Investments in Eastern India: A Glaring Paradox Rooted in Political Culture

The two contrasting numbers reflect the mysterious paradox that is Eastern India. While states like Odisha are offering data-backed proof that it is possible to escape the poverty trap decisively, others like West Bengal are regressing towards a 21st-century version of the poverty trap.

(Photo: Namita Chauhan/ The Quint)

Rhetoric is very useful in political debates. But then it is hard numbers that matter at the end of the day; numbers that reveal the economic realities hidden beneath the political rhetoric. Just recently, Mamata Banerjee, the chief minister of West Bengal went on a 12-day "business” trip to the UAE and Spain to attract foreign investors to her state.

Barring West Bengal, most media platforms ignored the visit as they covered controversies like the Sanatana Dharma, Manipur, G20, the INDIA Alliance calisthenics and more. In any case, there wasn’t any news to cover.

One success of the visit by Mamata didi was an agreement signed by organisers of the Kolkata Book Fair with those of the Madrid Book Fair. When it comes to investments, West Bengal remains a wasteland.

Investment in Bengal vs Odisha

Recently, the Reserve Bank of India released a study that shows the amount and share of investments attracted by various states in 2021-22. The study was not about "proposed” investments or MOUs, but actual bank credit-backed and approved investments. West Bengal accounted for about 1% of the share.

In numbers, the amount committed to the state was a pathetic Rs 3,500 crores. By any yardstick, that should be a matter of despair for residents of the state; once the most industrialised region of India.

If the numbers trigger despair in West Bengal, they evoke joy in neighbouring Odisha – once the poorest state in India along with Bihar. The same RBI study shows that Odisha attracted about 11% of the committed investments, or more than Rs 35,000 crores in the same period.

The two contrasting numbers reflect the mysterious paradox that is Eastern India. While states like Odisha are offering data-backed proof that it is possible to escape the poverty trap decisively, others like West Bengal are regressing towards a 21st-century version of the poverty trap. Take another parameter.

The NITI Aayog releases a multi-dimensional poverty report every year or so. This measure is based on 12 human development & standard of living parameters. In the 2021 report, 29% of citizens of Odisha were poor while the figure for West Bengal was 21%.

By 2023, the proportion of poor in Odisha had fallen to 15.7% and 11.7% in West Bengal. The latter is still better off, but Odisha is bridging the gap rapidly. But it is a third set of data that deepens the paradox: the per capita income of the two states.

By far, it is the most effective measure of the state of any economy. It is here that the astonishing performance of Odisha as compared to West Bengal stands out.

Per Capita Income In Bengal and Odisha at Current Prices

Source: Author 

How Odisha Bounced Back in Terms of Economic Growth

Look at the accompanying chart. When the 21st century arrived, Odisha, along with Bihar was the poorest state in India in terms of per capita income. West Bengal was far ahead of Odisha.

By 2023, the tables have decisively turned in favour of Odisha. Political stability or instability cannot explain this profound change. Odisha has been ruled by one Chief Minister Naveen Patnaik since 2000. In the same period, West Bengal has seen just two Chief Ministers Buddhadeb Bhattacharya and Mamata Banerjee. Both have been politically “stable”.

Then what explains this glaring contrast in economic performance? The contrast becomes even more glaring when you look at the Bihar numbers.

In 2000-01, both Odisha and Bihar had roughly the same levels of poverty. Now, the poverty ratio of Bihar is more than three times that of Odisha. Even Bihar has seen just two chief ministers (barring a short-lived tenure of Jiten Ram Majhi as the “caretaker”) Rabri Devi and Nitish Kumar.

For analysts and commentators more focused on these significant changes rather than social media wars over polarising issues, this contrast between joy and despair is truly hard to explain. And it definitely calls for a serious debate.

You can see the same paradox in the two states that were newly created in 2000: Jharkhand and Chhattisgarh. Both were resource and mineral-rich regions of Bihar and Madhya Pradesh that were treated in a "stepmotherly” manner.

People in both regions protested for decades demanding a separate state. Both the two new states had immense opportunities to deliver improved livelihoods to citizens. Both states have been badly affected by Maoist terrorism since they were born. Both had near-identical per capita incomes when they were born. But look at the difference now.

Chhattisgarh is now significantly ahead of Jharkhand and the gap is rising year after year. Some argue that political instability in Jharkhand could be a key reason for this. They are wrong.

'Culture of Violence’ Behind Economic Distress?

The divergence between the two started in earnest in 2014. Since then, both states have seen stable governments that have completed their tenure without any change in chief ministers.

The funny thing is major political parties have been responsible for both joy and despair. For instance, both the Congress and the BJP can take credit for joy in Chhattisgarh. Similarly, both have ruled as alliance partners even as Bihar and Jharkhand remained basket cases doomed to high levels of poverty and misery.

Of course, both the Left and TMC have presided over the flight of capital and economic regression in West Bengal. What could explain this mystery?

It can’t be corruption. There is widespread corruption in all states: Odisha, West Bengal, Chhattisgarh, Jharkhand and Bihar. It can’t be political instability as analysed earlier. The author thinks two factors are responsible for the rapid progress in Chhattisgarh and Odisha along with simultaneous stagnation and regression in Jharkhand, Bihar, and West Bengal:

The first is investments in infrastructure. Odisha and Chhattisgarh have seen massive growth in investments in physical infrastructure in the form of roads, connectivity, and power. The other three have lagged significantly behind. But perhaps, the more important reason is a “culture of political violence”. Now, violence is an everyday affair in all parts of India. But in West Bengal, Bihar, and Jharkhand (particularly in Bengal and Bihar) a culture of political violence has been nurtured and encouraged.

It is not just related to murder and rape of political opponents but also the impunity with which "workers” of ruling parties intimidate entrepreneurs and extort money from them.

Investors have learnt to live with corruption in India but when extortion mixed with implicit threats of actual physical violence becomes the norm, investors will choose to stay away. In fact, even existing investors will flee. People in West Bengal, Bihar, and Jharkhand are paying the price for this even as citizens of Odisha and Chhattisgarh are rapidly escaping the poverty trap. Political rhetoric alone cannot camouflage this reality.

(Sutanu Guru is the Executive Director of the CVoter Foundation. This is an opinion article and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)