As another round of assembly elections in West Bengal approaches, discussions around the state of its economy have inevitably resurfaced. Whatever one’s political views, the dominant narrative about the state’s economy is laced with nostalgia — a glorious past followed by a steady decline relative to the rest of the country since the 1960s.
Yet, there is a puzzle: Our research with Boston University economist Dilip Mookherjee shows that in terms of the growth rate of real net state domestic product (NSDP) per capita — a standard measure of a state’s economic prosperity — over the entire period for which we have comparable data (1960 to 2024), West Bengal has had very similar performance to that of the rest of India.
Only a careful analysis can bring out the true picture. Otherwise, one can pick numbers and make the state’s performance look better or worse.
For example, if we take nominal numbers and restrict attention to 17 major states in terms of population (and taking the pre-split units for the four major states that split up later), West Bengal ranked fifth in the 1960s, falling to the 12th spot in recent years, beaten even by states such as Rajasthan and Odisha, which were typically behind earlier.
However, nominal income reflects both output and prices, and without adjusting for price levels, this could give a misleading picture. If we adjust for prices at a disaggregated level and look at real income, West Bengal’s rank does not show such a dramatic decline, and the state turns out to be slightly below average (10th or 11th) most of the time, with some dips during the 1970s, 1980s, and 1990s.
We know ranks are not a very robust measure of a state’s per capita income, since a small change or not adjusting for price changes or how population projections since 2011 have been calculated could make one state overtake another.
A clearer picture emerges if we look at the ratio of West Bengal’s NSDP per capita to that of the rest of India and how it has changed over time.
From the early 1960s till the early 1990s, there was a steady decline in West Bengal’s NSDP per capita relative to the rest of India. From then to circa 2005, there was a steady improvement with West Bengal managing to catch up with the rest of India briefly in the early 2000s. Since 2005, there has again been a steady deterioration in its relative position that has continued to the present period.
Still, whether one uses nominal or real values and irrespective of West Bengal being above or below the rest of India, throughout this entire period, even at its worst, the gap has not exceeded 25%.
If, instead, we compare West Bengal with the best performing states since the early 1990s, which have consistently included Gujarat, Haryana, and Maharashtra, a starker picture emerges.
Here, the gap has been gradually increasing since the 1960s, with a slight recovery from the late-1990s to the early-2000s and has increased steeply since then and is more than double at present — West Bengal’s per capita real NSDP is 47% of these high-performing states.
If we compare West Bengal with the low-performing states, which have consistently included Bihar, Uttar Pradesh, and Madhya Pradesh, a symmetric but reverse picture emerges.
Until the early 1990s the gap between West Bengal and these states was positive, but relatively small (within 15%). Since then, West Bengal grew relatively faster and the gap has increased steeply. For the latest year, West Bengal was ahead by 77%.
This is the main story — West Bengal’s position vis-a-vis the rest of the country has indeed deteriorated over the decades, except for a brief window from the early 1990s to the mid-2000s.
But the gap is not huge. It is when we compare West Bengal with the best-performing states since liberalisation that its underperformance becomes stark; this gap has kept on widening since the mid-2000s, with some acceleration in recent years.
The reason why West Bengal’s performance relative to the rest of India as a whole is not bad is because of the worst-performing states, who fell progressively behind West Bengal in the same way that West Bengal fell behind the best-performing states.
This is the aggregate picture that hides many complexities. But it makes three points that are worth keeping in mind.
First, real and nominal differences are important, because prices matter not just for standard of living or cost of production but also because they contain information about relative scarcity.
Second, a narrative of West Bengal’s steady decline with respect to the rest of the country hides a much more nuanced story about the gap between states increasing after liberalisation. A state’s absolute growth can be positive — even accelerating — and yet its relative standing can deteriorate if peer states are outpacing it; conversely, a weak performer may look respectable in comparative terms simply because other states are growing even slower. Liberalisation was equivalent to a track becoming faster so that the gap between the better performers and the rest increased.
Third, for all the criticism it receives, it was a brief period from the early 1990s to circa 2005 that West Bengal experienced a turnaround, largely due to improvements in agricultural productivity.
But that does not take away from the fact that there was a decline in manufacturing from the 1970s, and services did not provide the kind of acceleration that could have made West Bengal follow the path that some of the southern states were able to take.
Maitreesh Ghatak is professor of economics, London School of Economics, and Tanika Chakraborty is professor of economics, Indian Institute of Management Calcutta. The views expressed are personal
