West Bengal’s economic turf is defined by a striking contradiction. While the state is growing in absolute terms, yet its relative standing within the Indian Union has been in a slow-motion retreat for decades. In the 2025-26 fiscal year, the state's Economic Review projected a real GSDP growth of 7.62 per cent, a figure that actually edges out the national GDP growth projection of 7.4 per cent.
On the surface, this suggests a robust recovery. However, when viewed through a long-term lens, the picture is more sobering. From contributing 10.5 per cent of India’s GDP in 1960, West Bengal’s share has dwindled to roughly 5.6 per cent today.
This long-term slide persists across various political regimes. From the Congress and the Left Front to the current Trinamool Congress government in power, the state's challenges are deeply structural rather than purely a result of current policy.
Committed expenditure trap
A significant reason for the state's inability to reclaim its former economic glory lies in its fiscal health. West Bengal has historically struggled with a high committed expenditure—the portion of the budget locked into salaries, pensions and interest payments.
For instance, in the 2025-26 budget, committed expenditure was estimated at approximately Rs1.48 lakh crore. This creates a crowding out effect, where very little remains for capital outlay—the money used to build roads, bridges and power plants that attract industry. '
While the state has recently increased its capital expenditure by a significant margin (a 35 per cent increase was proposed in the 2025-26 budget), the legacy of underinvestment remains a massive hurdle. By March 2027, the state’s total debt is expected to hit Rs8.15 lakh crore, a figure that necessitates massive annual interest repayments, further limiting the fiscal space for transformative economic projects.
Industrial stagnation
According to a Business Today report, while states like Gujarat, Tamil Nadu and Karnataka have leapt ahead by becoming manufacturing and tech hubs, West Bengal has found it difficult to replicate that success on a similar scale. The roots of this industrial stagnation date back to the 1970s and 80s, a period marked by capital flight and labour unrest.
Although recent years have seen major announcements—such as a Rs8,500 crore investment by Haldia Petrochemicals and a Rs1,33,000 crore investment reported in 2025 across sectors like steel and energy—the state still struggles with investor perception. Concerns over land acquisition and the ease of doing business continue to weigh on India Inc.
The absence of a large-scale manufacturing boom means that the services sector, though growing, has had to shoulder the burden of the state's economic expansion alone.
A paradoxical labour market
Despite the lagging GDP share, West Bengal boasts labour indicators that are the envy of many faster-growing states. As of late 2025, Bengal’s unemployment rate stood at just 3.6 per cent, significantly lower than the national average of 4.8 per cent. This is particularly evident in the urban female demographic, where the unemployment rate of 5.1 per cent is nearly half the national average of 9 per cent, a Times of India report said.
This suggests that while the state may lack massive industrial anchor projects, its local and informal economies are highly active. Furthermore, government initiatives like the Banglar Yuba-Sathi, which provides direct cash transfers to unemployed youth, and the Krishak Bandhu for farmers, have created a welfare-driven safety net that maintains high labour force participation even in the absence of a high-growth industrial environment.
India Inc’s quiet hopes
The looming 2026 Assembly elections in West Bengal have brought these economic debates to the forefront of the national conversation. Many in the Indian corporate sector are watching the exit polls with intense interest. Projections from Today’s Chanakya suggest a potential BJP sweep, forecasting up to 192 seats for the party. This has led to speculation that India Inc may be quietly hoping for a change in leadership to align the state more closely with the Central government’s Gati Shakti and Make in India initiatives.
The theory is that a double-engine government—where the same party rules at both the state and Central levels—could break the long-standing deadlock on industrialisation and infrastructure. However, with other pollsters like Matrize predicting a much tighter race and some, like Axis My India, citing a "silent voter" phenomenon, the political future remains as opaque as the state's economic paradox.
