West Bengal Economic Review

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

Group 10 Section D Page 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



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





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

40,76,110.00

29,16,614.80

20,84,681.90

20,29,708.70

80,50,313.20

21,54,535.80

41,65,494.10

42,00,165.10

33,35,831.80

0.00 20,00,000.00 40,00,000.00 60,00,000.00 80,00,000.00

Andhra Pradesh

Karnataka

Kerala

Madhya Pradesh

Maharashtra

Rajasthan

Tamil Nadu

Uttar Pradesh

West Bengal

Real GSDP (in absolute values)

GSDP( Rs.million)



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

7.83

5.61

4.01

3.90

15.47

4.14

8.01

8.07

6.41

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00

Andhra Pradesh

Karnataka

Kerala

Madhya Pradesh

Maharashtra

Rajasthan

Tamil Nadu

Uttar Pradesh

West Bengal

Real GSDP (%ge contribution)

as a %ge of Real GDP

47,848

48,789

60,063

27,850

70,885

31,468

61,531

20,708

37,070

46,555

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

Andhra Pradesh

Karnataka

Kerala Madhya Pradesh

Maharashtra

Rajasthan

Tamil Nadu

Uttar Pradesh

West Bengal

India

GDP per capita (real)

Per Capita GSDP

67,57,980.00 45,89,027.40

32,66,928.90 31,53,866.60

1,24,84,528.00 36,83,195.20

63,90,246.00 68,78,362.80

54,15,855.60

0.00 20,00,000.0040,00,000.0060,00,000.0080,00,000.001,00,00,000.001,20,00,000.001,40,00,000.00

Andhra Pradesh

Kerala

Maharashtra

Tamil Nadu

West Bengal

GSDP Nominal

in Rs.million



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.

8.21 5.57

3.97 3.83

15.16 4.47

7.76 8.35

6.58

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00

Andhra Pradesh

Kerala

Maharashtra

Tamil Nadu

West Bengal

GSDP Nominal

as a %ge of GDP

10.35 5.17

3.22 6.15

9.38 7.48

5.82 14.86

9.13

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00

Andhra Pradesh Karnataka


Maharashtra Rajasthan

Tamil Nadu Uttar Pradesh

West Bengal

Percentage Contribution to Nominal GDP in Agriculture

As a %ge of GDP agriculture



8.56 5.79

3.20 4.16

17.60 4.84

8.84 7.00

4.59

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00





West Bengal

Percentage Contribution to Nominal GDP in Industry

As a %ge of GDP industry

7.53 5.57

4.54 3.15

15.41 3.54

7.95 7.38

6.76

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00





West Bengal

Percentage Contribution to Nominal GDP in Services

As a %ge of GDP services

10.35

5.17

3.22

6.15

9.38

7.48

5.82

14.86

9.13

8.56

5.79

3.20

4.16

17.60

4.84

8.84

7.00

4.59

7.53

5.57

4.54

3.15

15.41

3.54

7.95

7.38

6.76

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Andhra Pradesh

Karnataka

Kerala

Madhya Pradesh

Maharashtra

Rajasthan

Tamil Nadu

Uttar Pradesh

West Bengal

Sectoral Contribution to GDP

GSDP agriculture GSDP industry GSDP Services



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 GSDP

Per capita NSDP

GSDP agriculture

GSDP industry

GSDP services

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 GSDP

Per capita NSDP

GSDP agriculture

GSDP industry

GSDP 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



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)

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.

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1970-71 series NSDP

NSDP in Rs.lakh NSDP Agriculture Industry Services

-20.00

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1970-71 series NSDP

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



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)

0

5,000

10,000

15,000

20,000

25,000

30,000

GSDP 1980-81 series

GSDP GSDP agriculture GSDP industry GSDP services



Dependent Variable: GSDPGE


Date: 12/15/12 Time: 17:12

Sample (adjusted): 1981 1997

Included observations: 17 after adjustments


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





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.

-15.00

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15.00

20.00

25.00

30.00

GSDP Growth 1980-81 series

GSDP Y-o-Y Growth Agriculture Y-o-Y growth

Industry Y-o-Y Growth Services Y-o-Y Growth



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.

-4.00

-2.00

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2.00

4.00

6.00

8.00

10.00

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GSDP vs GDP

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



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

6.80

7.00

7.20

7.40

7.60

7.80

8.00

8.20

8.40

8.60

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

GSDP as a %ge of GDP

GSDP as %ge of GDP

0

20,000

40,000

60,000

80,000

1,00,000

1,20,000

GSDP 1993-94 series

GSDP GSDP Agriculture GSDP Industry GSDP Services





Date: 12/15/12 Time: 18:26




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





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.

-10.00

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10.00

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GSDP Growth 1993-94 series

GSDP Y-o-Y Growth Agriculture Y-o-Y growth

Industry Y-o-Y Growth Services Y-o-Y Growth



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

the last decade.

0.001.002.003.004.005.006.007.008.009.00

GSDP vs GDP

GSDP Y-o-Y Growth GDP growth

6.60

6.80

7.00

7.20

7.40

7.60

7.80

8.00

8.20

8.40

8.60

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GSDP as %ge of GDP

GSDP as %ge of GDP



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.



Date: 12/15/12 Time: 19:19



0

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1,00,000

1,50,000

2,00,000

2,50,000

3,00,000

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4,00,000

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

GSDP 2003-04 Series

GSDP GSDP Agriculture GSDP Industry GSDP Services

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

GSDP Growth 2003-04 Series

GSDP Y-o-Y Growth Agriculture Y-o-Y Growth

Industry Y-o-Y Growth Services Y-o-Y growth




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



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

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GSDP 2003-04 Series

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

6.00

6.20

6.40

6.60

6.80

7.00

7.20

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


GSDP as %ge of GDP



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.



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.

-8.00

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GDP vs GSDP WB

GDP growth rate WB GSDP growth



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.

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.

0

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30

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50

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70

Percentage Sectoral Contribution to GSDP

Agriculture Industry Services



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.

0.001.002.003.004.005.006.007.008.009.00

GSDP %ge of GDP




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.

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GSDP vs GDP Deflator

GSDP Deflator GDP Deflator



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.

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WB vs India Inflation

WB Inflation India Inflation



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



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 4th 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.



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



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.



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.



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.



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.



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’.



All the above factors collected from various reports show how the contribution of services sector to

GSDP has increased over years.



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.

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.

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

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

0.12 0.12 0.21 0.23 0.33 0.35

Industry-wise Employment in Organised Sector in West Bengal

(1990 and 2002)

(In lakh)

Industry

Public Private Total



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



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.



A sharp change in trend between west Bengal and India is the tertiary sector in rural India didn’t

change much in its share whereas in West Bengal the tertiary sector is growing at a rapid pace in

rural areas also. As a result of its services sector, its economy is doing well. But there is a lot of scope

to improve manufacturing sector for a better economic development.

S19 gives recent distribution of employment across various sectors in West Bengal.

0%10%20%30%40%50%60%70%80%90%

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Sector wise employee distribution of Rural India

tertiary sector

secondary sector

primary sector

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Sector wise employee distribution of Urban India

tertiary sector

secondary sector

primary sector



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



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.



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.



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.



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

http://www.statesofindia.cmie.com/

http://www.indiastat.com/

http://www.rbi.org/

Documents

West Bengal Economic Review