squared 0.992884 Mean dependent var 5.366823 Adjusted R-squared 0.991867 S.D. dependent var 2.943956 S.E. of regression 0.265489 Akaike info criterion 0.344300 Sum squared resid 0.986784 Schwarz criterion 0.491338 Log likelihood 0.073447 Durbin-Watson stat 1.640075 Here it can be seen that agriculture is predominant and 1981-82 was the golden year for West Bengal. This is true but as 1990 approaches we can see a gradual shift increase the services sector of the state. The transportation services are a major contributor in this state. In the above graph we see an interesting situation. This is stage when West Bengal gradually transformed from being an agrarian state to a service sector dominated state. If we look at 1996- 97, towards the end of the graph, the state has a healthy services sector growing at a rate of 10.46% whereas agriculture sector was growing at a dismal 1.87%. Nonetheless the state’s primary output has more than doubled in two decades cumulatively. Group 10 Section D Page 12
  • 13. ECONOMIC REVIEW WEST BENGAL 13 There exists a problem with manufacturing sector. The state has a good manufacturing sector during 1960s and it remained stagnant since. It again started growing mid 1990s. Strong trade unionism in West Bengal is often allegedas a major cause for industrial slowdown in the state.Labour militancy reached a peak in the late 1960s andcontinued for several years thereafter, particularly in WestBengal. But probably that militancy was an expression ofthe workers’ anger against the massive labourdisplacement. The sharp fall of employment, especially inthe late 1960s, led to acute labour agitations in WestBengal. Sometimes strikes were provoked or evenengineered by the management of firms as an excuse fordeclaring lockouts. When we compare the growth of the state with the country’s growth, we see that the economy hasn’t performed at the rate at which the country is growing. But post 1990, we can see that West Bengal’s growth rate has outperformed India’s growth rate. But in spite of a growing industry, the contribution to GDP by West Bengal has declined over the two decades. GSDP vs GDP 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 -2.00 -4.00 GSDP Y-o-Y Growth GDP Growth Rate GSDP as %ge of GDP Group 10 Section D Page 13
  • 14. ECONOMIC REVIEW WEST BENGAL 14 GSDP as a %ge of GDP 8.60 8.40 8.20 8.00 7.80 7.60 7.40 7.20 7.00 6.80 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 GSDP as %ge of GDP 1.4.3 Growth Performance(1993-94 series): Refer Table 1.7 for data. GSDP 1993-94 series 1,20,000 1,00,000 80,000 60,000 40,000 20,000 0 GSDP GSDP Agriculture GSDP Industry GSDP Services Group 10 Section D Page 14
  • 15. ECONOMIC REVIEW WEST BENGAL 15 GSDP Growth 1993-94 series 20.00 15.00 10.00 5.00 0.00 -5.00 -10.00 GSDP Y-o-Y Growth Agriculture Y-o-Y growth Industry Y-o-Y Growth Services Y-o-Y Growth Dependent Variable: GSDPGE Method: Least Squares Date: 12/15/12 Time: 18:26 Sample (adjusted): 2 12 Included observations: 11 after adjustments Variable Coefficient Std. Error t-Statistic Prob. GSDPAGE 0.281882 0.022021 12.80086 0.0000 GSDPIGE 0.180011 0.038815 4.637721 0.0017 GSDPSGE 0.527229 0.023120 22.80377 0.0000 R-squared 0.669082 Mean dependent var 7.066391 Adjusted R-squared 0.586353 S.D. dependent var 0.530530 S.E. of regression 0.341213 Akaike info criterion 0.914378 Sum squared resid 0.931408 Schwarz criterion 1.022895 Log likelihood -2.029082 Durbin-Watson stat 2.571900 The regression analysis above reveals the fact that GSDP is now predominantly dependent on services sector. Agriculture sectors coeff and the other got interchanged. The manufacturing sector is declining towards early 2000. But there was a steep rise in services sector performance. The contribution of the services sector to the WestBengal’s GDP has been increasing rapidly during the post-reformperiod. Within this sector trade-related activitiesare growing faster in West Bengal. In the countryside ofthe state, transport-related activities under own accountservice enterprises accounted for the highest share. But inurban areas, ‘education’ accounts for the largest numberof own account service enterprises. Group 10 Section D Page 15
  • 16. ECONOMIC REVIEW WEST BENGAL 16 The state outperformed the country’s growth rate and its contribution to GDP has increased over the last decade. GSDP vs GDP 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 GSDP Y-o-Y Growth GDP growth GSDP as %ge of GDP 8.60 8.40 8.20 8.00 7.80 7.60 7.40 7.20 7.00 6.80 6.60 1 2 3 4 5 6 7 8 9 10 11 12 GSDP as %ge of GDP Group 10 Section D Page 16
  • 17. ECONOMIC REVIEW WEST BENGAL 17 1.4.4 Growth Performance (2003-04 series): In recent years, West Bengal’s manufacturing and agricultural sector performance have come down drastically. But its services sector still plays a major role. In fact this sector did well during the years of recent global slump also. In the years before 2007-08, India was growing at a very fast pace. But West Bengal was not able perform at that pace. This can be attributed to the government that is there for 33 years in rule. As a result we can also see that the its overall contribution to GDP has come down. Refer Table 1.8. GSDP 2003-04 Series 4,00,000 3,50,000 3,00,000 2,50,000 2,00,000 1,50,000 1,00,000 50,000 0 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 GSDP GSDP Agriculture GSDP Industry GSDP Services GSDP Growth 2003-04 Series 12.00 10.00 8.00 6.00 4.00 2.00 0.00 -2.00 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 -4.00 GSDP Y-o-Y Growth Agriculture Y-o-Y Growth Industry Y-o-Y Growth Services Y-o-Y growth Dependent Variable: GSDPGE Method: Least Squares Date: 12/15/12 Time: 19:19 Sample (adjusted): 2 8 Included observations: 7 after adjustments Group 10 Section D Page 17
  • 18. ECONOMIC REVIEW WEST BENGAL 18 Variable Coefficient Std. Error t-Statistic Prob. GSDPAGE 0.203125 0.030212 6.723275 0.0025 GSDPIGE 0.217931 0.026177 8.325392 0.0011 GSDPSGE 0.574328 0.013253 43.33435 0.0000 R-squared 0.981310 Mean dependent var 6.937639 Adjusted R-squared 0.971965 S.D. dependent var 1.111892 S.E. of regression 0.186171 Akaike info criterion -0.226777 Sum squared resid 0.138638 Schwarz criterion -0.249958 Log likelihood 3.793720 Durbin-Watson stat 0.428481 GSDP 2003-04 Series 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 GSDP Y-o-Y Growth GDP Y-o-Y Growth GSDP as a %ge of GDP 7.20 7.00 6.80 6.60 6.40 6.20 6.00 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 GSDP as %ge of GDP Group 10 Section D Page 18
  • 19. ECONOMIC REVIEW WEST BENGAL 19 1.4.5 Growth Performance Long Term: In WestBengal, the overall economic growth rate improved in the1980s, and accelerated further in the 1990s compared tothe performance in the 1970s. The rate of growth of thestate economy after the 1980s (1991-2006) had beennearly double the rate prevailed in the 1970s. During late 1970s and early 1980s West Bengal rate of growth rates were rapid though they were in accordance with country’s growth rate. The rapidity shows greater contribution to GDP and heavy dependence on primary sector. This table shows how WB growth rate has varied on a compounded on 5-yearly basis. It shows West Bengal was doing well in during periods 1970-75, 1980-85, 1990- 2000 and again 2005-2012. Refer Table 1.9 CAGR GSDP WB GDP 1970-1975 3.14 2.82 1975-1980 2.45 2.86 1980-1985 4.03 3.75 1985-1990 3.82 4.37 1990-1995 5.03 4.31 1995-2000 6.96 4.54 2000-2005 5.69 5.64 2005-2010 7.13 6.51 2010-2012 6.89 4.9 The economy performed at a much better pace during early 1990s. Of late it can be seen that the economy was slower that India’s growth pace during 2004-08 period. Group 10 Section D Page 19
  • 20. ECONOMIC REVIEW WEST BENGAL 20 GDP vs GSDP WB 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 -2.00 -4.00 -6.00 -8.00 GDP growth rate WB GSDP growth West Bengal performed better in agriculture since theearly 1980s. According to a planning commission report, the state started to lose its prominence inmanufacturing growth since the mid- 1960s. But it can be seen that the rate ofmanufacturing growth increased after the mid-1990s. In WestBengal, the overall economic growth rate improved in the1980s, and accelerated further in the 1990s compared tothe performance in the 1970s. The rate of growth of thestate economy after the 1980s (1991-2006) had beennearly double the rate prevailed in the 1970s. It went up from 3% to almost 6%. The graph below shows how sector-wise contribution to GSDP varied over time. It is clear that agriculture sector prominence has declined. However, it’s disheartening that manufacturing sector is also now healthy given its natural resources. The major contributor is Services sector clearly. Agriculture in West Bengal marked the end of‘impasse’ in the 1980s. Manufacturing in West Bengalgrew at around the rates of 2 per cent and 3 per cent,respectively during the 1970s and 1980s and the rateimproved to 6.6 per cent during 1991-2006. The growthperformance of this sector turned better after the mid-1980s compared to the period of state control. Industrial growth in West Bengal, as in otherconstituent states in India, has largely been determined bythe stance of economic policy adopted by the Centralgovernment, the allocation of central public investment inindustry and infrastructure, the allocation of credit bybanks and term lending institutions under the control ofthe Central government and the general attitude of largebusiness houses and multinational corporations towardsinvestment in that particular state. Group 10 Section D Page 20
  • 21. ECONOMIC REVIEW WEST BENGAL 21 The slow growth of manufacturing inthe eastern part of the country, particularly in WestBengal, was a damaging consequence of the license permitraj. The policy ofequalising the prices of coal and steel led to the loss of comparative advantage of resource-rich states such asWest Bengal, Bihar, Orissa and Madhya Pradesh as reported by Planning Commission survey. Percentage Sectoral Contribution to GSDP 70 60 50 40 30 20 10 0 Agriculture Industry Services The growth of the services sector isa subjectof much discussion. Income from the services sector has been growingat a faster rate since the early 1990s. A careful observation at component break-up of GSDP shows that the higher growthof services income is largely due to the rapid growthincome from trade-related activities followed by bankingand financial services. The graph below reveals that West Bengal is not performing at the pace of its other major states in recent years. Its GDP contribution has come down over the years from around 8% to little more than 6% of late. Group 10 Section D Page 21
  • 22. ECONOMIC REVIEW WEST BENGAL 22 GSDP %ge of GDP 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 GSDP as a %ge of GDP Note that Tables 1.5 to 1.9 are computed from Tables S7, S9, S8 and S11. Tables S1 – S14 give complete data about West Bengal and India in terms of GSDP(Constant, Current), NSDP(Constant, Current), GDP(Constant, Current) NDP(Constant, Current) respectively. Group 10 Section D Page 22
  • 23. ECONOMIC REVIEW WEST BENGAL 23 2. INFLATION: Since CPI WPI is not available for every year, the deflator method for inflation was done for both West Bengal and India. The graph below shows that the price levels are consistent with the country’s price levels. They are relatively on a little higher side historically. A clearer picture can be revealed by year on year inflation as shown in the next graph. Refer table 2.1for data. It is computed from S14 and S7-S12. S15, S16, S17 give data for CPI, WPI(India) and CPI WB. GSDP vs GDP Deflator 180 160 140 120 100 80 60 40 20 0 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 GSDP Deflator GDP Deflator Group 10 Section D Page 23
  • 24. ECONOMIC REVIEW WEST BENGAL 24 WB vs India Inflation 16 14 12 10 8 6 4 2 0 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 -2 WB Inflation India Inflation This shows that historically WB is more than that of the country. However it got stabilized in early 2000s but still it is often more than the country’s average. Group 10 Section D Page 24
  • 25. ECONOMIC REVIEW WEST BENGAL 25 3. Sector-wise Contribution to GSDP 3.1 Agriculture Sector The Agriculture Sector consists of the following  Agriculture  Forestry and Logging  Fishing In West Bengal, productivity growth in agriculture, particularly in food grain production, contributed significantly to overall economic growth of the state since the early 1980s. There has been a growing concern in recent years about the deceleration of agricultural output in most of the agricultural states in India since the early 1990s. The positive impulse of the fast growing yield rate to output growth of the major crops as observed in the 1980s have been petered out in the phase of neo-liberal reforms in India. In the context of agricultural growth in India, a significant Group 10 Section D Page 25
  • 26. ECONOMIC REVIEW WEST BENGAL 26 fall in public sector capital formation in agriculture was a major constraint on productivity growth in agriculture. Declining trend in the supply of institutional credit in the post-reform period in India has also been responsible for near stagnation in yield levels. West Bengal which took up the implementation of Establishment of an Agency for Reporting of Agricultural Statistics (EARAS) scheme in 1980-81 on a pilot basis has been able to cover a sample size of about 14 percent only. Efforts are underway to increase the sample size adequately in the current year. Kerala which had modified the sampling design with effect from 1987-88 have also been advised to follow the stipulated pattern. With reference to Table 3.1, Total food grain production in West Bengal was roughly 16 million tonnes contributing 7.4 per cent of the country’s total food grain output and ranked 4 th among the major states in India in 2006-07. With rice output of 14.51 million tonnes in 2006-07, the state led all the major states in production of rice and contributed nearly 16 per cent of the country’s total rice output. The share of the state in food grains production has been increasing steadily during the past two and a half decades. Group 10 Section D Page 26
  • 27. ECONOMIC REVIEW WEST BENGAL 27 In line with the changing trend across the country, West Bengal has experienced a structural shift in output front as the share of agriculture in the State’s GDP is recorded to have come down from about 33 % in 1999-2000 to about 25 percent in 2007-08. However, increasing trends of real wages in the latter half of the 1980s were not sustained in the subsequent years. The decline in wage rate has been observed in the first half of the 1990s. The latter half of the decade started with recovery of the wage rate but again declined in the beginning of the 2000. 3.2 Industrial Sector The Industry Sector consists of the following  Mining and Quarrying  Manufacturing  Construction  Registered Services  Unregistered Services Group 10 Section D Page 27
  • 28. ECONOMIC REVIEW WEST BENGAL 28 West Bengal, over the past three decades. In India,different regions have been growing at uneven rates. Theregional disparities in growth have been highly associatedwith unequal incidence of industrial development. Capital intensity in registered manufacturing increased during 1981-2002, but it is much lower in the factory sector in West Bengal. Labour productivity measured by value-added per employee in this sector in the state also increased, but emolument per employee remained at the same level during this period as surveyed by Planning Commission. Group 10 Section D Page 28
  • 29. ECONOMIC REVIEW WEST BENGAL 29 With reference to Table 3.2, In West Bengal, the manufacturing sector has not performed as an engine of growth over the past three decades in a causal sense. The rate of growth of labour demand is given by the excess of the rate of growth of output over the rate of growth of labour productivity. Output growth in the manufacturing sector has played an insignificant role in promoting employment growth in the state. Also there were several criticisms of the country's industrial policy framework, mostly on the regime of licensing, for regional diversities in growth. Group 10 Section D Page 29
  • 30. ECONOMIC REVIEW WEST BENGAL 30 Many studies have documented a mismatch between output growth and employment growth in Indian manufacturing in the 1980s, leading to virtually jobless growth. The situation has been no different in West Bengal. Industrial output grew up consistently with some fluctuations, but the level of employment in registered industries declined in the 1980s followed by a stagnating or rising phase in the earlier decade. Group 10 Section D Page 30
  • 31. ECONOMIC REVIEW WEST BENGAL 31 3.3 Service Sector The Industry Sector consists of the following  Electricity,Gas and Water supply  Transport,Storage and Communication  Railways  Transport by other means  Communication  Trade,Hotels and Restaurants  Banking and Insurance  Real Estate,Ownership of Dwellings and Business Services  Public Administration  Other Services In West Bengal, the responsiveness of the growth of the services activities to the growth of the commodity sector (agriculture and allied activities and manufacturing) and to the growth of real income of the rest of the economy is found to be more than proportional in such sub-sectors as trade, banking and transport. Growth in sectors like real estate and public administration was less than proportional to the growth in the rest of the state’s economy. As per capita income rises, demand shifts away first from the agricultural commodities and, then, even from industrial goods; more and more demand is created for services such as education, health, tourism, etc. Thus, an increasing share of national/state income originates in the services. If the labour productivity remained unchanged, the services sector also generates relatively more employment. Group 10 Section D Page 31
  • 32. ECONOMIC REVIEW WEST BENGAL 32 With reference to Table 3.3, the size of the tertiary sector—comprising transport and communication, trade, hotels and restaurant, banking and insurance, real estate and ownership of dwelling and business services, public administration, other service in terms of share of NSDP at constant prices, has been larger than either the primary or the secondary sector in the state. In the urban, ‘education’ accounts for the largest number of own account service enterprises. This was followed by ‘other transport and related activities’. Of the urban services establishments, the largest is ‘restaurants’, in numbers. In terms of employment, however, ‘education’ is the leading sub-sector within the rural ‘own account service enterprises’, this was followed by ‘other community social and personal services’. The highest share of employment in rural service establishments was that of ‘mechanised’ road transport’. Group 10 Section D Page 32
  • 33. ECONOMIC REVIEW WEST BENGAL 33 All the above factors collected from various reports show how the contribution of services sector to GSDP has increased over years. Group 10 Section D Page 33
  • 34. ECONOMIC REVIEW WEST BENGAL 34 4. Sector wise Contribution to Employment: The fluctuation in employment or unemployment has tocome to terms with the periodic instability of the growthprocess. The trend in employment, in fact, is the‘outcome’ of the changing combinations of capital,technology and the labour market institutions. This is state is predominantly a rural state with most of them dependent on agriculture. Of late, services started contributing more. However, there is a steep decline in manufacturing sector. A comparative analysis between 1999 and 2002 shows this. Industry-wise Employment in Organised Sector in West Bengal (1990 and 2002) (In lakh) Public Private Total Industry 1990 2002 1990 2002 1990 2002 Agriculture and Allied 0.3 0.22 2.05 1.77 2.35 1.99 Mining and Quarrying 1.78 1.65 1.78 1.65 Primary Sector 2.08 1.87 2.05 1.77 4.13 3.64 Manufacturing 2.82 1.81 5.14 3.89 7.96 5.7 Electricity & Gas 0.43 0.4 0.16 0.17 0.59 0.57 Construction 0.54 0.61 0.04 0.04 0.58 0.65 Secondary Sector 3.79 2.82 5.34 4.1 9.13 6.92 Wholesale and Retail Trade/ Hotels and Restaurants 0.12 0.12 0.21 0.23 0.33 0.35 Transport, Storage and Communication 3.58 3.3 0.08 0.06 3.66 3.36 Finance, Insurance & Real Estate 0.95 1.02 0.2 0.17 1.15 1.19 Services 6.33 7.26 1.02 1.14 7.35 8.4 Tertiary Sector 10.98 11.7 1.51 1.6 12.49 13.3 Total 16.85 16.39 8.9 7.47 25.75 23.86 The growth is happening predominantly in services sector while the other two sectors declined with time. A more detailed break-up of the employment is given in the annexure. Group 10 Section D Page 34
  • 35. ECONOMIC REVIEW WEST BENGAL 35 This is the growth rate between 2000 and 2005 and it is very clear that the tertiary sector in rural areas is growing at a rapid pace. The above table is taken from Economic Review 2009-10 of west Bengal by state government. It is seen from above table, that daily employment increased between 2002 and2008 in all major industry groups like Rice, Tea, Printing and Allied, Rubber & RubberProducts, Chemical and Chemical Products, Glass & Glass Products, Engineering, Electricity and for all industries as a whole. the Group 10 Section D Page 35
  • 36. ECONOMIC REVIEW WEST BENGAL 36 growth of the State Domestic Product atconstant prices from the tertiary sector has registered significant growth in recent years. The growth of employment in the tertiary sector has been quiteimpressive. The rapid growth of employment in shops, commercial establishments,cinemas, theatres and other establishments of public entertainment in the State conform tothis observation revealed from NSS data. The total daily employment in theseestablishments increased to 7.82 lakh on 30th September, 2009 from 6.83 lakh on 30thSeptember, 2007. This is evident from table below that in spite of the adverse effect ofrecession the employment in these establishments increased considerably. Data is taken from S18for the next two figures. Group 10 Section D Page 36
  • 37. Axis Title per 1000 persons 0% 0% 100% 100% 20% 30% 40% 50% 60% 70% 80% 90% 10% 20% 30% 50% 60% 70% 80% 90% 10% 40% July 1987-June 1988 July 1987-June 1988 July 1989 -June 1990 July 1989 -June 1990 Group 10 Section D July 1990-June 1991 July 1990-June 1991 July-December 1991 July-December 1991 January-December… January-December… January-June 1993 January-June 1993 July 1993-June 1994 July 1993-June 1994 July 1994-June 1995 July 1994-June 1995 July 1995 -June 1996 July 1995 -June 1996 January-December… January-December… January-June 1998 January-June 1998 July 1999-June 2000 July 1999-June 2000 July 2000-June 2001 July 2000-June 2001 India India July 2001 -June 2002 July 2001 -June 2002 July-December 2002 July-December 2002 January-December… January-December… January-June 2004 January-June 2004 July 2004-June 2005 July 2004-June 2005 to improve manufacturing sector for a better economic development. July 2005-June 2006 July 2005-June 2006 July 2007-June 2008 July 2007-June 2008 July 2009-June 2010 July 2009-June 2010 S19 gives recent distribution of employment across various sectors in West Bengal. Sector wise employee distribution of Rural Sector wise employee distribution of Urban ECONOMIC REVIEW WEST BENGAL tertiary sector tertiary sector primary sector primary sector 37 secondary sector secondary sector rural areas also. As a result of its services sector, its economy is doing well. But there is a lot of scope change much in its share whereas in West Bengal the tertiary sector is growing at a rapid pace in Page 37 A sharp change in trend between west Bengal and India is the tertiary sector in rural India didn’t
  • 38. ECONOMIC REVIEW WEST BENGAL 38 5. Debt Situation in West Bengal The fiscal situation of West Bengal is characterized by the fact that it has the Debt/ GSDP ratio of 42.5 % which is the second highest amongst the non special category states in India. Another fact is that West Bengal has own tax revenue(OTR)/ GSDP ratio of 4.1%, which is the lowest for any non special category state. These are two reasons for the huge debt of West Bengal. Problem of High Debt/GSDP ratio in West Bengal: On analysis of the Debt/ GSDP Ratio of all the states from the above figure, we can conclude that the Debt/ GSDP ratio of all the states have increased from 1997 onwards and started to decline from 2003-2004. But in West Bengal the ratio started to decline from 2005-2006. Moreover the Debt/ GSDP ratio was higher for West Bengal as compared to all the other states of India. One of the main reason for the rise of Debt/ GSDP ratio of all the states can be attributed to the features of the State Government Finances of India. One of the key features of the Federal Government has been that the resources are mostly concentrated in the hands of Central Government with the states having limited power to collect taxes and mobilise resources. In addition to it all the development work is done by the state government which adds to the expenditure of the State Government. This asymmetry in relations leads to the dependence of State Government on the Central Government in order to carry out their expenditure responsibilities. Against this backdrop, the following features of state government finances can be ascertained:  Revenue Receipts: The revenue receipts of the states, as we know, consist of not only its own revenue receipts, but also revenue transfer from the centre in the form of grants and shares in the central taxes. Since the level of revenue transfers remains outside the purviewof the states' own economic policies, the determination of total revenue receipts also becomes exogenous to the state government Group 10 Section D Page 38
  • 39. ECONOMIC REVIEW WEST BENGAL 39  Interest Rate The interest rate is determined exogenously by the Central Government depending on the monetary policy of the country. In India it is determined by RBI. For all the states the RBI has constitutional power to determine both the extent and the terms of borrowing from all the resources. During the liberalization of the economy the interest rate has a tendency to rise. If the rate of increase of interest rate is more than the rate of increase of GSDP the debt/ GSDP ratio will increase which happened with all the states in India from 1997 onwards. The Debt/ GSDP ratio for West Bengal is higher than other states because of the fact that the revenue receipts of WB is lower than the other states and the effective rate of interest is higher for WB compared to other states. The effective rate of interest for WB is higher mainly because of the composition of liabilities of WB having a higher share of NSSF loans. States have to compulsorily borrow a fixed portion of NSSF funds that they collect. Since WB has a much higher proportion of NSSF loans, it has to borrow more from this pool. The higher interest rate on these loans in turn increases the interest burden of WB. But if we analyze the relationship between Debt and GSDP of West Bengal, it is evident from the above graph that their GSDP has increased at a higher rate as compared to the Debt. Data is taken from table 5.1. Group 10 Section D Page 39
  • 40. ECONOMIC REVIEW WEST BENGAL 40 6. FISCAL DEFICIT The Fiscal Deficit of West Bengal has steadily increased over the past 25 years. As evident in the graph the fiscal deficit of West Bengal is above 8 % of the total fiscal deficit since 1999 till now which is a major concern of the West Bengal Government. Group 10 Section D Page 40
  • 41. ECONOMIC REVIEW WEST BENGAL 41 7. CONCLUSION The economy of West Bengal had a history of outpacing the India's growth rate and be a major contributor to the country's GDP. A major shift from agriculture to services sector was observed throughout this time period. But manufacturing was always stagnant. Though it ranks in top 5 states in GSDP output, it doesn’t figure even in top 10 for per capita GSDP. This is because of its dense population. But beyond population growth, proper resource utilization was not there in many sectors. So, we would conclude that given the natural resources and human capital of West Bengal, it has a prospect of growing at a faster rate with a proper policy to revive manufacturing sector and consolidate other areas. Group 10 Section D Page 41
  • 42. ECONOMIC REVIEW WEST BENGAL 42 8. REFERENCES www.statesofindia.cmie.com www.indiastat.com Domestic Product of States of India by EPW Research Foundation www.rbi.org Economic Review 2009-10 West Bengal Human Development Report -Development and Planning Dept, Govt of WB West Bengal Development Report - Planning Commision of India 2010 Transforming West Bengal by BibekDebroy and LaveeshBhandari Group 10 Section D Page 42