While there is a clear policy shift towards large-scale industrialisation in the state of West Bengal (WB) during the early 1990s, not much improvement can be discerned in the performance of the manufacturing output. Moreover, contrary to the Indian experience, more than half of the manufacturing output is still produced by small initiatives in the unorganised sector. We argue that it is the peculiarity of institutional behaviour that determines the policy outcomes in the state. The rigidities in the political as well as the economic institutions in the state are prompting us to look at WB as a classic case of “institutional stickiness” leading to “path dependency”. Clearly the right institutions for creating a more enabling environment for industry do not seem to exist. Not only do they not exist, but also their growth or emergence is frustrated by an overarching institution – ‘the party’ which seems to keep encroaching upon every sphere. All this results in a veritable decline of organised manufacturing alongside a corresponding growth of the unorganised sector in the state. Apart from secondary sources this paper is based on information collected from some selected stakeholders: business associations, firms, trade unions and bureaucrats.
Discussion Paper Series, Research Programme Consortium for Improving Institutions for Pro-Poor Growth, Manchester, UK, No. 32, 43 pp.