By Uttam Tiwari

The northern states have always found comfort in taking the self-satisfying stance of criticising the development of Bengal. However, a recent study by the Department of Industrial Policy and Promotion (DIPP) shows West Bengal in a positive light. The ‘Assessment of States Implementation of Business Reforms, 2015‘ report, supported by the World Bank and KPMG, placed the state at 11th position with an overall average score of 46%, beating Kerala, Tamil Nadu, and Delhi. The report assessed the states in eight different areas – setting up a business, allotment of land and construction permits, environmental procedures, labour regulations, infrastructure related utilities, tax reforms, inspections and enforcing contracts.

Business Reality in West Bengal

The Rank wise list of states as released by DIPP | Source: DIPP

Business in West Bengal

West Bengal fared better than the Indian average in Assessment of states implementation of Business Reforms, 2015 Report by DIPP | Source: DIPP

The Power of Dubious Reputations

The state has been a sheer victim of bad perception, for reasons which are not completely wrong. Naxalism during the 60’s, uninterrupted communism for 34-years and unionism led to the creation of “North Korea-look-alike” image in the minds of many. The deterioration of industrial output, halving within a span of 20 years, along with the formation of a number of powerful unions and violent breakouts did not help either. Along with these, there has been a continuous loss of 40-60 lakh man-days on an average every year. Even the addition of the word “Gherao” to the Oxford dictionary in 2004 (courtesy: CPI-M) further exacerbated matters. These reasons prompted the country to assume that a week in the state consists of four working days, two holidays and a Bandh Day.

As a domino effect, the young workforce started migrating to other metropolitan cities like Delhi, Hyderabad, Mumbai, and Bengaluru.

Long before the dusk of the Marxist government, many business houses had already undergone separation. They began shifting either their Registered office or HQ outside of West Bengal. The departure of the Shaw Wallace, Brook Bond, Phillip’s, Bata, Reckitt and Benckiser, Goodyear, Lipton, and others exemplified the anti-industrial and non-friendly image of the state.This also adversely impacted related industries like hospitality, marketing, accounts and financial services. As a domino effect, the young workforce started migrating to other metropolitan cities like Delhi, Hyderabad, Mumbai, and Bengaluru. A report stated that even now, with no “party” rule, people prefer jobs outside Kolkata, for obvious reasons.

Political Instability – The Achilles Heel of the Business World?

With the demise of the red rule, TMC got the opportunity to become the harbinger of change. Its leader and current CM Mamta Banerjee did not really come up as ‘Gandalf The Grey’. She gave a “you shall not pass” to one of the biggest industrialists in the country. This proved that she might not be a communist but her ideologies lie in the left most corner of the right wings.

Business Reality in West Bengal

CP(I)M had been striving hard to regain power in the 2016 state elections | Source: The Hindu

We cannot be too hasty in appreciating the TMC for their 2011 win. It was a result of an infamous incident that was a total blunder in their ledger. Their second win in 2016 was attributed to the non-Bengali background of the BJP and the nonsensical alliance between the Congress and the CPI (M), while they were having a little war down in Kerala during the same time.

Far From the Misguided Perception of a ‘Lost Cause’

While neither the TMC nor the Bengal Province is seen as finest examples of good politics, the new party in 5-years has been almost successful in giving the underpinnings to break the perception. Above the gloomy past, what investors skip to see, are the advantages that the state holds for increasing returns in the future.

The geographical location, in itself, serves a big advantage. With its own coal reserves in Raniganj, it is surrounded by two of the largest coal producers – Jharkhand and Odisha. The nearby state of Bihar and ekda amaar Bangladesh are sources of supply of cheap labour. Sharing borders with Nepal, Bhutan and Bangladesh gives it an even larger market to sell.

Labour conflicts have also been reduced due to the strict rules the state government set regarding absenteeism, especially during strikes and rallies. Data released by the ISI showed that loss of man-days during the recent years have reached a negligible figure.

Evaluating Performance Under TMC

The Trinamool Congress did its best to sell its pro-development agenda during the state assembly campaigns, 2016. State FM Dr. Amit Mitra completely rejected the notion that despite government’s efforts, there has been no major investment in Bengal. In the previous financial year, the Gross Value Added (GVA) growth has been recorded at 10.48%, per capita at 13%, agriculture at 6% and industries at 8%, all of them being higher than the national averages (Planning Commission report, 2014-15).

Business Reality in West Bengal

A low own tax revenue at 5.7% and a huge debt  to GSDP rate of 35% during 2014-15 might question the substantiality and sustainability of the growth figures. But, given the history of the previous government, reliance on high debt is inevitable. The only solution to this is that private investors put their money in the state’s infrastructure.

The state’s expenditure on infrastructure has increased by 311% and capital expenditure by 600%, from 2,200 crores to 13,375 crores, from 2010-15. A total investment of Rs. 8,700 crores have flown inside during the same period. Major investment plans and expansion projects are underway. These include Reliance Jio Infocomm investment of Rs. 5,000 crores, Matix (Essar Group) investment in fertiliser plant of 6,000 crores and expansion projects by TCS, WIPRO and Cognizant with a total increase in staff capacity by around 50,000.

The State government has been appreciated in the DIPP report for its achievement in easing tax procedures and payments. All processes including registration, payment and return filing for state taxes can be done online. It has also become one of the three states where a single ID is issued for all state taxes like VAT and Sales Tax.

The issue of tender by 63 departments of the state has been brought online. The number of odd approvals for setting up a business has been brought down from 90 to 7. Single window clearance under the Shilp Saathi Program is at a stage of full implementation. The report has also applauded West Bengal for being successfully able to maintain timeliness in the provision of the three essential utilities – water, sewer, and power. Supply of power is efficient and at a low cost since West Bengal, a power surplus state, is the only one in the bunch with profit earning DISCOMS.

Other Avenues of Excellence

West Bengal holds an additional advantage in some industries.

In India, spoilage and wastage of food are as high as 40% of the total produce. Food processing would be an apt example with the state being the largest producer of rice, fruits, and vegetables. It has the potential to become the food processing hub of the nation.

Business Reality in West Bengal

Dr. Amit Mitra, minister in charge of finance, excise, commerce & industries, public enterprises, IT and electronics at Bengal Global Business Summit 2015 | Source: Business World

Business magnates like Sanjeev Goenka, Harshvardhan Neotia, Hemant Kenoria, Mukesh Ambani and many others, have higher than 11-digit investments in Bengal. These have appreciated the government’s efforts to make business in the state easier.

But, the state has failed to attract a single investment, domestic or otherwise, in the real estate during 2013-14 (ASSOCHAM report). The reason for investor concern is the unjustified stance of the government over the issues of Land Acquisition and FDI. The Urban Land (Ceiling and Regulation) Act, 1976 is still acting in the state. This makes it almost impossible for any private investor to acquire lands from farmers. TMC’s convergence with the CPI against the issue of FDI in retail, insurance, and pension makes CM’s visits to the UK and other foreign countries merely a vacation break.

Planning Ahead

As far as availability of industrial land is concerned, CM Mamta Banerjee might have played the scarecrow on the lands of Singur. But, the state is prepared with 4,500 acres of land with complete infrastructure to lure the migrating flocks back in. It also has 1 lakh acres of land with its different departments which may be allocated for business purposes if required. Development of New Town and government’s plan to make it a financial hub seems to be working effectively. Allocations for the same have been made to fifteen different banks up till now.

The capital city, Kolkata, is home to 8,700 millionaires ($), making it the third wealthiest neighbourhood in India. The number rose by about 174% between 2004-14, the highest ever in the country. Around 570 ultra-rich people, holding more than $10 million, live in the city of joy. New avenues are opening and there is scope for better exploitation of the accumulated wealth.

The government has, if not enough, put a considerable amount of effort in disseminating earlier perceptions. The only factors needed for the effectiveness of the development programmes are time and consistency. For now, we can find comfort in the fact that the government, is not taking shield under the state’s rich culture and heritage. It is giving the blame game a miss. It is indeed putting penny plain development in its agenda.

Uttam Tiwari is a third-year student pursuing BCom(H) at St. Xavier’s College, Kolkata

Featured Image Credits: Pierre LeBigot via VisualHunt

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Posted by The Indian Economist