Perhaps one day we will learn the full story of industrial decline in West Bengal. On current evidence, however, it is not easy to say when things started going really awry. It is true that changes in technology and demand patterns, and the rise and fall of industrial centres are facts of life in a market economy - the Manchesters and the Pittsburghs of the world fade away, yielding place to the Silicon Valleys. Still, the crude facts of the last twenty years about the relative position of West Bengal are nothing short of stunning. In 1980-81, West Bengal produced 9.8 per cent of the industrial output produced in India. In 1997-98, which is the latest year for which we have the numbers, the share was 5.1 per cent, up from a nadir of 4.7 per cent in 1995-96. Organized sector employment actually declined in West Bengal over the period 1980-97; in particular, employment in the organized private sector went down from 10.84 lakhs all the way to 7.99 lakhs. A similar pattern shows up when we look at foreign trade: in 1985-86, the Calcutta airport and port handled about 10 per cent of the imports and exports from the country while in 1998-99 that fraction was around 4 per cent. Or to take a measure of the vibrancy of trade, in 1999-2000 the value of cheques cleared in Calcutta was just 6 per cent of the value in Mumbai, compared to 38 per cent in 1980-81. Even in the mid-Sixties, West Bengal was the second most industrialized of the larger states. By 1995-96, West Bengal was a long way down in that list, behind Karnataka and just ahead of Uttar Pradesh in terms of the share of output from industry. What makes these numbers even more striking is the fact that this industrial meltdown happened in a period of relative peace and political stability in the state after the turbulent Sixties and the repressive Seventies. According to the report, Crime In India 1997, West Bengal was 30th among 32 states and Union territories in terms of the rate of Indian penal code crime (this category includes almost all crimes against private persons and private property) and Calcutta was 23rd among the 23 largest cities. Moreover, this was a period when incomes and therefore demand was growing: per capita gross state domestic product grew at 2.6 per cent per annum in the Eighties and an impressive 5 per cent in the Nineties. Most remarkably, all this happened in a period when the industrial growth rate in the country as a whole accelerated: the rate of growth of industry value added was 7 per cent in the Eighties and 6.7 per cent in the Nineties compared to 5.5 per cent in the Sixties and Seventies. This was after all the period of the software boom and liberalization, the period that put Karnataka, Andhra Pradesh, and Delhi on the industrial map of India. It would almost seem that West Bengal opted to step off the bus just as everyone else was getting on. The cliché about West Bengal, the most familiar story of how things could come to such a pass, is of course poor labour relations - who would invest in West Bengal, when they could invest in Maharashtra and Gujarat and buy themselves a much more docile labour force? This is certainly not what jumps out when we turn to the evidence on labour disputes. There was indeed a rash of strikes in the early Eighties: according to the West Bengal labour commissioner there were 78 strikes in 1980, as compared to an average of 22 per year over the period 1990-97. The average number of man-days lost due to strikes in the eight years from 1990 to 1997 was just below 17 lakh. And if we leave out 1992, the one year when there was a really big strike, the average comes down to 6 lakh, which amounts to less than one day per private organized sector employee in a year. The median number is even lower at 3.2 lakh. It is worth putting these numbers in the context of other Indian states. The one year for which we have data from the other states is 1996. The Indian Labour Handbook tells us that West Bengal had only 16 strikes in that year, which puts it lowest among all the major states. These 16 strikes affected 27000 workers, compared to 143 strikes in Tamil Nadu that affected 37,000 workers, or 129 strikes in Gujarat affecting 120,000 workers. Now there are a number of possible reasons why these numbers might be misleading. Employers might have had to make huge concessions to avoid strikes, which would of course discourage future investment. This, however, is not what people say about industrial relations in West Bengal. Moreover, it seems inconsistent with the ready willingness of employers in West Bengal to declare lock-outs. On average about 2 crore man-days were lost each year due to lock-outs in the early Nineties. And while that number has come down since, it was still over a crore a year at the end of the Nineties. Indeed in 1996, the one year we can make an inter-state comparison, West Bengal was the national runner-up in lockouts, with 80 lockouts according to the Indian Labour Handbook (and 144 according to the revised numbers issued by the state government). The government of West Bengal numbers also tell us that the number of lockouts in any year in the Nineties did not go below 120 when the median number of lockouts in the other states was less than 20. In 1996, West Bengal was also the state with the highest number of man-days lost due to lockouts. The fact that there were so many lock-outs suggests a rather different story -- that there were relatively few strikes because employers in West Bengal are very willing to declare lockouts, which put the workers in a relatively weak bargaining position. Employers do not usually like to preemptively lock out a profitable business - the fact that lock-outs were being used so heavily suggests that doing business in West Bengal was not particularly profitable. A recent joint study by the World Bank and Confederation of Indian Industry based on data from over a thousand firms, provides some support for this view. They only report data for the group of what they call the poor investment climate states. West Bengal, tellingly, is in this group, along with Kerala and Uttar Pradesh. Value added per worker in these states is at least 30 per cent lower compared to what the study calls the best investment climate states (Maharashtra and Gujarat). Low profitability is however less a cause than a consequence of deeper sources of malaise. The World Bank-CII study tries to assess the contribution of various factors towards low profitability in the so-called poor investment climate states. Their assessments are based on the opinions of surveyed entrepreneurs. It is particularly notable that the entrepreneurs themselves believed that labour market rigidities, represented by over-manning of factories, is less important in these particular states than it is elsewhere in India (excluding the best climate states). While this is consistent with the evidence, cited above, on the relative weakness of workers in West Bengal, it should not be read as saying that the West Bengal government does not need to grapple with the issues of industrial relations. For even according to these numbers, firms in Maharashtra and Gujarat are much leaner than their counterparts in West Bengal. Moreover, a part of the reason why workers are in a weak position now may be that employers have chosen not to make use of labour-intensive technologies - which of course hurts both workers and employers. And the fact that workers in West Bengal are less aggressive than they used to be after all these years of industrial decline, is no guarantee that industrial strife will not pick up as soon as growth revives. Finally and most important, strikes and over-manning are not the only cost of poor labour relations. If poor relations within the factory translate into a lazy or opportunistic labour force, productivity will suffer. If management has a lot of bargaining power, this might not hurt them so much; it will be the workers who will pay the price in terms of lower wages. Indeed we learn from the World Bank-CII report that wages are 25 per cent lower in the poor industrial climate states compared to the best states. Instead of labour relations, the report goes on to cite over-regulation, poor infrastructure and lack of skills as the most important problems faced by the poor industrial climate states. Over-regulation is measured in the survey by the average number of visits to an industrial unit by a government inspector. There are almost twice as many visits in any given year in the poor investment climate states compared to the best states. While it is true that these visits are often a waste of time and have the potential of leading to corruption, it is somewhat difficult to believe that it is the visits themselves that are holding these states back (except perhaps in the case of very small firms, an issue which we will touch upon later in this article). One suspects that the direct effect of these regulations is dwarfed by the effects of what they represent - a government that is regulation-happy is much less likely to cooperate effectively with investors. Eliminating inspector visits will only help if it signals a true commitment to investor-friendly governance.