People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 10

March  06, 2011


West Bengal: Pioneer in Small Scale Sector


Manab Mukherjee


THE industrial scenario of West Bengal, often a topic for debate, has become much brighter in the recent period. While the focus of discussion mainly centres round big industries, the state has gained a very strong ground in the small scale sector. This is particularly noteworthy as a counter current in the era of neo-liberalism.


The factors on which the development of small scale industries depends are universal. One of them, definitely, is the demand generated by the large and medium scale industries in the state. But this is not the only source from where the demand comes. Small scale industries can flourish even on the commodity demands of the local market. In this sector, West Bengal is the pioneer in the country as all these factors are very strong in the state.




West Bengal is one of the oldest industrial belts in the country. Geographically it was extended from Kolkata to Asansol on the one hand and had had a huge number of industries on both the banks of Hughli river in the other direction. Unfortunately, due to the indifferent and negative attitude of the central government controlled by the Congress, a good number of industries left the state in the 1960s and later, industrial investment amount recorded a net outflow.


When the Left Front government first came to power in 1977, the industrial scenario in general in the state was in a very bad shape. The Left Front government took the historic initiative to implement the Land Reforms, followed by consorted efforts to rejuvenate the industrial scenario in the state. The initiatives for land reform and the demand for Haldia petrochemicals were almost simultaneous. The thrust on industrialisation under the leadership of late Comrade Jyoti Basu was severely jolted by the step-motherly attitude of the central government. It was only after deregularisation, an end to of the era of licence raj, which the Central Congress government was forced to do to introduce new economic policy in 1991, and an end to the freight equalisation policy, that large industries with remarkable investments started pouring into the state.


But it was a different case with respect to the small scale enterprises (SSEs). There was no scope for the central government to impose regulations and so they grew up steadily since 1977.  But neo-liberalism, because of its inherent character, solidly stood in the way of development of the SSEs. The reserved list, which existed prior to 1991 for the SSEs, was radically reduced and ultimately erased step by step. Liberalisation made the SSEs face extremely uneven competition from the national and international corporate houses, which staked their very existence.


At the same time, a good number of the large-scale central public sector undertakings (PSUs), which formed the backbone of industrial scenario in West Bengal, were either closed down or privatised. This created an additional negative effect in the state. A large number of SSEs, which were dependent on those large-scale PSUs, had to be closed. Some parts of the traditional industrial belt from Kolkata-Howrah to Durgapur-Asansol now looked totally deserted.




Thus began a defensive struggle to protect the industries in West Bengal, which culminated in a glorious comeback. Some long term and short term initiatives taken by the Left Front Government countered these negative factors. The most important factor was successful implementation of land reforms which led to economic empowerment of the poor rural people. Slowly but steadily, purchasing power of the rural people increased uniformly. Income distribution became comparatively more equitable in rural areas. For example, rural Bengal purchased industrial commodities worth Rs 26,500 crore during the last year. A part of this amount has gone to the sale proceeds of small scale industries through local markets. Some portion has gone to the savings kitty, of which too a part is invested in small scale units locally.


After 1991, opportunities were opened for investment in large and medium industries. This automatically resulted in development of the ancillary and downstream small industries. The traditional industrial belts were thus rejuvenated, and new industrial outlets like Haldia, Kharagpur and Siliguri were formed.    


As already stated, the growth of small scale industries does not depend exclusively on investment in large industries. The new SSIs are not geographically concentrated around the industrial belts but are more or less uniformly distributed in all the 19 districts of the state. These are the SSIs that are dependent mostly on the demands created by the local markets and supported by local investments. The rise in the figures of small scale industries in West Bengal in the recent period is therefore really unprecedented, according to the report of SSI Census conducted by the government of India. See Table 1 alongside.



                             1st SSI            2nd SSI             3rd SSI           4th SSI

                             Census           Census        Census                Census     

                              1972          1987-88        2001-02                   2006-07    



No. of Units 26,522             94,362          7,71,388          25,13,303     

Employment  1,76,198      3,11,838             21,69,106         58,31,566


Comparatively, the number of SSEs is highest in Uttar Pradesh (slightly over 31 lakhs), followed by West Bengal, Maharashtra and Tamilnadu, in each of which their number is in the range of 25 lakhs. But the number of SSIs alone cannot give the total picture of small scale industries in a state. Equally important is the rate of survival of these SSIs. The percentage of closed SSIs is 21.47 per cent at the national level while it is 25.35 per cent for UP, 25.08 per cent for Tamilnadu and 24.85 per cent for Maharashtra. But for West Bengal the figure is only 14.68 per cent, which is one of the lowest in the country. SSIs are adequately protected here (Source: 4th SSI Census Report).


This is a result of the state governmentís long term policy and short term initiatives. For example, the monetary incentives of the Left Front government in different sectors give priority to the micro sector (with less than Rs 25 lakh investment in plant and machinery), which has the largest share. The focus is on the backward areas, women entrepreneurs and marginalised sections of the society. Preference is also accorded to this sector in government procurements and consumptions. Labourers of this sector get the highest social security.




However, the principal obstacle for the progress in this sector is institutional financing. The attitude of the public sector banks towards West Bengal has traditionally been negative and here the credit-deposit ratio has been consistently below the national average. This has severely hit the weakest sections of industries.


Keeping these parameters in view, the state government has laid much stress on the programme of self-employment generation. West Bengal is much ahead of other states in India in this respect also. The Prime Ministerís Employment Generation Programme (PMEGP), running for the last three years, is the flagship employment generation programme in the country. Since its inception, West Bengal has been heading the performance chart across the states in India in terms of number of cases and, judging from the extent of progress, there is enough reason to feel confident that the state will continue to maintain its position this year also. During the last year, the total number of approved units in the state was 8,610, and total employment generated was 81,241. Among these small entrepreneurs, 32.56 per cent were from the minority sections, 20.42 per cent from the backward communities and 22.56 per cent were women (Source: Reports on PMEGP, Ministry of Micro, Small and Medium Enterprises).


The state also registered highest success across the states in regard to the nationwide special self-employment scheme for the minorities.


Along with these successes, the stateís Left Front government has, on its own initiative, provided huge financial support to the entrepreneurs and introduced a Bangla Swanirbhar Karma-Sansthan Prakalpa (BSKP) which has received tremendous response from the people. Its record is obvious from Table 2 alongside.



Year                      No of cases        Project                  Subsidy

                          Sanctioned        cost involved            involved


2008-09             22315                Rs.46325 lakh        Rs.8836 lakh

2009-10            24691                 Rs 8200 lakh          Rs.12848lakh

2010-11            16321                 Rs.36648lakh         Rs.7329lakh

(Up to 31.12.10)



Also, the self-employment schemes are another way of setting up SSEs with the support of the state government. So the Banks were compelled to extend financial resources to some extent at least. This is one of the most prioritised areas in the programme of the Left Front government and in this sense West Bengal stands as an example for the whole country. In spite of the differences in the origin and philosophy of the khadi and village industries, the West Bengal Khadi & Village Industries Board has, under the stewardship of the Left Front government, won the recognition from the central government of being the best performing khadi organisation. It is extending continuous help for promoting other khadi activities, including village industries, throughout the state.




In West Bengal, there are a few traditional sectors which create huge employment. Handicrafts are one of them. More than 5.52 lakh artisans are engaged in this activity. But the sector is facing a challenge in terms of quantity as well as quality. The state government has been continuously helping these artisans by way of providing them financial and marketing support. The Left Front government has been promoting their artefacts not only in India but in the international market as well, and its efforts have achieved huge successes. Encouraged by the additional support from the government, these artisans have now formed Self-Help Groups (SHGs). Besides assisting these groups, the government provides special welfare schemes for them. They have been receiving state sponsored old age pension and provident fund facilities. The West Bengal Handicrafts Development Corporation (Manjusha), a state government undertaking, works for the development, promotion and marketing of the products of these artisans.


West Bengal has traditionally been rich in another allied sector also --- the handloom sector. Though this sector is facing severe distress in the period of neo-liberalisation, there are indeed signs of reversal in West Bengal. Figures from the last Handloom Census show that though the number of handloom weavers have been declining at the national level, opposite is the case in West Bengal: here the number of weavers is now 6.66 lakhs, which is second in rank across the states in the country. The Left Front government has also taken adequate steps to place the handloom products in the national and International markets and for production of diversified handloom articles. Already, three lakh weavers are covered under the health insurance scheme and more that 25 per cent of them have been covered by the life insurance scheme. Old age pension has been introduced for handloom weavers. The West Bengal State Handloom Cooperative Society (Tantuja), with the hefty participation by the state government, is primarily engaged in organising and developing the markets for handloom products.




Another traditional sector, which has been protected and developed by the Left Front government, is sericulture. Sericulture is a combination of both agriculture and industrial activities. In terms of the total sericulture production, the state has secured the third position among all the states in the country. The total number of people earning their livelihood from this sector is 3.26 lakhs. Apart from adequate social security measures, the state government provides the sector huge subsidies in inputs and infrastructure. 


To protect the small industries sector from the grip of uneven competition from the large industries, the Left Front government has put much emphasis on the Cluster Development Programme (CDP) for the same kind of industries. The groups may consist of high-end production or very small productions on cottage scale. Composite infrastructure, latest technology, marketing openings and guaranteed supply of raw materials are the key components of this programme. To create the physical infrastructure, 90 per cent finance is provided by the state government and the rest by the industry association or by the special purpose vehicle formed therein. Some parts of CDP are exclusively state governmentís initiative and some are done jointly with the central government. In terms of the number of CDPs in joint venture with the central government, West Bengal ranks second across states, after Uttar Pradesh, and these are mostly in the micro and small scale sectors. Besides, a huge number of clusters have been developed in the handloom sector. A mega handloom cluster, one of the largest in the country, is being set up in the districts of Murshidabad and Nadia, with joint participation of the central and state governments. A total of 103 clusters are being set up in the state in various sectors. The Left Front government believes that the Cluster Development Programme could be used as an important tool for enabling the small industries to face the uneven competition from the large ones.


In the industrial scenario in West Bengal, the Left Front governmentís policy thrust has been on the development of small scale industries. According to the last NSS roundís data, there are 27.5 lakh unorganised industrial units in West Bengal with employment generation for 55 lakh people, which is the highest in the country.


After the promulgation of MSME Act in October 2006, the total set-up has been restructured. During the period from 2006 to 2010, it has been seen that 45,495 micro and small scale units have started operation with an investment of about Rs 3,882 crore, generating employment for 4,65,704 persons. We are pledged to maintain this tempo in the days to come.


The reported data make it obvious that the Left Front government of West Bengal is aware of the threats and challenges for the small scale industries in the era of neo-liberalism and is committed not only to protect these sectors from the threats; it also has a vision to create an alternative model of industrial development in the country.