A Tale Of Two States: Why Bengal Can Learn A Few Things About Governance From Odisha

“Destiny is not a matter of chance; it is a matter of choice,” someone famously said.

West Bengal and Odisha, two neighbouring eastern Indian states, proved that to be true. Only their choices were different.

Two decades ago, Odisha was a poor, mining destination with few public sector facilities. Today, the state has major private sector investments in port, LNG, metal, IT, etc. It is now aspiring to capitalise on the global investment opportunity opening up to the country.

An industry leader, who had attended the recently concluded investment summit in Bhubaneswar, dubbed the state as “another Gujarat in the making”. A look at the Industrial Policy Resolution (IPR) 2022, released during the summit will tell you why.

Significantly enough the summit held between 30 November and 4 December is named ‘Make in Odisha’. The intent is fully backed by the IPR that lays out a clear roadmap for facilitating investment by ensuring cheap land, electricity, administrative support, etc.

The entire document is nicely aligned with the federal initiatives in terms of production-linked incentive (PLI) schemes, green technologies, corridor-based development, etc, with specific (and repeated) reference to “migrated units”.

Over and above the “priority” in sectors like metals, marine products, etc; huge incentives are lined up for a five-to-seven-year window for “thrust sectors” like aerospace, defence, electronic system (EDSM), automobiles, pharma, green hydrogen, telecom equipment, textiles, etc.

Filling Up The Gap

The policy paper left ample scope to accommodate any prized investment, in areas beyond those mentioned in the list, under the thrust sector. That’s a perfect approach in a highly volatile global scenario that is throwing up unexpected opportunities.

With the world’s most valuable company showing urgency to shift its iPhone production to India and a top global electronic component maker striking a $20 billion semiconductor JV in the country; not many would doubt India’s arrival on the global stage as a manufacturing destination.

The concern, if any, was about the readiness of the Indian economy. While the federal government is doing everything possible to lap up the opportunity, it is the states that have the responsibility to give a safe and secure home to the investors.

This is a high-stakes game. A Foxconn or Pegatron is in a hurry to move out of China and ramp up operations in the new destination quickly. They are not here to listen to lectures on federalism and social justice. If India cannot, they will go to Vietnam or some other destination.

States need a vibrant ecosystem, the ability to offer incentives and tremendous intent to implement such projects. So far only a few developed states had fit this bill. Naturally, the foreign direct investments (FDIs) were heading to Karnataka, Maharashtra, Tamil Nadu or Gujarat. 

And, that gave rise to the concern about widening regional disparity. The Yogi Adityanath government is making sincere efforts to attract investments and is also successful to some extent.

However, given its size and decades of neglect, they need more time to catch up.

This is where Odisha is making a huge contribution to the country’s growth aspirations. Their success will make the Indian growth story more equitable and sustainable. And, rest assured this is no frivolous attempt.

They have had a painstaking journey — riddled with conflicts over land and environment leading to missed opportunities during the last boom, illegal iron ore mining controversy in the run-up of the 2008 Beijing Olympics, etc — over the last two decades.

However, the Naveen Patnaik government never lost sight of its industrialisation agenda, stayed clear of any major corruption charges and remained focused on institution building. Today they are strengthening those institutions.

The IPR is not a black promise. It’s a firm commitment to capacity building right from the district level with a clear allocation of responsibilities and assured budgetary support. Most float funds to create infrastructure. Odisha floated a fund to maintain infra as well.

Antithesis Of Development

West Bengal is an antithesis of Odisha — a story of sustained destruction. In terms of the economy, education and infrastructure it was among the most advanced (if not the most) states in India during Independence.

Till the 1960s, Kolkata was the South Asian headquarters of most multinational companies (MNCs). Though industries left the state in the 1970s, most blue chips had headquarters here in the 1980s. With one of the oldest ports in the country and early Plan focus, it had every soft and hard infrastructure necessary for the industry.

The rest is a story of wrong choices. The same Leftists who used to blame freight equalisation policy for the misfortune of the state took four years to welcome private investment after the economy was liberalised in 1991.

And, when the Leftists finally proposed industrialisation, Mamata Banerjee disposed it. “16 Years ago (2006) today, I began my hunger strike for the farmers of Singur and rest of the nation,” West Bengal Chief Minister tweeted on 4 December.

Her movement ended up sending a prized auto investment packing, from West Bengal to Gujarat in 2008. Gujarat was already industrialised. Banerjee’s agitation helped it to become India’s newest auto hub. For Bengal, that was the end of the rejuvenation dream.

While the non-BJP Naveen Patnaik government became a poster boy of cooperative federalism, West Bengal shines in the opposition. There is no attempt to align its policies with the Centre to tap investment opportunities.

Yes, Bengal too holds business summits and churns out mammoth investment numbers. But there is not much reflection on the ground. Despite the low fertility rate (1.6), Bengalis, across class and creed, move out to other states in search of opportunities. Kolkata has the lowest share of the youth population among all metros. 

Limited formal opportunities lead to suboptimal informal activities and low tax revenue. The result is telling on the “stressed” state finances. The Banerjee government resorted to financial jugglery to survive the crisis. The problem is now blowing in its face.

In May this year, Kolkata High Court ordered the state to mitigate 35 per cent gap in payment of dearness allowance. The order was upheld by the division bench and is now awaiting the judgement of the Supreme Court.

If implemented, West Bengal has to pay nearly Rs 42,000 crore in arrears. This is a little less than one-fifth of the state’s expenditure budget of Rs 229,454 crore in the last financial year. Moreover, the annual salary outgo will increase by Rs 12,000 crore to 15,000 crore.

Constitutionally, there is no available means for the Centre to foot this bill. The immediate option lies in curbing the freebies, which are too many.

The Rs 500 cash handout to women alone reportedly would cost over Rs 10,000 crore to the exchequer this fiscal. Adoption of centrally-sponsored schemes like Ayushman Bharat and limiting food subsidies to the prescribed 40 per cent of the population would also bring home immediate savings.

The long-term solution lies in industrialisation and the formalisation of the economy. There was a time when Bengal was the thought leader of the nation. Now it should learn good governance from Odisha.