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Some Issues Concerning Industrialisation of West Bengal

Tuesday 8 May 2007, by Kamal Nayan Kabra


Like any predominantly agricultural economy, West Bengal (WB) too needs to go in for a strong drive for industrialisation. More so after its farm sector has made a reasonable progress as its average yield level is higher than the national average, the time is ripe for concerted moves to restore the prime position that WB had in industrial development not too long ago. Is this kind of an argument reminiscent of the lesson of history that successful agricultural revolution provides a solid ground for industrial development? The case appears to be a little more compelling because with the security of tenure, the institutional profile of its agriculture has acquired features that prevent the gains of higher productivity from getting concentrated in the hands of a small group of large landholders. There are Green Revolution States that have made remarkable progress in agricultural development, but there the small peasantry and the rural poor have been able to participate only marginally. In fact, with the relatively stronger position of the rural large landholders, the balance of the socio- economic forces and market power tends to tilt against the majority of the small landholders and the labouring masses who have hardly any land of their own and have little security of tenure on the lands they lease-in.. With this kind of agricultural growth, there is little basis for a relatively democratic industrial and tertiary sector development within the overall framework of a market economy. They may well be treated as cases of economic growth where the initial socio-economic conditions cannot but lead to a variant of capitalist industrial growth that is socially unbalanced and thus exclusionary from its inception Thus. one can say that unlike in many States going for industrial development with a small size of the local market (an outcome of the highly skewed land relations) giving rather limited purchasing power to a very large part of the poor peasantry and rural, landless poor, WB is in a better position. This is owing to its success in combining land reforms with programmes and policies that have led to higher levels of yield .for creating effective demand for goods of industrial origin. This process seems to have been helped also by the relatively more effective implementation of various programmes of rural development by means of active involvement of the panchayayt raj institutions. In brief, the move to go in for greater priority to industrial development in the changed context of relatively more evenly spread benefits of agricultural development is in conformity with the well-established proposition of various schools of development studies insofar as a comparatively less skewed distribution of income, assets and means of participation in economic activities provide at least some basis from the demand side for a variant of capitalist industrialisation in which the choice of the product-mix would not be tilted excessively in favour of what Frances Stewart has termed high income goods.
The need to build upon the improved agriculture by means of attempting a decisive breakthrough in industries makes a lot of sense. After all, the proportion of population dependent on agriculture at 65 per cent in WB is well above the national average of 56 per cent. The classical case for transfer of workforce from agriculture to manufacturing thus has a sound basis in both theory and historical experience and is among the main arguments in favour of industrial development. The point is that the industries that come up, irrespective of the scale, ownership and location, must serve the twin criteria of increasing employment and give greater priority to the production of mass consumption goods. This is essential in order to absorb the additions to the labour force in non-agricultural occupations and thus spare agriculture from the non-sustainable task of shouldering the responsibility of supporting ever new additions to the labour force. But without privileging the production of mass consumption goods to a greater extent, generally having comparatively greater capacity to create employment opportunities, the real physical wherewithal of supplying the demand for additional consumption emanating from the newly employed workforce may remain missing. This would be an unsettling influence from the macroeconomic balance and lower the real wages of the workers. Thus it can be maintained that what a State like WB needs is not any industry irrespective of its character, but certain industries, irrespective of their size and ownership, but some industries that satisfy some criteria of fitting in with the specific conditions of WB. Thus the point then is that the choice of the industries to be promoted cannot be left entirely to the market forces (as even capitalist industrial growth that needs state support must serve at least a modicum of social or economic needs of the area in which they are located). The need for such selectivity, rather than a blanket support for industrial investment, is particularly sharp and pointed when it comes to dealing with the investments proposed by the large business houses and big industrial groups which have a distinct and demonstrated preference for the presently sun-rise industries on the forefront of technological advancement and, except for retail trade, do not like producing mass consumption goods having relatively low price tag. The story of the Tatas exiting tea gardens and toiletries can possibly be taken to be an indicative trend. Similarly certain other aspects of the regional economy must be borne in mind in extending state support to industries, like the scarcity of land, their need to disperse industries and cause the least disturbance to existing viable means of livelihood, such as multiple cropping areas of farm sector production. We are pointing out certain factors in general, rather than attempting a comprehensive examination of the conditions in WB that must be borne in mind while devising public policies for the support of private sector-led industrial growth.
In any such exercise it is always very instructive to learn from the experience the country has obtained from promoting industries over almost six decades now. It may be noted that in India the pattern of industrial development in the period 1950-2006 has not been accompanied by any meaningful reduction in the proportion of the workforce dependent on agriculture. In fact, the absolute number of people deriving their livelihood from agriculture has increased in a big way and the per capita/cultivator availability of land has nose-dived. This is a serious distortion that makes the structurally retrogressed Indian industrial development lop-sided, exclusionary and de-linked from the vast number of agricultural population who were expected to find a relatively high productivity vocation in industry but, in effect, could not. On the contrary, as a result of land acquisition directly for setting up industries or indirectly for secondary purposes connected with setting up industries, the loss of livelihoods that has come about as a result of transferring land from the farmers to the industrialists has not even been made good by the new opportunities for work in the factories. That such a pattern of industrial growth thus causes a glaringly perverse redistribution of resources is another negative factor that needs to be taken into account. That is to say, industrial development was expected to improve the productivity and living standard of those agriculturists who were attracted into the new and expanding industries, but, ipso facto, also help the earnings of those who remained in their traditional farm sector occupations. But the actual rate and pattern of industries turned out to be such as to belie these expectations.
The new industries that grew in India rapidly in the post-independence period were largely capital and intermediate goods industries, durable- use consumer goods industries and the weight in the index of industrial production of light consumer goods industries, agro-based industries and, in general, the industries producing mass consumption goods declined. Also most of the industries that developed were based on imported high capital-intensity industries, located in a few pockets. The fact that the share of wage payments in the turnover of the corporate sector large industries is below seven to eight per cent and the total number of workers in the factories sector (according to the data from the Annual Survey of Industries, is under 80 lakhs, and also that a good part of the employment is in relatively small-sized factories, as seen in the organised manufacturing sector employment of around 46 lakhs) shows that the labour absorption has been rather limited in the manufacturing sector. In fact, for the last few years during the liberlisation period, even the absolute level of employment in the manufacturing sector has declined even as the accelerated rate of industrial growth is gladdening the hearts of the liberalisers! The overall position of the manufacturing sector in India, with its contribution of under one-fifth of the GDP and around one-eighth of the work force is a clear indication that along with highly laudable achievements, such as its product-mix diversification, technological sophistication of many new and old industries, massive size of the large industrial conglomerates, a large presence in the basket of our exports and comparative position of Indian industries vis-à-vis the industries of most of the Third World countries, the manufacturing sector of India has been able to provide a rather limited, costly and sectarian response to the massive problem of low productivity, inadequate and insecure livelihoods, positive spread effects on the other sectors and the poorer regions in the general prevalence of low level of social and economic advancement. In one word, it would be a heroic bravado indeed to claim that the industrial development seen during the past six decades, (including that during the last 15 years of giving a free hand and liberal public policy support to the large, corporate industrial sector, without any restraint of imposing even a modicum of social responsiveness considered disheartening interference by the industrialists), can be treated as living up to the great national challenges, especially if one were to take out the role of the really big unregistered industrial sector. It is a case of pure private gains without any social counterpart of a modicum of social benefits. In fact, by way of the sins of both commission and omission, this kind of industrial growth has extracted an unrequited cost from the rest of society. Let us recall that even Adam Smith supported free wheeling pursuit of private gain by the butcher, baker and brewer because unintentionally in this process was produced a social dual of supplying the needs of society for meat, bread and wine; yes for society and not for a tiny, self-serving portion of it!

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