Why balanced Investments were not available in Calcutta?

S. C. Chakraborty

1Professor Bhattacharya tried to explain the economic decline of Calcutta by the lack of balanced investment. We all know that balanced investment is good for a state. My question is, why this goodness in balanced investment was not available to Calcutta?

2My observation regarding Mrs. Banerjee's passionate presentation of the misery of the informal sector: I do agree with her that there is something sinister about the whole situation. But she did not at all mention that the informal and the organized sectors have been existing side by side in Calcutta. I wonder whether this coexistence of the informal sector and the organized sector produced a kind of a happy marriage so that the euphoria presented asks to work out a more balanced investment. I hope the question is clear.

The poor and their economic activities

Sudhendu Mukherjee

3In seminars on the urban problems, gradually the problems of the poor are coming up fast. This is a very healthy sign. But we often jumble up "the poor". References have been made to slum-dwellers, pavement-dwellers, hawkers, refugees and their economic life; but I think some clear categorization is necessary regarding many points like the location of these poor settlement, their type of industries and their linkages with modem industry.

4Take the leather processing industry at Tiljolla. There are very modem machines engaged in leather processing there, as also very traditional methods. Amongst the modern manufacturers are the Chinese and I think Mrs. Banerjee mentioned that many of them have shifted to Canada. But there are other reasons why the Chinese are in difficulty in Calcutta1.They were the pioneers in this tanning industry. Among the traditional groups of tanners, two or three methods are used. Think of the Chemicals they used for processing leather —they are so complicated and so much related to the modern industry that it would need a fuller exposition— it is just not informal, just not casual, just not detached from the metropolitan economy.

5Take garment-making, which had a very good market in Calcutta. Textile and Calcutta garment-makers had a booming business in the rest of India and also in East African and South African markets, but today they are in decline. Some of them are just on the fringes of the Metropolitan boundary like Bankra in Howrah District, and some within the boundary. The refugee women in various slums have also taken up this garment-making business.

6Sometimes pavement-dwellers also have found employment in some industries, or occupations like digging holes and trenches for the Metropolitan Underground. What I mean is that it is very difficult to adjust to such an urban way of life for the poorer section.

What is the informal sector?

M.G. Kutty

7I would only raise one or two small points. The first one is as to what the informal sector is. I would start right at the top with the organized large-scale sector and come down right to the base, may be to the one-man operator who works on a works contract basis, or something which is in the indistinct kind of territory between a works contract and a kind of cottage or household industry. I would also refer to the interrelationships between producers. In the entire production System in the urban metropolitan economy, there are a number of interrelationships between the various types of producers within the metropolitan economy and the hinterland with which it interacts. For the classic example you may take the jute industry, where the urban manufacturers in the metropolitan economy interact with the farmers who make the raw jute and then supply it to the factories. And we all know what has been happening in the jute industry and how the farmers do not receive their legitimate share. These inter-producers relationships have also growth implications. Because when we talk in terms of economic growth in the metropolitan economy, we also deal with the question: how the terms of trade work for these different types of producers?—and this has an impact on the overall growth of that particular industrial line or product line.

8From the question of interrelationships between producers we may move on the question of interrelationships which Mrs. Banerjee very correctly referred to, i.e., the issues like that of wages. How much of the gross product does the person who really conducts the productive activity get? We know that when an auxiliary unit is there, say for example, in Beliaghata, it prepares these parts for insulators and supplies it to a very big unit which has got the marketing infrastructure, which has got overheads etc... to ensure that they are able to sell it at a proper price; but the small producer in Beliaghata does not have the marketing infrastructure. Because of the commanding position in the productive System which the larger producer has, he is able to work the terms of trade in his favour and against the person who supplies these goods to him. And this, of course, has distributional implications.

9The same kind of thing operates for the fellow who is in the informal sector. This again is just a Step, in my view, from the inter-producer relationships to the class-relationships between the person who works for a wage and the person who has put in the capital. It is a question of sharing the cake. There of course we come to the very important issues of social structure and social policy. But, within the confines of a debate on metropolitan development, the point I would like to make is that the inter-producer relationships within the metropolitan economy and the producers in the rural areas have very significant implications for growth, and these have been demonstrated in the case of a number of industries in the Calcutta Metropolitan District.

Let us devote more attention to the complexity of Calcutta society

Jean Racine

10I would like to refer briefly to two of the papers just presented. One is Mr. Sinha’s paper. The Deputy Director of the Census Operations brought to light an important fact: the population of Calcutta city is not growing much (7.6% for 1961 1971, according to his statement VI). Well. But is this trend also valid for Calcutta's suburbs, or even for the Calcutta Metropolis as a whole? Apparently not, according to the same statement. We need therefore an addendum to Mr. Sinha's study, in which the overall metropolitan scope would be considered2. Only this can help us to view the metropolis problems in a proper perspective.

11The second is Mr. Chaube's paper. I was a bit surprised to hear that, if we exclude labour unrest, social tensions were mainly reduced in his paper to the images built up by the police Statistical data. May we expect to have more flesh on the skeleton? One thing is really missing in this Seminar, and it is a view of the Calcutta society. It is difficult of course to indulge ourselves in comments on social tensions if we do not have clearly in mind the different social components of the Calcutta metropolis population. It is neither only a question of robberies or murders, nor only a question of classes. It is also a question of communities. Even if there was no big communal riot in Calcutta since 1964, cannot we, nevertheless, take into consideration the Hindu-Muslim communities, to say nothing about other minorities? And, in a metropolis where non-Bengalis are so numerous, is there nothing to say about the relationship between Bengalis and Biharis, and Oriyas and Marwaris and so on. As I understand them, social tensions express themselves not merely by riots. The gentle way the average Bengali despises Biharis —they are too poor— as well as Marwaris —they are too rich— testifies, I believe, to very subtle tensions. The fascinating intricacies of Calcutta's very complex society, in which linguistic affinities, religious communities, geographical origins, classes and castes interact constantly deserve certainly more attention. This remark, I feel, might be valid also for Mr. Banerjee’s paper on the two pasts of Calcutta.

Why those differences between Maharashtra and West Bengal?

S. K. Bhattacharya

12Well, as to why investment of balanced pattern did not take place in the eastern region or in Calcutta I can offer some guesses, but I cannot really provide an answer. Perhaps the person who can answer this question is sitting beside me who was in Delhi in those times when these important decisions were made3. But most of the Bengalis here perhaps would know that Ranajit Roy has a hypothesis that it was an out and out political decision which shut off the eastern region from Maharashtra and Punjab and so on4.

13I think this is a partial explanation. The other explanation would be that perhaps not much of entrepreneurial activity was also coming forth in this region. Witness for example, the case of Inchek Tyres or Sen-Raleigh producing the kind of consumer goods I was speaking of. Even after a lot of investment was made, they could not be kept going on and became sick. The point is that these industries also got sick5. If you believe that a major part of the explanation lies in the fact that there was not much of real industrial bourgeoisie developing in this part and that most of them prospered on cases of cheating and so on, then it could be different. What I am trying to point out is that, as I see it, a large part of the industrial activity that developed in the Maharashtra region after Independence was due to the siting of three oil refineries. Now that was a Chemical source material which gave rise to the drugs, polythene and other things, which made it possible for the cotton textile industry in those regions also to switch over.

14Dr. Sudhendu Mukherjee was speaking of fabrics and their export abroad. These are mostly made of synthetics and these synthetics are more easily available in those areas, rather than in these areas. All these explanations are there but if you want a single explanation, I am sorry I cannot offer any. The fact remains that Maharashtra has developed consumer goods industries which are not necessarily based on agriculture commodity (I am not speaking of sugar in which also Maharashtra is rich). Maharashtra has developed over the years a lot of such industries; paper Publishing, paper products and so on, in which West Bengal at one time was the leading region, but has now gone to second place as in many other cases. Perhaps Professor Chakraborty would have some explanation?

Professor Chakraborty: (Intervention)

15The production relation in the organized sector is constrained by the relationship with the informal sector which has kept the capital fixed asset rates too low. And that was what I wanted to point out.

Professor Bhattacharya: (continued)

16I know of this view and am in sympathy with such kinds of hypothesis but I want to make one point clear. In the confines of this seminar, instead of going over to world-wide comparison, and class basis and this and that, the first thing (and a very small thing) I would like to satisfy myself is about the cause of this difference between Maharashtra and West Bengal.

17Inside the country we do have more or less the same sort of production relations, the same sort of political-societal environment, but still we have this difference. Unless and until we can explain at least this difference, it will be futile to go to global explanations and class relations or international comparisons. There could of course be local differences, but not such large ones as between Maharashtra and West Bengal in terms of class relations.

Pauperization and mobility of the commercial capital

Nirmala Banerjee

18I did not define "informal sector” because as Mr. Kutty says, it is a very difficult thing to define, being an amalgam of all kinds of regular and irregular activities. But in my mind I use a criterion, where the labourer or the producer "either the self-employed worker, the wage-earner, or the ordinary worker" is alone in his bargain with the others. He has no protection of the group as is required in a labour surplus economy. Now this isolation arises, as I was making the point in the paper, out of his ignorance, his total lack of communication with the rest of the world. He is isolated by his lack of technical education, lack of access to capital, by his class barrier against them. I am not saying that the formal and informal sector are just two clear divisions in the economy, there is a continuum of more or less exploitative occupation in any situation; women workers of the city are on the lowest rung of the ladder. This whole scheme is based on the fact that there is one group which is vulnerable because of its ignorance, desperation, lack of access to means and the other group which has all this.

19That brings me to my answer to Professor Chakraborty's question, that there is certainly a marriage between the organized and the unorganized sector but the marriage is a very unhappy one —it is a marriage based entirely on the exploitation of the unorganized sector or producer by the organized sector, trader or large scale business unit. And this marriage can only lead to more and more pauperization at the bottom end. Workers and producers continuously get further and further impoverished.

20If I go into Professor Bhattacharya's territory, I would go on further to say that capital accumulation is a problem in the whole of the country. The point is that capital in our country is a very mobile resource which can move from trade to agriculture to industry. And this mobility is very much controlled by a group of capitalists who held the access to the whole capital. Up to now all efforts at some kind of nationalisation of banks, and national institutions from the public sector have not been able to break this hold of that one group of capitalists on the total accumulation that is taking place. This group can shift its capital between different types of activities, depending on the relative rates of return. Keeping the activities unorganized, on the basis of small units, makes it easier to move capital from one activity to another. It is one of the maladies of Calcutta that a large part of a capital that is being accumulated here remains in the form of commercial capital rather than becoming industrial.

The causes of the industrial decline of Eastern India

S.C. Chakraborty

21The production relation is not similar all over the country. It is extremely dissimilar over regions. For example, in Calcutta the leading industry was engineering in 1965 and the engineering industry marketed their products primarily through contracts handed out to smaller and smaller organizations so that the productive capital measured in terms of fixed assets was bounded by the smallness of the size of the small producers. And the capital that Mrs. Banerjee was referring to, which she admitted is mercantile capital, was accumulating in the hands of the large organizations. This relationship does not hold good in Bombay and Maharashtra. There the proportion of the total capital converted into fixed assets was always higher as compared to eastern India.

22Look at the industrial profile of eastern India in 1947. It was the leading industrial region in terms of engineering and Chemical industries, and producer of consumer durables. Why is it that it is no longer a leading industrial region in any of these areas? You must also compare the kind of new technology that the Maharashtra or the Tamilnadu group of new entrepreneurs have adopted in producing almost similar kind of goods. You do not have to go far. Compare the fixed capital assets and its relationship with labour in Perambur Internal Coach Factory with the traditional engineering organizations like Jessops and Burns6 and see their capital assets which will explain why I am saying that the production relation obtaining between the informal and the organized sector was primarily responsible for the loss of the leadership of eastern India in the industrial growth after 1947.

Investment and production relations

S. K. Bhattacharya

23I am sorry to Interrupt here but there seems to be a semantic confusion Professor Chakraborty referred to production relations. Production relations as I understand them refer to the way the surplus is divided between the forces used in the production process. Professor Chakraborty is now referring to the fact that certain groups of capitalists in certain regions have invested more. The fact that the industries he spoke of lost the leadership because they did not adopt the new technology merely means that during this period the capitalists of the region did not invest so much for acquiring the capital goods of new technology. That is the only meaning. And the fact that you have more fixed capital in Maharashtra or in Tamilnadu, as he says, only means that they invested more. So they invested more there and they invested less here: this in no way distinguished them in terms of production relations. This is what I wanted to point out. To my mind, production relations refers to the fact of the relationships between the capitalist and the wage worker or may be the tenant and the landlord and so on, that is, as to how the produce is divided up between the different forces.

The gut problem of Calcutta is the economy

Asok Mitra

24This afternoon we came to the gut problem of Calcutta. And the gut problem of Calcutta is the economy and the industrial production and not the song and the dance for which Calcutta is now famous. One of the things that Professor Bhattacharya mentioned was how Bombay gained at the expense of Calcutta. Around 1956 a very important decision was taken in the national interest. And no less a person than Dr. Bidhan Chandra Roy, who was above all a very patriotic person, did support it in the greater interest of India. This was the equalization in the prices of coal, Steel and iron. Upto that point Calcutta had enjoyed a singular advantage by way of lower prices of coal, Steel and iron. But this stopped.

25Dr. Bidhan Chandra Roy was very optimistic and very confident of the entrepreneural quality and solidity of the West Bengal Investor. This is why to counterbalance the lost geographical advantage he went forth hammer and tong to build up Durgapur and various other places including Salt Lake. Unfortunately his successors did nothing of the kind. In 1977, Chief Minister Basu called together the capitalists and industrialists and wanted them to revive Calcutta's industry. But mere exhortation is not enough. In the next two years instead of new plants coming up, existing plants were taken out of the state. Sweet and midnight oil are required. These were Dr. Roy's strength. Old, sick plants have begun to drop like overripe plums into the lap of the West Bengal government and the government is apparently happy to have them. Not a single new plant has come up.

26I was recently talking to an income tax commissioner in Delhi who was in Calcutta from 1964 to 1969. He said: Mr. Mitra, the depreciation rate that the government allows on a new plant along with the concessions on exports and so on and the other substantial facilities and write-offs that they permit on capital expenditure virtually amount to a gift of a brand new plant in just three years. I suspect that this is the advantage that Bombay and other States have reaped. While West Bengal has been happy with old dilapidated plants, the capitalists and industrialists of other States have gone in for new plants. After all, the very essence of a city is high productivity. If productivity does not increase how will the wealth as a state increase? How will the share of the ordinary worker increase?

27Let me give one or two instances. In 1951 West Bengal was second in literacy. In 1961 West Bengal was seventh in literacy and in 1971 West Bengal was thirteenth in literacy. And in 1981 West Bengal will probably be the sixteenth7. With the overcrowded schools it is impossible for a child from an indigent family to compete with an affluent man’s son. And if this is the way the most important inputs to a country's prosperity fare —capital and knowledge— then I do not think the things are proceeding on the correct communist way.

28Let us look at the labour training and crafts Institutes. I am talking of the year 1976. Andhra Pradesh had 8,600, Gujarat 5,000, Maharashtra 19,000, Punjab 10,000 and Tamilnadu 11,000 slots. West Bengal had 8,300 slots, but none whatever for women. This proves Mrs. Banerjee’s case. So much about training capability.

29Dr. Bhattacharya mentioned about unbalance. Here is a picture of unbalance. In rubber, plastics, petrochemicals and coal products, Andhra Pradesh had 55 factories, Gujarat 224, Maharashtra 593 and Bengal only 193. In Chemicals and Chemical products, you known Dr. Bidhan Chandra Roy, apart from securing a whole new Steel plant, set up the Durgapur coke ovens and Chemicals to produce a chain of industrial and pharmaceutical Chemicals and plastics. I am sure you know that almost the entire output of Chemicals goes from Durgapur straight to Gujarat. Very little is utilized here. Only a very small fraction of the Chemicals is processed here. In Chemicals and Chemical products the number of workers in Maharashtra is 31,171, West Bengal 32,375 and Tamilnadu 35,900.

30In machinery, machine tools and parts and electrical machinery, Maharashtra has 87,000 workers and 8,004 plants, West Bengal 52,225 workers and 5,025 plants. And yet Bengal was the primary producer of Castings, etc. Whereas Howrah is still plodding along with casting machinery designed in 1890, in Maharashtra you will find brand new casting machinery. And all coming as a gift because of the tax concessions. And all the old plants are falling like rotten fruits into the lap of West Bengal government because of its lack of ability to make use of the tax concessions. In electrical machinery, apparatus and appliances Maharashtra had 60,267 workers and West Bengal 31,800. In number of factories, 501 are in Maharashtra and only 280 in West Bengal. In transport equipment Maharashtra had 61,000 and West Bengal 67,000 workers. The total number of units in Maharashtra was 194 and in West Bengal 174 only. In metal products and parts, except machinery and transport, Maharashtra had 54,000 workers and West Bengal 42,000 only. Maharashtra had 1100 units and West Bengal 709 only.

31Let us look at the joint stock Companies. In mining and quarrying the paid up capital in 1975-76 in Andhra Pradesh was Rs. 984 million, in Tamilnadu Rs. 1599 million and in West Bengal Rs. 3100 million. Bengal still takes the lead. In textiles, Gujarat Rs. 809 million, Maharashtra 984 million, Tamilnadu Rs. 519 million, West Bengal Rs. 800 million, mainly because of the jute and other mills, mostly old. But few textiles mills in Maharashtra and Gujarat are more than about (with constant renewals, etc.) 10-12 years old in technology or in the plant line. In leather and leather products, Maharashtra had 45 units and West Bengal 59. The paid-up capital in Maharashtra is only Rs. 9 million, in West Bengal Rs. 37 million. In iron and Steel basic manufactures, Maharashtra has Rs. 727 million as paid-up capital, while West Bengal has Rs. 601 million. In Chemicals and Chemical products, the paid-up capital in Andhra Pradesh is Rs. 597 million, in Gujarat Rs. 2,000 million, in Maharashtra Rs. 16,000 million, in Tamilnadu Rs. 342 million and in West Bengal only Rs. 538 million. In petroleum and petroleum products, Maharashtra’s paid-up capital is Rs. 1,014 million, West Bengal's Rs. 177 million and Tamilnadu's Rs. 139 million.

32In 1974-75 the extern of value added in manufacturing industries in Andhra Pradesh was Rs. 2,300 million, in Gujarat Rs. 5300 million, in Maharashtra Rs. 14,800 million, in Punjab Rs. 996 million, in Tamilnadu Rs. 5,000 million, in West Bengal Rs. 7,300 million. So much for value added by manufacturing. Let us work out value added per man-hour of work which really gives you some idea of the state of technology and the state of management. In Andhra Pradesh the per manhour value is Rs. 5, in Tamilnadu Rs. 5.7, and in West Bengal Rs. 4.2. I think that is about as depressing an account as one can think of.