A file pic of West Bengal CM Suvendu Adhikari
by Jayanta Ghoshal
The central question now is: how will the new government under Suvendu Adhikari navigate West Bengal out of its severe financial crisis and put the state back on a path of development?
West Bengal today stands among the most financially stressed states in India. According to analyses by the Finance Commission, alongside Kerala and Punjab, West Bengal is considered one of the country’s most debt-burdened states. The state’s total outstanding debt has now reached approximately ₹8.15 lakh crore, making it one of the highest among India’s major states.
The distinction, however, lies in the debt-to-GSDP ratio. While Punjab’s debt-to-GSDP ratio remains even higher, around 46 to 47 per cent, West Bengal’s ratio stands close to 38–39 per cent. Kerala ranges between roughly 33–38 per cent. But in terms of sheer outstanding debt volume, West Bengal carries the heaviest burden.
The Reserve Bank of India has repeatedly flagged these states as highly stressed. Concerns over Bengal’s debt are not new. Discussions on the issue had begun long ago, even during Mamata Banerjee’s earlier tenure when Pranab Mukherjee served as Finance Minister at the Centre.
At one point, there were efforts to seek relief. A committee was formed under the Finance Commission framework to examine state debt restructuring. West Bengal’s Resident Commissioner and financial representatives participated in discussions. Numerous meetings took place. But Pranab Mukherjee maintained a practical position: as India’s Finance Minister, he could not provide exceptional treatment to one state alone. If Bengal received such relief, Punjab and others would naturally demand similar concessions.
Over the years, financial complexities only deepened. Then came GST and the changing Centre–state equations. Political relationships also became increasingly complicated after the Narendra Modi government came to power in 2014.
Repeatedly, Prime Minister Narendra Modi urged states to adopt centrally sponsored schemes such as Ayushman Bharat. However, political disagreements between the Centre and the state government often prevented consensus. As a result, several projects saw funding bottlenecks. At times, the centre argued that expenditure reports had not been submitted properly. Questions also arose over utilisation certificates and spending patterns.
Many economists and policy institutions, including NITI Aayog, repeatedly highlighted implementation gaps and missed opportunities. But the larger issue gradually became political rather than purely economic.
Today, however, the core problem is not merely that West Bengal’s debt is high. The deeper issue is that much of it is increasingly viewed as unproductive debt.
Three major concerns
First: Revenue expenditure dominates spending.
More than 90 per cent of spending goes toward salaries, pensions, subsidies and welfare schemes. Programmes such as Lakshmir Bhandar and other cash support measures form a significant part of expenditure.
Second: Interest payments have become enormous.
Nearly ₹45,000 crore annually from the state’s own revenue goes toward interest payments alone. Around 42 per cent of state-generated revenue is absorbed simply by servicing debt.
Third: Capital expenditure remains weak.
Although investment spending has increased somewhat, it began from a very low base and still has not generated the level of private investment necessary to create long-term economic growth.
To address this, discussions around a five-step roadmap have emerged, reportedly with NITI Aayog’s involvement. Economist Ashok Lahiri, now serving as Vice Chairman, is expected to become a key coordinating figure. With both the Centre and state now being led by the same political party, supporters believe the so-called “double-engine government” framework could reduce friction and improve cooperation under India’s federal structure.
Several possible measures are being discussed.
● Expanding Revenue Sources: West Bengal’s own tax revenue as a percentage of GSDP remains lower than that of states like Maharashtra. The proposal is to plug tax leakages, broaden the tax base, reform professional taxes and modernise stamp duty structures.
If effectively implemented, such reforms could potentially generate an additional ₹20,000–30,000 crore annually over the coming years.
● Rationalising Welfare Spending: There is no indication that welfare schemes will be discontinued. In fact, many promises involve expanding assistance. However, discussions are underway about making welfare spending more targeted.
One idea involves linking long-term benefits to skill development and employment generation. Welfare would remain, but in a more structured framework.
● Asset Monetisation: The state possesses land assets and public sector undertakings that could potentially be monetised. Unused government land in Kolkata, Haldia and other regions may be considered for productive use.
West Bengal has numerous departments and public entities with underperforming assets. Their restructuring or monetisation could create one-time financial gains.
● Increasing Private Investment: The BJP’s stated emphasis has been on manufacturing and job creation rather than relying solely on welfare politics.
Large infrastructure projects such as the following:
1. Tajpur Port
2. Deocha-Pachami coal project
3. Industrial clusters
4. Port and logistics sectors
are expected to become central pillars.
However, this requires balancing politics and economics carefully. Complete rejection of welfare politics is not realistic in West Bengal’s political environment. Historically, governments under the Left Front and later under TMC followed models that combined economics with social support.
Any future finance strategy may similarly require a mixed approach.
● Debt Restructuring and Central Support: There are discussions about seeking long-term concessional funding and low-interest support from the Centre.
High-cost loans could potentially be refinanced at lower rates, reducing annual interest burdens substantially. If successful, annual savings of several thousand crores could emerge.
Comparisons with other states provide useful lessons. Gujarat’s debt ratio is much lower because a large share of expenditure goes into productive sectors and capital formation. Odisha benefits from mining revenue and strong fiscal discipline. Tamil Nadu’s debt exists alongside sustained industrial investment and capital expenditure.
West Bengal’s challenge is different. The state cannot simply rely on welfare spending and expect debt to shrink. Economic growth itself has to become stronger.
Experts argue that for every three rupees spent on revenue expenditure, at least one rupee should shift toward capital expenditure. GSDP growth may also need to reach 8 per cent or more. Without that, projections suggest debt levels could remain around 35 per cent for years. The immediate target, therefore, is not a dramatic reduction. It is stabilisation.
The first phase may involve preventing debt from rising further between 2026 and 2028. Measures could include freezing additional liabilities, collecting pending central dues and monetising available assets.
The second phase, from around 2028 to 2031, would focus on reducing debt ratios through growth, infrastructure and investment expansion.
The final phase could extend beyond 2031, aiming for long-term normalisation.
Yet numbers alone do not explain Bengal’s economic story. The roots go back decades.
When the Left Front came to power in 1977, governance reflected what was popularly known as a “public sector mindset”. Privatisation was viewed with suspicion. Even computerisation faced resistance.
There was opposition to introducing computers in banks. English education at the primary levels was also removed for a period under policies associated with Ashok Mitra, creating long-term consequences in competitiveness and national integration.
Capital flight had already been troubling Bengal for decades. Jyoti Basu often spoke about how the movement of India’s capital to Delhi in 1911 initiated a long economic shift away from Bengal. The state also endured repeated historical crises, famines, food shortages and economic disruptions.
Later, Buddhadeb Bhattacharjee attempted a major industrial shift. His reform-oriented image was so strong that some even described him as India’s Deng Xiaoping. Former Prime Minister Manmohan Singh publicly praised his economic outlook.
Yet major initiatives, from SEZ proposals to Singur and Salim Group projects, faced resistance.
Land politics became a recurring obstacle.
Mamata Banerjee opposed several of those projects as a leading opposition figure then. Many proposals never materialised.
As a result, Bengal repeatedly witnessed announcements, investment promises and projections that struggled to translate into actual implementation.
This remains the central concern today. Without sustained investment, Bengal risks remaining trapped in a cycle of debt and financial stress. That is why the roles of the new Chief Minister and the new Finance Minister become crucial. The roadmap now exists on paper.
The larger question is whether policy, politics and execution can finally move in the same direction.
