West Bengal leader eyes private investment to ease debt
KOLKATA, India, July 6 -- The newly elected chief minister of West Bengal, India's fourth most populous state with 91 million residents, hopes private investment will help lift the region out of a $42 billion debt.
Mamata Banerjee, the state's first non-Communist chief minister since 1977, took office in May. She organized an investor summit in June that was attended by several large technology and manufacturing companies, including ITC Limited, RPG Group and Godrej.
Analysts say the business summit is a step in the right direction.
“If this debt is not accompanied by high growth it is going to be a problem, as debt-servicing will take up a huge part of revenues,” said Abhay Pethe, professor of economics at the University of Mumbai.
In that case, he said, the state will end up borrowing more to service the existing debt, instead of for productive asset creation.
Private investment may not be the only solution.
S.L. Rao, the former chairman of the Institute for Social and Economic Change, said the government needs to increase property taxes and cut subsidies on electricity and water.
Economists say the state also needs massive investment to create long-term assets that will generate employment, income, and revenue for the state.
But the task of building trust in the government appears enormous.
Much like the rest of India, West Bengal has seen its share of protests over government seizures of farmland. The government pays the farmers, but the farmers claim the rate is well below market value.
Current federal law allows the government to acquire any land it deems necessary for development. Proposed legislation could end that.
The government claims the land is sold at a fair price, and is used for businesses and creates thousands of jobs. But the farmers are up in arms. Rahul Gandhi, son of political heavyweight Sonia Gandhi, was arrested in May after he joined a farmers' protest. The farmers say they were forced to sell their land for rates as low as $20 per square meter. The government resells the land for $65 per square meter, the farmers say. The government denies that charge.
In West Bengal, violent protests have erupted in villages over land acquisition. The protests spurred the state to pass the Singur Land Rehabilitation and Development Act, which allows the government to return land to farmers who forced to surrender it without any compensation.
Banerjee has vowed that land belonging to farmers who are unwilling to sell their land will not be seized by any means. She created a "land bank," composed of all unused, development-ready land held by various official departments. She has also advocated for direct negotiations between private investors and landowners to minimize the government's role.
Pethe, the economist, said this type of participatory process has a chance for success.
“It is a governance issue and if transparent processes are put in place, land acquisition will be possible," he said.
Rabin Maiti, member of a local farmer's bloc which played a role in earlier protests, said he believes Banerjee will act "in a more sensible manner while integrating the concerns of farmers in decision-making."
Beyond debt and land, other issues are plaguing Bengal, including unemployment. The state is ranked last in human development, including health, poverty and education, compared to other regions of the country. Many factories owned by companies including Essem Jute Industries and Wellington Mill have been closed for years. According to the Industrial Reconstruction Department there are 361 dormant factories in Bengal. Meanwhile, unemployment is at 6.4 million.
Despite the challenges, expectations are high for Banerjee.
“High hopes are pinned on Mamata that she will restore the lost glory of West Bengal,” said Amlan Karmakar of Kolkata, where Banerjee has an overwhelming support base.
Saubhik Mukhopadhay, an unemployed youth, said he hopes dormant industrial jobs will be revived.
"The elected representatives will likely rescue us from the crisis," he said.