Structural Break in Output Growth

There has been considerable discussion on the trend break in India’s growth rate of GDP (DeLong,
2001; Wallack, 2003; Rodrick and Subramanian, 2004). According to Wallack (2003), the most
significant date for the break of GDP growth was 1980, whereas for GNP growth the break point was
1987. The major breaks in the growth path of the annual series of net state domesticproduct (NSDP)
and its sectoral components as observed in West Bengal are shown in Table 1.1. The break points
are estimated by following Andrews and Ploberger (1994) on the basis of estimated F-statistics
corresponding to different years shown in Figure 1.1. The major break appears corresponding to the
maximum value of the test statistic, called the supremum value, shown in Table 1.1.

Sequence of Test Statistics for Structural Break

In West Bengal, the major structural break in growth of NSDP occurred in 1980, a long period before
the initiation of liberalisation. West Bengal experienced a structural break in agricultural growth in
1983. In manufacturing growth, break appeared in 1978. Total services in West Bengal followed no
such significant trend break. As there is no scope in performing time series analysis in detail to locate
multiple breaks in the trend paths of different series of NSDP, we can utilise simple time series plots
of the series as shown in Figure 1.2 to trace other break points, if any, at least visually. In agriculture,
another break appeared in 1997 and growth of agricultural NSDP decelerated thereafter. In
manufacturing also the secondary break point has been observed in themid-1990s from where
manufacturing growth accelerated significantly. Although the trend path of the services sector NSDP
is smooth and thus no significant trend break appeared, the path has been steeper since the
mid1990s.

The growth acceleration in the manufacturing sector in West Bengal is largely attributed by the
better performance of the unorganised sector. Although manufacturing industries, organised and
unorganised, performed well in terms of output growth since the mid1990s, the unorganised sector
grew at a faster rate compared to the registered sector during the same period (Figure 1.3)
 Employment
The fluctuation in employment or unemployment has to come to terms with the periodic instability
of the growth process. The trend in employment, in fact, is the ‘outcome’ of the changing
combinations of capital, technology and the labour market institutions. The estimated aggregate
employment in the state increased gradually from 17.8 million in 1983 to 27.6 million in 2004-05
(see ‘Employed-AV’ in Table 5.1).1 The compound annual rate of growth (CAGR) of employment (i.e.,
Employment-AV) that was 3.01 per cent during 1983 to 1993-94 declined significantly to 0.67 per
cent during the period 1993-94 to 1999-2000 (Table 5.2). Thereafter, employment tended again to
grow at a higher rate, i.e., 1.77 per cent, during 1999-2000 to 2004-05. It is important to recognise
that between 1983 and 1993-94, i.e., during the period when small and marginal peasant-based
agriculture in West Bengal was surging ahead the employment growth rate in the state exceeded the
all-India average, which was hovering around 2.43 per cent. During 1993-94 to 1999-2000, while the
all-India rate was 1.12 per cent, West Bengal was lagging behind with the CAGR of 0.67 per cent.
Percentage of US (FS+SS) Workers as Self-Employed, Regular Employee and
Casual Labour in West Bengal and All-India
 Trend in Rural Poverty
There has been secular decline in rural poverty in the state during the last two decades. The
Headcount Ratio (HCR) of rural poverty shows a declining trend from 73.16 per cent in 1973-74 to
40.8 per cent in 1993-94, 31.85 per cent in 1999-2000, and further to 28.6 per cent in 2004-05.2 GoI,
Economic Survey (2002) observes: ...while some states such as Punjab and Haryana have succeeded
in reducing poverty by following the path of high agricultural growth, others have focussed on
particular areas of development e.g. Kerala has focussed on human resource development, West
Bengal on vigorous implementation of land reform measures and empowerment of Panchayats, and
Andhra Pradesh on direct public intervention in the form of public distribution of food grains. Since
1999-2000, the decline in poverty in the state has been faster than all-India. Still, there are (as in
2004- 2005) 173.2 lakh BPL population in rural West Bengal, constituting 7.8 per cent of the rural
BPL population in the country. However, it is comforting to note that the rural BPL population in the
state as a proportion of all India (rural) has declined from 9.3 per cent in 1999-2000. Estimates of
poverty prevalence ratios show that in the rural areas, the ratios in 1999-2000 were higher than in
1993-94 in Assam, Karnataka, Madhya Pradesh, Orissa, Tamil Nadu and West Bengal. However, in
Maharashtra (the industrially developed state), the poverty ratio remained virtually unchanged
between 1993-94 and 1999- 2000 (Table 7.5)
 Rural Infrastructure
For studying the impact of the JRY programme the Ministry of Rural Development, GoI sponsored a
quick evaluation study and the report was published in November 2000. This evaluation study was
done by International Institute for Sustainable Development and Management (IISDM), Ahmedabad.
The evaluation study presented composition on wages and materials at different levels of
implementation, namely district, block and gram panchayat. The desirable ratio between wages and
materials is 60:40. However, the figures for West Bengal show a comparatively higher weight of the
‘wage’ component than the ‘material’ (meant for asset creation), especially at gram panchayat (GP)
level (Table 7.7). In the short-run, more funds for ‘wages’ means more employment generation.
However, in the long-run, the employment effect of the latter policy is likely to be adverse once the
JRY scheme is discontinued. Works/assets created under JRY can broadly be classified into five
categories: (a) rural roads, (b) water supply and irrigation, (c) land development, (d) construction of
social and other buildings, and (e) social and farm forestry. Table 3.8 shows that rural road
construction under the JRY programme was not on the top of the list of priorities in West Bengal,
unlike many other states which are much less densely populated such as Gujarat (258 per sq. km.),
Madhya Pradesh (196), Tamil Nadu (480), Assam (340).