How West Bengal lost its crown as India’s financial hub

In the mid-20th century, West Bengal was the pride of India’s economic landscape. Calcutta, now Kolkata, wasn’t just any other city—it was the heart of India’s industrial might. Today, however, the state faces a significant economic downturn.
According to a recent working paper from the Economic Advisory Council to the Prime Minister (EAC-PM), West Bengal’s share of India’s GDP has fallen sharply from 10.5% in 1960-61 to just 5.6% in 2023-24.
Following India’s independence, Bombay (now Mumbai), Calcutta, and Madras (now Chennai) were the leading lights of India’s industrial scene.
In the early 1960s, Calcutta’s busy port and vibrant trade made West Bengal a top economic state, with a per capita income 127.5% above the national average, the third-highest in India at the time.
Yet, beneath this glittering surface, signs of trouble began to emerge. Despite its advantageous location and strong industrial base, West Bengal’s economic fortunes started to slip as early as the 1960s.
By 2023-24, the state’s contribution to India’s GDP had dwindled to 5.6%, a dramatic fall from its former prominence. The EAC-PM report describes this decline as a “continuous drop in relative economic performance over several decades.”
While West Bengal’s fortunes faded, other maritime states took a different path. Tamil Nadu, for instance, experienced a notable turnaround. In the 1990s, Tamil Nadu’s share of GDP had dropped from 8.7% in 1960-61 to 7.1%. However, by 2023-24, it rebounded impressively to 8.9%. This resurgence highlights a state that adapted and thrived.
Odisha, once seen as an economic underachiever, has also made remarkable strides. Its per capita income surged from just 54.3% of the national average in 1990-91 to 88.5% in 2023-24, surpassing West Bengal’s per capita income of 83.7%.
The EAC-PM report notes, “Odisha’s relative per capita income has increased significantly in recent years, while West Bengal’s has continued to lag.”
The economic liberalisation of 1991 was a turning point for many states. Karnataka and Andhra Pradesh, once considered average performers, rose to become economic powerhouses. Maharashtra, Gujarat, Delhi, and Haryana also maintained steady growth.
In contrast, West Bengal struggled to adapt to these changes.
Economist Sanjeev Sanyal, who has closely analysed West Bengal’s economic history, believes the state’s decline wasn’t solely due to external factors.
He criticised former economic leaders like Ashok Mitra, Ashim Dasgupta, and Amit Mitra, not just for failing to reverse the state’s economic slide but for “actively contributing to it.”
“The long list of ‘esteemed economists’ did more harm than good,” said Sanyal.
West Bengal’s journey from a leading economic powerhouse to a struggling state is a complex tale of missed opportunities and shifting economic tides.
For many, the state’s decline is not just a statistic but a personal story of a once-thriving land that now struggles to find its footing.
The failure to adapt to changing times and harness the benefits of economic reforms has left West Bengal grappling with its diminished role in India’s economy.