Bengal - Why did the Red Fortress crumble: Economy

Now that Mamata Bannerjee has led the Trinamool-Congress combine to a landslide victory in Bengal. Its time to look back and see what went wrong with the Red Fortress to the extent that it crumbled under an onslaught by a rag-tag party.
People were of course, unhappy with minutiae of intervention by left cadres in their everyday life, by the fact that one had to be a party sympathiser at least for form's sake to qualify for jobs, business contracts and what have you. This unhappiness turned into palpable anger in rural areas which had resiliently stayed Red even while urban West Bengal had turned to Mamata more than a decade back, when land acquisition threatened to turn sharecroppers (whom the Left had made permanent land tiller with protected rights) into land oustees without compensation.
But beyond this there was unhappiness all around about how `Golden' Bengal had been turned into an industrial wasteland, with an economy in shambles, little or no job creation, poor roads, a weakened educational system and social upheavals by continuous inward and outward migration.
The Macro StoryLets just take the case of how West Bengal fared compared to the rest of the country since the economy was opened up two decades back. The visible changes in the economic juggernauts of Gujarat, Haryana, Tamil Nadu and Karnataka – spanking new highways, swank airports, bustling factories certainly make Calcutta’s malls, Salt Lake’s call centre’s and the Kona expressway pale in comparision.
But the real tale is hidden in the figures which data miners have hoarded in a report prepared for the deputy chairman of the planning commission. Between 2002 and 2009, the state, grew by 6.66 per cent, just below the national average of 7.83 per cent and well below the rates posted by rivals like Gujarat (11.19 per cent) which took away the Tata Nano project from the eastern state and Maharashtra (8.70 per cent). Even poorer neighbours –Orissa and Bihar posted faster growth rates at 9.34 per cent and 9.80 per cent.
So what really ailed Bengal? Economist Ashok Desai says “while the liberalization since 1991 (which boosted India's foreign trade) helped maritime states like Tamil Nadu and Maharashtra grow, West Bengal which has poor seaports could not catch up.” Others feel poor political infrastructure, red tape, inability to create a home-grown entreprenuer class and belated understanding on the part of Left that it could take advantage of a phase of liberalisation which they had so vehemently criticised to better Bengal, stopped growth from being a happening story in the state. This despite, rules being changed to end Socialist era laws which equated iron and coal prices all over the country, which gave Bengal's forges, foundries and factories, a huge advantage over the rest of the country.
Industry in the state which once boasted of being India’s premier industrial hub just could not play catch up with faster growing rivals, while farm growth which was substantially higher than the national average could never earn enough money to make the state a high flier.
Average State GDP Growth rate (%)
(2002-2009 )
Andhra Pradesh 8.20
Bihar 9.8
Gujarat 11.9
Haryana 9.28
Karnataka 8.10
Maharashtra 8.70
Orissa 9.34
Tamil Nadu 7.33
West Bengal 6.66
All India 7.83
Source: Databook for DCH: 28 March 2011 (Planning Commission)

Red in the Account Books
West Bengal can best be described as a classic middle class debtor's case - it can't climb out of debt and yet is not indebted enough to be termed bankrupt. The only problem is that the state is not a middle class individual but a major state government. Its total debt by the year 2011 has reached an astounding Rs 1,98,195 crore or nearly 41 per cent of  its state GDP. This is the third highest debt run up by any state in the country, but the other two states – Uttar Pradesh and Maharashtra - which have larger debts also have far larger economies and larger revenue streams to pay-back their loans.
West Bengal on the other hand, runs the risk of having to borrow to pay the interest pay-outs on its huge debt mountain. It managed to raise taxes worth just a tad over Rs 20,000 crore in the financial year gone by, just a little more than what it needs to pay simple interest on its loan.
Its total income during the year was Rs 47,572 crore, including transfers from the centre while its expenses were a whopping Rs 69,895 crore, leaving a fiscal deficit of Rs 22,323 crore, far more than the money it earns from taxes. Successive internal memos prepared by the Planning Commission have warned "the state seems to be very close to a debt trap." “The state will have to either raise more revenues or depend on larger central dole  to set its house in order,” said D.K.Joshi, chief economist with CRISIL.
Said Plan panel advisors who have been studying West Bengal’s case for long: “The whole problem is that the state is neither a basket case nor a top notch performer. States like West Bengal will always be demanding more money as they feel they can catch up with others doing well with just that extra effort. But the real problem is that extra money borrowed or begged from the Centre may not always be used to better one's state but merely to pay a huge army of babus or to pay back older debts.”