Kolkata: The fall of India’s financial capital
When we talk about the Indian economy, we talk about Mumbai. Maharashtra ranks first among the Indian states in Gross State Domestic Product (GSDP). There are only 26 countries that have a bigger GDP than the GSDP of Maharashtra. Maharashtra’s capital Mumbai is the financial capital of India.
Before Mumbai became the economic hub of India, Kolkata was India’s financial nerve centre. For centuries, Bengal was one of India’s wealthiest states, and Kolkata was probably the wealthiest city in Asia. Due to its extreme wealth, even the British East Company and British Raj established their capital in Kolkata.
After India’s independence, West Bengal accounted for more than 25% of India’s manufacturing in 1950. The share of manufacturing fell to 13% in 1960 and nose-dived to 7% in 2000. In the 1950s and 1960s, Calcutta Stock Exchange was the prime competitor of the Bombay Stock Exchange. However, in 2013, trading was stopped on the Calcutta Stock Exchange.
Before independence, Bengal was the biggest trading point in India. The export from Bengal was continuously higher than the export from the other two important trading points, Madras (Chennai) and Bombay (Mumbai). The number of companies listed in Bengal in 1934 was almost 3x of Bombay. During its peak, Kolkata housed the biggest business house in India, the Birla Family.
Just after Independence, the per capita income of West Bengal was higher than India’s average per capita income. West Bengal’s per capita income started to fall below India’s average from the 1960s. In the 1960s, the Per capita income was 99% of India’s average and reached 85% in 1977. Since then, the West Bengal per capita remained between 80–90% of India’s average.
Bengal was the major exporter of jute, cotton, textile, tea, and agri commodities during the British era. During its golden days, Bengal had the highest population of Marwari businessmen living outside Rajasthan. These Marwari businessmen played a crucial role in making Bengal the economic powerhouse.
The British raj shifted the capital of India from Kolkata to Delhi in 1911. As the power centre of India moved out of Bengal, it started a domino effect. Though the results were not seen immediately, Kolkata losing out as India’s capital was the first of many incidents that led to the fall of the massive Bengal economy.
When India was partitioned during independence, most of the fertile farmland of Bengal went to East Pakistan. Due to subsequent political differences and war, the textile and jute mills in West Bengal witnessed a severe shortage of raw materials. Some of these mills were closed a few years after the independence.
After World war 2, the demand for synthetic fibres like Nylon increased around the globe. The rise of synthetic fibres led to a decrease in demand for jute. The jute mills of West Bengal were already suffering from a shortage of raw materials. As the demand for jute decreased, these mills experienced a fatal blow.
The biggest of all reasons was the rise of trade unionism in West Bengal. As West Bengal got its first left front government, workers’ strikes and attacks on the management of industries and factories increased. The increasing number of strikes made it hard for businesses to break even. Industrialists did not get the support they were expecting from the Government.
During the peak of trade unionism, Aditya Vikram Birla, the head of India’s biggest business house was dragged out of his car and physically attacked by union members. It forced the big names of India’s businesses like Birla, Thapar, Singhania, Goenka to move out of Kolkata and shift their base to Mumbai. In just a few years, Kolkata lost most of the biggest businesses. Most of these companies relocated to Mumbai and Delhi.
The fall of Bengal and Kolkata is a result of many factors. These incidents happened in such a quick succession that the most prosperous state of India lost its entrepreneurs, businesses, its competitive advantage and fell behind the economic growth. At the same time, the major competitors of Bengal witnessed rapid growth. The fall of Kolkata as India’s financial capital led to the rise of Mumbai.
