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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

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

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ECONOMIC REVIEW WEST BENGAL

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

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ECONOMIC REVIEW WEST BENGAL

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ECONOMIC REVIEW WEST BENGAL

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, its fifth largest contributor to GDP. Area wise it ranks 12th. But its ranked fourth in terms of population. As a result despite its spectacular contribution, per capita GDP is not high. Its 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 Uttar Pradesh Tamil Nadu Rajasthan Maharashtra Madhya Pradesh Kerala Karnataka Andhra Pradesh 0.00 33,35,831.80 42,00,165.10 41,65,494.10 21,54,535.80 80,50,313.20 20,29,708.70 20,84,681.90 29,16,614.80 40,76,110.00 20,00,000.00 40,00,000.00 GSDP( Rs.million) 60,00,000.00 80,00,000.00

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ECONOMIC REVIEW WEST BENGAL

Real GSDP (%ge contribution)


West Bengal Uttar Pradesh Tamil Nadu Rajasthan Maharashtra Madhya Pradesh Kerala Karnataka Andhra Pradesh 0.00 2.00 6.41 8.07 8.01 4.14 15.47 3.90 4.01 5.61 7.83 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 West Bengal Uttar Pradesh Tamil Nadu Rajasthan Maharashtra Madhya Pradesh Kerala Karnataka Andhra Pradesh 0 46,555 37,070 20,708 61,531 31,468 70,885 27,850

60,063
48,789 47,848 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Per Capita GSDP

Its compared in nominal terms in the graphs below.

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

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

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 Uttar Pradesh Tamil Nadu Rajasthan Maharashtra Madhya Pradesh Kerala Karnataka Andhra Pradesh 0.00 2.00 9.13 14.86 5.82 7.48 9.38 6.15

3.22
5.17 10.35 4.00 6.00 8.00 10.00 12.00 14.00 16.00

As a %ge of GDP agriculture

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Percentage Contribution to Nominal GDP in Industry


West Bengal Uttar Pradesh Tamil Nadu Rajasthan Maharashtra Madhya Pradesh Kerala Karnataka Andhra Pradesh 0.00 2.00 4.59 7.00 8.84

4.84
17.60 4.16 3.20 5.79 8.56 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 Uttar Pradesh Tamil Nadu Rajasthan Maharashtra Madhya Pradesh Kerala Karnataka Andhra Pradesh 0.00 2.00 6.76 7.38 7.95 3.54 15.41

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

GSDP agriculture

GSDP industry

GSDP Services

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ECONOMIC REVIEW WEST BENGAL 1.3 Growth Performance in 2011-12:

The growth performance of West Bengal has outperformed Indias growth in agricultural sector. The agricultural sector saw a growth of 19.95% (nominal) while Indias average was at around 9.45%. But in real terms, we didnt 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 doesnt 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

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ECONOMIC REVIEW WEST BENGAL


1.4.1 Growth Performance (1970 series):

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

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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 AGRI INDU SERV R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Coefficient 0.404200 0.285490 0.292710 0.997641 0.997304 0.292844 1.200603 -1.593642 Std. Error 0.008469 0.021646 0.024128 t-Statistic 47.72795 13.18885 12.13174 Prob. 0.0000 0.0000 0.0000 3.522371 5.639742 0.540428 0.687466 1.788920

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Durbin-Watson stat

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

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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 Industry Y-o-Y Growth Agriculture 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 GSDPAGE GSDPIGE GSDPSGE R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Coefficient 0.289911 0.310889 0.384527 0.992884 0.991867 0.265489 0.986784 0.073447 Std. Error 0.008816 0.028730 0.020359 t-Statistic 32.88348 10.82099 18.88776 Prob. 0.0000 0.0000 0.0000 5.366823 2.943956 0.344300 0.491338 1.640075

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Durbin-Watson stat

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 199697, 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 states primary output has more than doubled in two decades cumulatively.

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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 countrys growth, we see that the economy hasnt performed at the rate at which the country is growing. But post 1990, we can see that West Bengals growth rate has outperformed Indias 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

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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

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GSDP Growth 1993-94 series


20.00 15.00 10.00 5.00 0.00 -5.00 -10.00 GSDP Y-o-Y Growth Industry Y-o-Y Growth Agriculture 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 GSDPAGE GSDPIGE GSDPSGE R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Coefficient 0.281882 0.180011 0.527229 0.669082 0.586353 0.341213 0.931408 -2.029082 Std. Error 0.022021 0.038815 0.023120 t-Statistic 12.80086 4.637721 22.80377 Prob. 0.0000 0.0017 0.0000 7.066391 0.530530 0.914378 1.022895 2.571900

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Durbin-Watson stat

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 WestBengals 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.

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The state outperformed the countrys 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

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1.4.4 Growth Performance (2003-04 series):

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In recent years, West Bengals 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 -4.00 GSDP Y-o-Y Growth Industry Y-o-Y Growth Agriculture Y-o-Y Growth Services Y-o-Y growth 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

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

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Variable GSDPAGE GSDPIGE GSDPSGE R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Coefficient 0.203125 0.217931 0.574328 0.981310 0.971965 0.186171 0.138638 3.793720 Std. Error 0.030212 0.026177 0.013253 t-Statistic 6.723275 8.325392 43.33435 Prob. 0.0025 0.0011 0.0000 6.937639 1.111892 -0.226777 -0.249958 0.428481

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Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Durbin-Watson stat

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

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1.4.5 Growth Performance Long Term:

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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 countrys 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, 19902000 and again 2005-2012. Refer Table 1.9

CAGR 1970-1975 1975-1980 1980-1985 1985-1990 1990-1995 1995-2000 2000-2005 2005-2010 2010-2012

GSDP WB 3.14 2.45 4.03 3.82 5.03 6.96 5.69 7.13 6.89

GDP 2.82 2.86 3.75 4.37 4.31 4.54 5.64 6.51 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 Indias growth pace during 2004-08 period.

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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 mid1960s. 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, its 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 ofimpasse 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

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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.

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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.

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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 countrys 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

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WB vs India Inflation
16 14 12 10

8 6
4 2 0 -2

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 countrys average.

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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
WB Inflation India Inflation

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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

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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 countrys 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 countrys total rice output. The share of the state in food grains production has been increasing steadily during the past two and a half decades.

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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 States 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

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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.

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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.

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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.

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ECONOMIC REVIEW WEST BENGAL 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

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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 states 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

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With reference to Table 3.3, the size of the tertiary sectorcomprising 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.

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

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

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.

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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

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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.

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

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per 1000 persons July 1987-June 1988 July 1989 -June 1990 July 1990-June 1991 July-December 1991 January-December January-June 1993 July 1993-June 1994 July 1994-June 1995 July 1995 -June 1996 January-December January-June 1998 July 1999-June 2000 July 2000-June 2001 July 2001 -June 2002 July-December 2002 January-December January-June 2004 July 2004-June 2005 July 2005-June 2006 July 2007-June 2008 July 2009-June 2010

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

July 1987-June 1988 July 1989 -June 1990 July 1990-June 1991 July-December 1991 January-December January-June 1993 July 1993-June 1994 July 1994-June 1995 July 1995 -June 1996 January-December January-June 1998 July 1999-June 2000 July 2000-June 2001 July 2001 -June 2002 July-December 2002 January-December January-June 2004 July 2004-June 2005 July 2005-June 2006 July 2007-June 2008 July 2009-June 2010

Sector wise employee distribution of Rural India

Sector wise employee distribution of Urban India

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tertiary sector

tertiary sector

primary sector

primary sector

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secondary sector

secondary sector

A sharp change in trend between west Bengal and India is the tertiary sector in rural India didnt 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.

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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 nances 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

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Interest Rate

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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 xed 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.

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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.

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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 doesnt 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.

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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

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