Few states have fallen so far behind as West Bengal. At independence, it was India’s industrial heartland; first among all provinces in manufacturing employment, home to about a third of Indian factory workers, with Calcutta as the nation’s commercial capital.
It had ports, proximity to the mineral wealth of the eastern plateau, a gateway to Southeast Asia and an intellectual tradition that gave the boast “what Bengal thinks today, India thinks tomorrow” its swagger. Entering the 1960s, it stood among the three richest states in the Union.
Today, with the Trinamool Congress voted out in favour of the Bharatiya Janata Party, it ranks among the country’s most indebted states. Its relative per-capita income—127.5% of the national average in 1960-61—had fallen to 83.7% by 2023-24. It now draws under 1% of all foreign investment and roughly 6,700 firms shifted their registered offices out of Bengal between April 2011 and March 2025.
Its accumulated borrowings rose more than fourfold from about ₹1.9 trillion at the end of Left Front rule in 2010-11 to almost ₹8.2 trillion that was inherited by the new government this year, with interest payments alone swallowing 20.5% of revenue receipts. A state that once powered India’s industry now borrows to pay its own interest.
Why do some regions surge ahead while others, often better endowed, fall behind and rarely recover? The ones that pull ahead assemble certain conditions—infrastructure, skilled labour, financial depth, a productive industrial base and credible institutions.
Once these are in place, growth turns self-reinforcing, with each advantage drawing the investment that builds the next. The regions that fall behind are left in a slow-growth club, and without change, the gap widens instead of closing. This is the hard problem of regional economics (Breinlich, Ottaviano and Temple; Venables).
The Indian states that surged ahead—Gujarat, Maharashtra and Tamil Nadu—engineered these conditions. Gujarat made land its instrument, laying out around 200 estates of ready, clean-title industrial land with access to working ports and dependable power supply.
Maharashtra placed the financial weight of Mumbai behind the Mumbai-Pune manufacturing belt and now takes the largest share of foreign investment.
Tamil Nadu built clusters around anchor industries and spread them across the state; carmakers and electronics near Chennai, knitwear at Tiruppur and engineering inland at Coimbatore and Hosur.
Haryana did this at Manesar and Faridabad; cities like Bengaluru, Gurugram and Hyderabad applied the cluster approach to services and prospered.
Clusters accelerate growth and jobs. The Chennai corridor grew from Hyundai’s 1998 arrival into an automotive cluster with over 80 component makers and now accounts for a large share of India’s vehicle exports. Uttarakhand’s Pantnagar, anchored by Tata Motors, drew in 60–65 ancillaries. Tiruppur accounts for about 90% of India’s cotton-knitwear exports and employs some 600,000 workers. The gains go beyond scale.
Doubling the density of activity in a place lifts output per worker by around 6% (Ciccone and Hall). They innovate more, too (Jaffe, Trajtenberg and Henderson). Because returns rise as a cluster thickens, the task is to reach a critical mass; Murphy, Shleifer and Vishny (Journal of Political Economy, 1989) show that escaping a low-activity equilibrium requires investment coordinated and concentrated enough to become self-sustaining.
This makes a case for focusing effort on two or three locations and sectors rather than a scatter of many.
Bengal has let all these conditions lapse. To rebuild them, it must start with restoring credibility. Enact a 10-year industrial policy backed by an investment authority insulated from politics. Bengal is one of only four states never to have repealed the 1976 Urban Land (Ceiling and Regulation) Act (Ulcra). Repeal it, free land and empower the West Bengal Industrial Development Corporation to assemble ready land banks with clean titles.
Logistical costs are high, with Bengal’s Kolkata and Haldia ports draft-constrained. Commit to a deep-water port, complete the Eastern Dedicated Freight Corridor and build plug-and-play logistics parks. Notify the state’s rules under the four central labour codes so a higher retrenchment threshold takes effect and end the militant labour unionism that drove industry out.
On these foundations, pick sectors of latent strength, anchor each with a global player and build an entire ecosystem in one place. Distribute these clusters across districts such as Howrah, Haldia, Durgapur and Siliguri, and align the programme of industrial training institutes and engineering colleges with each cluster’s demand.
Haldia can be a shipbuilding hub; a ₹70,000 crore national mission now backs this sector. Attract global capability centres, which have massive urban multiplier effect. Build labour-intensive clusters where Bengal has skilled labour pools, such as in gems and jewellery, leather goods and textiles.
The new government’s first budget made a promising start. It commits to an integrated deep-sea port at Dadanpatrabarh and opens an Ulcra review; a semiconductor unit is proposed in Durgapur and an IT park in Siliguri.
In Tagore’s words, you cannot cross the sea merely by standing and staring at the water. The state’s slide was a result of policy choices; reversing it is a choice too. West Bengal is well placed to make that choice.
The author is a director at Arrjavv who researches and writes on behavioural finance and economics. Her X handle is @DivaJain2