West Bengal's GDP share halved: Economists blame land issues, corruption over politics

West Bengal's economic footprint has shrunk to half what it once was. In 1960, the state accounted for one-tenth of India's total GDP. Today it generates 5.6 percent. The decline extends into household earnings: per capita income has swung from running 27 percent above the national average to sitting 12 percent below it. Two economists—Maitreesh Ghatak at the London School of Economics and Debajit Jha at Jindal School of Government and Public Policy—have spent considerable time studying why, and their conclusion cuts against the grain of most political commentary. The slowdown, they argue, has less to do with which party holds power than with three structural failures: the inability to acquire land for development, corruption systems that have calcified into the state's operating machinery, and a missed chance at industrialization that the state never recovered from.

Ghatak acknowledges the decline looks somewhat less severe when you adjust for inflation over six decades, but the underlying trend remains unmistakable. What makes his analysis distinctive is his refusal to pin the problem on ideology alone. During parts of the Left Front's tenure, he notes, per capita income actually improved—driven largely by agricultural productivity gains. The timing, however, was unfortunate. While those gains were accumulating, the 1990s arrived with the information technology boom, and West Bengal simply did not participate. The state had the ingredients: strong universities, a substantial pool of educated workers, and Kolkata as a major metropolitan center. It had everything except the industrial transformation that would have anchored its economy for the next three decades.

Jha pushes the analysis deeper into the mechanics of extraction. He identifies two entrenched systems that function as permanent brakes on investment. The first, which locals call "syndicate raj," operates as straightforward extortion. Contractors and investors are forced to purchase materials—often substandard—from connected local groups at inflated prices. The second system, "cut money," works similarly: a tax levied on economic activity by those who control informal networks. Both drain resources that would otherwise flow into productive investment. "Extraction always has a negative impact on investment," Jha explains. These are not temporary obstacles that a new administration can sweep away in a few months. They have become embedded in how the state functions, sustained by local employment structures and patronage networks that benefit enough people to resist dismantling.

Land acquisition emerges as the thread connecting all three problems. Ghatak returns to it repeatedly: without solving the land question, industrial recovery remains theoretical. Infrastructure projects stall. Housing developments freeze. Factories cannot be built. The problem is not new—it has delayed major projects for years—but it remains unsolved. And here is where both economists issue a warning that transcends electoral cycles. Political change alone will not fix this. A new government might bring different priorities and cleaner administration, but unless that government arrives with a concrete plan to resolve land acquisition, dismantle the syndicate systems, and eliminate cut money, the structural problems persist. Jha emphasizes that restoring basic law and order is a prerequisite for any meaningful industrial revival. But he also acknowledges the political trap: the corruption networks that strangle investment also provide income and employment to people in many regions. Dismantling them creates immediate losers with immediate grievances. The economists are not saying recovery is impossible. They are saying it requires sustained, difficult governance work that transcends the familiar left-versus-right debate and demands something harder: the willingness to confront entrenched systems regardless of which party benefits from them.