By G N Bajpai
The nation has seen much political heat in the midst of elections particularly in West Bengal (WB). Stepping away from the electoral slugfest, the subsequent political developments seen in the Trinamool Congress and the further hot exchanges that followed, it is time to inquire into economic development issues in West Bengal and their impacts on the integrated development of the entire Northeastern (NE) region.
The BJP now rules all States except Jharkhand from Delhi to WB, including six of the seven NE sisters, either directly or as a major coalition partner. All except Delhi are laggards in economic development, GDP per capita, and human development outcomes. The massive outbound migration from these states—labour in search of a living, talent in search of opportunity and capital in search of returns — has been a constant source of social and political concern.
At the dawn of India’s political independence in 1947, the country’s economic geography was markedly different from contemporary paradigms. The eastern belt comprising UP, undivided Bihar, and WB occupied a more prominent position in the country’s industrial and commercial economy. This region was endowed with the bulk of industrial infrastructure, mineral resources, railway network, riverine transport, and engineering capabilities.
UP dominated sugar production, textile manufacturing, leather goods, glass and brassware, along with agricultural output. Kanpur was often called the “Manchester of the East” because of its textile mills and leather factories. Cities such as Varanasi, Agra, Meerut, and Moradabad had strong manufacturing traditions. Bihar commanded coal, iron ore, mica, copper, bauxite, limestone production, and steel manufacturing. The cities of Bokaro, Ranchi, Dhanbad, and Hazaribagh formed an integrated industrial ecosystem based on mining, metallurgy, and engineering.
WB was undoubtedly the most industrialised State in the country at the time. Kolkata was India’s leading commercial and manufacturing center and a gateway for trade and commerce to a large hinterland spanning the entire NE India, Southeast Asia, and even Europe. The city was a hub of banking, insurance, and shipping. The State dominated jute, engineering goods, railway equipment, heavy machinery, foundries, and chemicals, as well as the tea trade and exports. The industrial belt stretching from Kolkata, Howrah, Durgapur, Asansol, and Burdwan formed the backbone of India’s heavy industry. Researchers estimate WB accounted for approximately 27% of India’s industrial output in 1950-51. The region’s integrated economy delivered higher productivity.
While discussing the decline of NE India, the historical truth of its foundational contribution is forgotten. The industrial infrastructure built in UP, Bihar, and WB during the early decades of independence laid the crucial foundations for India’s broader economic transformation. The economic divergence among the NE, Western, and Southern Regions is the result of a series of complex historical events characterised by macroeconomic policy distortions, structural imbalances, and political transitions. The decline began with the Freight Equalisation Policy in 1952, under which the Union Government subsidised the long-distance transport of key industrial inputs using an Equalisation Fund, effectively removing the geographical advantages that naturally belonged to States with abundant mineral deposits.
The broader objective of ensuring balanced regional economic development led to freight subsidies for transporting minerals such as coal and steel to other States. However, the transportation costs of other commodities, such as cotton and oilseeds, were not similarly equalised. In one view, the policy obliterated the NE’s natural advantage of lower input costs without compensating for this loss of natural advantage. WB’s GDP fell from around 10.5% of India’s in 1960-61 to 5.6% in 2023-24.
It is argued that this setback was compounded by several other factors like labour unrest, infrastructure degeneration, misgovernance and the rise of coastal economies. The phenomenon of decline, which economists often refer to as the “great divergence” within the country, converted a structurally forerunner region into one of systemic underdevelopment.
The NE is blessed with the fertile Gangetic plains, an extensive railway and river network, coal and other mineral resources, historical industrial sites, a large and youthful population, and access to the Bay of Bengal. The proximity to Nepal, Bhutan, Bangladesh, and Southeast Asia opens up significant overseas markets.
Historian and economist Gunnar Myrdal famously said, “Development and underdevelopment are cumulative processes.” The revival of NE should be organised as a cumulative process of developing the entire region as an integrated economy, rather than by building the economies of individual States in isolation. This calls for evolving pragmatic policies and a cooperative approach. An ultra-modern high-speed freight and industrial corridor comprising business and industrial parks, warehouses, logistics hubs, and export zones, connecting the cities of Kanpur, Prayagraj, and Varanasi in UP; Patna and Dhanbad in Bihar; and Asansol, Durgapur, and Kolkata in WB, should be developed. The freight and logistics network should be built around an Eastern dedicated freight corridor, inland waterways, container terminals, cold storage chains, and multimodal logistics parks. Kolkata should be revived as Eastern India’s gateway through port modernisation, technology parks, logistics hubs, and international trade facilities.
Based on historical experience, special focus should be on the manufacturing of electronics, defense, leather textiles, and food processing in UP; agro-processing, fertiliser, engineering, cement and construction materials, and renewable energy equipment in Bihar; and engineering, petrochemicals, shipbuilding, railway equipment, and heavy industries in WB. The plans should be supplemented by a sharp focus on urban development, investment in human capital, a mandate to realign the Credit-to-Deposit ratio, and institutional coordination. A permanent “Eastern Regional Council” comprising UP, Bihar, Jharkhand, WB, and Assam should be created to reap the benefits of India’s ‘Develop East Policy’. Economist Albert Hirschman contended, “Development depends not so much upon finding optimal combinations for given resources and factors of production as on calling forth and enlisting for development purposes resources and abilities that are hidden, scattered, or badly utilised.” The potential is enormous. A unified corridor-based economic strategy will enable optimal harnessing and a more balanced, prosperous, and inclusive India.
(The writer is a former Chairman of SEBI and LIC. Views are personal) (Syndicate: The Billion Press)
