The West Bengal government organised the fifth Bengal Investment Summit on February 7-8, 2019, with great fanfare. According to Chief Minister Mamata Banerjee, the business meet has been able to generate investment proposals of around Rs. 2.84 lakh crore.
The total investment proposal in the last summit was around Rs. 2.19 crore. This year, as many as 140 Memoranda of Understanding (MoUs) have been inked. If these proposals translate to reality, as many as 8 to 10 lakh job opportunities will be created in the state.
The industrial scenario of India and West Bengal
In West Bengal, the previous Left Front government was active in ensuring industriali-sation. Under their leadership, the state was prepared to extend different concessions to investors to make the state attractive as an investment destination. However, political unrest over acquisition of land and the offered compensation became more important than industrial investment in the state. The setting up of Special Economic Zones (SEZs) had to be stalled and the state’s industrialisation drive received a major jolt. The final blow came with the global financial crisis in 2008. The Mamata Banerjee government is trying in its own way to improve the situation. But the desired results are yet to be achieved.
India has been passing through a phase of low industrial and manufacturing growth. But the situation is worse in the eastern part of the country including West Bengal. From the credit data of the scheduled commercial banks it is seen that West Bengal’s share in total outstanding credit in India has been declining. It fell from an average of 5.6% in the five year period between 1999-2000 and 2003-04 to 4.6% from 1999-2000 to 2003-04 to 4.6% in the period between 2012-13 and 2016-17. The state’s average industrial credit also declined from 6.8% to 6.1% during the same period
(Prasenjit Bose, State of West Bengal Economy, EPW, January19, 20019). From 2013-14, there has been a sharp decline in the total as well as industrial credit growth across India. Since 2013-14, the credit growth in West Bengal has declined more sharply as compared to the Indian average. It should be noted that in such a situation industrial credit witnessed almost a zero growth with total credit growth of only 2% in 2016-17.
West Bengal has the second largest position after Uttar Pradesh in MSMEs (Micro, Small and Medium entrepreneurs) sector. The credit to MSMEs in West Bengal also declined from 7.7% in 2010 to 5.4% in 2017. The credit to agriculture has also been declining in the state.
Declining savings affecting investment in the country
After 2012, savings as a percentage of GDP have been falling in India. This had a negative repercussion on the investment scenario of the country. CSO data show that savings had been declining to 30.5% in 2018 from 34.6% in FY 2012. Out of this, the household savings which is the largest contributor of the economy had been declining to 17.2% of GDP in FY 2018 from 23.6% in FY 2012. Private corporate savings are more or less flat and public sector savings are marginally higher in the same period. This fall of savings, particularly, household savings has caused a fall in overall investment. Investment dropped from 34.3% of GDP in FY 2012 to 28.2% in FY 17 and 28.6% in FY 18. The fall of investment caused by falling household savings, has been sharper due to shocks of demonetisation and the implementation of GST.
West Bengal, like many other states, has been trying to attract investment very intensively. In spite of that, Gujarat and Maharashtra have been able to account for 26.5% and 25% of the total corporate investment of India during the period 2012 to 2017.