Future of West Bengal now.

An alliance led by the Communist Party of India (Marxist), which has ruled the state continuously for 34 years, is widely blamed for the state’s economic woes, and has received a drubbing at the hands of Ms. Mamata Banerjee’s  Trinamool Congress in alliance with the Indian National Congress. This would represent a seismic shift in Indian politics: most members of the youthful electorate have known no other government. It may not be as momentous as the fall of the Berlin Wall but for India it would run close.

Mamata Banerjee, CM, West Bengal

Her railway budget presented earlier this year was widely seen as populist and a lead-in to the election campaign rather than a serious attempt to stem the tide of red ink and rationalize operations. Ms. Banerjee has also been criticized for an excessive focus on her home state in planned future investments. Indeed, half the railways’ losses were accrued in West Bengal.

Amit Mitra, secretary general of the Federation of Indian Chambers of Commerce and Industry, who is now the Finance Minister for the state, blamed the railways’ losses on the global financial crisis and the subsequent drop in freight carriage, the largest revenue source.  Evidently, Ms. Banerjee found it tough to strike this balance as Railways Minister: how would she do this as Chief Minister?

Amit Mitra, Finance Minister, West Bengal

Next, we can glean some clues from the TMC’s election manifesto. The first part is a thorough and fairly devastating critique of West Bengal’s poor economic performance under CPM rule. Starting with a decline in manufacturing, then going on to the fall in manufacturing employment and labor productivity, the document moves on to the decline in agriculture, the state’s fiscal crisis, the poor state of infrastructure, health and education. Indeed so bleak a picture was painted that the CPM tried to offer a rebuttal, but not very convincingly. For instance, their claim that the state ranks 9^th out of 17 major states in per capita income sounds like an own goal!

The second part of the TMC manifesto presents the party’s positive vision of how it would turn the economy around if elected. This boils down to reviving manufacturing as the driver of the economy, focusing on labor-intensive sectors which would bring the added benefit of large job creation; investing in infrastructure, health and education; and restoring the state’s finances to good order. The planned infrastructure investments don’t have a price tag but we can expect it to be large. It’s not clear how massive new investments can be combined with balancing the books without a major increase in taxes or a cut in other expenditures such as social spending or salaries.

This leaves open the question of whether improved tax collection alone can fill the gap or whether spending cuts would be necessary. Either way, the state’s dire fiscal situation will leave Ms. Banerjee, little room to makeover. Also, let’s not forget the ever-sensitive issue of land acquisition, which will be necessary to re-industrialize the state. Add to that dealing with entrenched interests and a state government apparatus intertwined with the CPM for more than a generation makes her plans for revitalizing the state a tall order indeed.

If Mamata Banerjee takes on serious economic reform, how much short-term pain will Bengalis be willing to put up with for uncertain gains in the future? Or will she play it safe and take the populist route instead? Lets Wait and Watch

Cheers,

Akash Poddar