The Eastern states, led by West Bengal, have the potential to become a $3 trillion regional economy and account for over a quarter of the national GDP by 2035, says a report.
A report by domestic rating agency Smera Ratings says the critical location of Bengal makes it the potential business hub of a $3 trillion regional economy by 2035, when the size of national GDP is likely to touch $11.34 trillion.
The agency believes that the fortunes of the Eastern region, comprising West Bengal, Odisha, Bihar, Jharkhand, Chhattisgarh, Assam and the seven North-Eastern states, are directly connected with the development of West Bengal since the state is the node for the entire Eastern region.
Bengal currently contributes 40% of the region’s GDP, and is also home to the most developed metropolitan area in East India, Kolkata.
“As of last fiscal year, the Eastern region contributes the maximum in terms of locomotive equipment output at 63.5%, out of which West Bengal alone chips in with 46% share, almost the entire (99.2%) jute production output of which over 79% comes from West Bengal alone, and over 82% of the country’s tea production,” the report said, quoting data from the India Brand Equity Forum and other industry bodies.
The region also contributes to over 25% of leather production, 21.5% of steel output and 44.1% of mining and quarrying, 28.7% of crude oil output and 10.4% of chemicals and chemical products, the report said.
“Due to these factors, West Bengal is at the cusp of a trans-regional economic crossroad given the ‘Act East’ policy of the government. The Eastern region, home to 27% of the country’s population, contributes 16.5% to its GDP,” the agency’s economist Karan Mehrishi said.
He expects the region to contribute at least 25% of national GDP by 2035 and create nearly $1 trillion of incremental value. The Eastern region has direct influence over 30% of IIP and 57% of core industries. Depending on the level of growth in the next two decades, the GDP contribution from the region can be $2.8-3 trillion, it said.
The ‘Act East’ policy can give a big leg-up to the country’s bilateral trade with the ASEAN countries, particularly Cambodia, Laos, Myanmar and Vietnam, which in turn will add further impetus to the Eastern region.
The Indo-ASEAN trade is already valued at over $80 billion. Currently, the GDP of West Bengal is $136 billion, or 6.6% of national GDP, which although is not even half of that of Mumbai, is growing at an average rate of 7%, the report said.
The Kolkata region saw a 200% jump in FDI inflows in the first half of FY16, while rest of the region saw a decline.