Elections are a fertile ground for political theatre and economic anxiety. Unemployment, prices, energy costs are the perennial grievances worldwide and unbeatable by anything else. Sticking to West Bengal’s economy and its broader development, what is the story?
The reigning economic narrative centres on fiscal indiscipline and stress: large debt accumulation, a persistent revenue deficit, and an above-average interest payment burden. This has substantial merit. But a closer look at the state’s development trajectory reveals a more layered story — of genuine social progress alongside structural vulnerabilities that sentiments and the din tend to obscure.
Let’s start with the fiscal. West Bengal’s public finances rank among the more strained in the country — 13th from the bottom on the revenue deficit measure in the just-ended financial year. This, however, is less exceptional than it appears. Across all states, elevated debt and recurring shocks — demonetisation, the 2019-20 slowdown, and especially the pandemic — have compounded balance-sheet damage. West Bengal is not an outlier, though it is more exposed than most other states given its low-income base. There are some notable outcomes beneath: development spending has risen substantially since 2008-09, converging with the all-India average by 2023-24 — a non-trivial achievement. Spending on social services out of revenue expenditure is among the highest across states. The weaker area is composition: the ratio of capital to revenue expenditure remains significantly below its comparable low-income peers, limiting the productive multiplier from such public expenditures.
Its economic structure is a related concern. Services account for more than half of state output, industry’s share has risen only marginally since 2011-12
with a slight slide back after 2021-22, while the structural transition from agriculture has largely bypassed manufacturing — tracking, but not improving upon, the national pattern. For a low-income state — West Bengal is among the 11 with the lowest per capita income in India — the absence of a manufacturing base constrains productivity growth and shuts out the formal employment gains that could lift incomes more broadly. The state has less fiscal cushion to compensate for this compositional weakness than higher-income peers.
Against this, the social development record is more encouraging than commonly acknowledged. The sex ratio exceeds the national average. Life expectancy has remained above the all-India mean for at least three decades. Multidimensional poverty, which captures health intensity alongside headcount poverty, halved between 2015-16 and 2019-21. Secondary school gross enrolment rates are well above the national average, with gender parity broadly maintained above the national average. Consumption inequality between rural and urban households is lower than the national figure, comparing favourably with most peer states. These are not insignificant outcomes for a low-income state operating under chronic fiscal stress after 2015-16.
Not everything holds under scrutiny. School dropout rates are a serious and worsening concern. While enrolment at preparatory and mid-school levels tracks the national average, dropout rates at the secondary stage more than doubled relative to 2015-16, with approximately one-fifth of students — boys and girls alike — not completing school. This represents an alarming deterioration over a decade and a reversal of earlier gains. Health indicators are similarly mixed. Child anaemia rates, which had declined to 54.2% in 2015-16, rose sharply to 69% by 2019-21, tracking a national trend that several comparable states have managed to moderate. The picture for anaemia in pregnant women follows a similar trajectory. Multidimensional poverty trends replicate this in the last five years.
Perhaps the most unknown and underappreciated aspect is West Bengal’s demographic trajectory, recently revealed by the central bank’s analysis. Fertility rates have declined comparably faster than the national average, slipping below the replacement rate, from 2.1 to approximately 1.4 by 2021-23. The working-age population is anticipated to be peaking this year, with transition to an ageing state within the next five years — well ahead of most Indian states. This is, in one sense, a development achievement: faster fertility decline reflects gains in education, health, and women’s empowerment. But it narrows the window for harvesting the demographic dividend and creates fiscal and labour market pressures sooner than expected. Planning for an older population while per capita incomes remain low is an unenviable policy challenge.
Let’s move on to employment. West Bengal recorded one of the lowest unemployment rates in the country in 2023-24 — 2.5%, below the national average — and this attracts both attention and scepticism. The state’s large informal sector in agriculture, trade, transport, hospitality, and repair services segments absorbs surplus and displaced labour with a flexibility that formal employment surveys tend to credit as employment. The low rate also reflects the state’s comparably larger agricultural base, which absorbed returning migrants during and after the pandemic lockdowns, as observed nationally. This is not unemployment solved; it is agriculture doing what it has always done — disguise unemployment.
That absorption capacity also points to the disproportionate burden of repeated shocks on a low-income, largely informal economy. The sequence is sobering — demonetisation in 2016-17, a sharp national slowdown in 2019-20, a pandemic contraction that was above the all-states average in West Bengal, and a slow, asymmetric recovery since which tracks the national trend. Low-income levels and dependence on agriculture and informal services mean the incidence of these disturbances has likely been more severe and more persistent than for higher-income states. A full recovery remains incomplete.
Looking ahead, the pressures are intensifying. The 16th Finance Commission award discontinues revenue deficit grants, removing a meaningful fiscal cushion. The GST revenue guarantee has already lapsed. And the Gulf conflict — with its oil price shock — arrives at a time of already-constrained fiscal space. Hard choices on spending priorities — among debt service, social transfers, and capital investment — are unavoidable. How West Bengal navigates these trade-offs will matter more for its longer-run trajectory than any others competing for attention.
Renu Kohli is Senior Fellow, Centre for Social and Economic Progress, New Delhi. Views are personal