Whoever wins West Bengal will inherit a tough economy

West Bengal's economy is not in crisis. But it is under pressure.

One hundred and forty-two seats in West Bengal will vote tomorrow in the second phase of the Assembly polls. In this largely bipolar contest, the state economy is an important poll plank.

West Bengal’s economy is not in crisis. But it is under pressure. The next government will inherit high debt and an elevated fiscal deficit, along with the responsibility of continuing a large welfare system.

Income is rising, but still lagging

Looking at West Bengal’s per capita income, it has improved steadily over the years. But it remains below the national average. In 2023–24, the per capita income in the state stood at around Rs 79,600, compared to over Rs 1.06 lakh nationally, as per the NITI Aayog.

This gap has persisted for nearly two decades. At the same time, unemployment has come down, especially in rural areas. But urban unemployment remains relatively high.

Fiscal deficit remains elevated

The state’s fiscal deficit has remained close to or above the three per cent mark for most years. It reached 4.24 per cent in 2010–11 and rose again to nearly 3.9 per cent during the pandemic. In recent years, it has also stayed around 3.3 per cent.

On top of this, the state has been following a welfare-heavy model, with significant spending on subsidies. The subsidy bill jumped to over Rs 21,000 crore in 2024–25, according to the Reserve Bank of India’s report on state finances.

High debt, limited room for investment

West Bengal’s debt remains among the highest in the country, at around 38 per cent of the GSDP, as per the state's medium-term fiscal policy statement released earlier this year. A high debt burden means a large portion of the budget goes towards interest payments, reducing the money available for development.

Consequently, it directly affects capital spending. Looking at the data, infrastructure spending has fluctuated over the years, with capital expenditure mostly remaining between one and two per cent of the GSDP.

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