West Bengal is India's sixth-largest economy. It has more manufacturing workers than Karnataka, more informal enterprises than Maharashtra, and a city, Kolkata, that once served as the economic capital of the British Empire. By most measures of mass, it belongs in the first tier.
This is the second piece in Grain of Data's West Bengal Election Data Series, looking at investment and industrialisation. Six comparison states: Gujarat, Maharashtra, Tamil Nadu, Karnataka, Telangana, and Odisha. Different models, different trajectories. WB's position among them is the story.
Where capital goes
Foreign direct investment (FDI) measures the equity capital flowing into a state from overseas. Factories, technological partnerships, long-term investments, and acquisitions. It is not a perfect measure of economic health, but it is one of the cleaner signals of where large investors expect returns.
FDI is an imperfect proxy for investor confidence: it skews toward states with financial hubs (Maharashtra), IT ecosystems (Karnataka). But across five years, it tells a consistent story.
Maharashtra and Karnataka together absorbed the overwhelming share of India's state-level FDI between FY21 and FY25. The five remaining states split what's left, and WB's slice (hovering between $73M and $298M annually) is thin even within that group.
A few things to note before reading this chart cleanly.
Karnataka's FY22 spike to $22B reflects a surge in startup funding rounds (Byju's, Swiggy, Flipkart raises) classified as FDI equity. That capital was real and consequential for Karnataka's tech ecosystem. But it reads differently from the long-horizon manufacturing investment that drove Gujarat's FY24 numbers. Karnataka's FDI has moderated since, reaching $6.6B in FY25 as that funding cycle cooled.
Gujarat's trajectory is the more interesting one. From $1.9B in FY21 to $7.3B in FY24, driven by Micron's semiconductor plant and PLI-linked manufacturing investments. This is long-horizon capital, not startup equity rounds that can exit overnight.
Telangana's FY24 jump of $3B, up 132% year-on-year, was driven by Amazon and pharma manufacturing. A state that inherited Hyderabad's infrastructure in 2014 and has since built on it steadily.
West Bengal's FY25 figure of $298M is its highest in five years. That is a positive signal and deserves fair weight. In absolute terms, it remains at roughly 1.5% of Maharashtra's annual FDI inflow, and 4.5% of Karnataka’s. Almost insignificant in the chart.
Stuck between two models
Not all states are chasing the same economic destination, and FDI alone doesn't capture the structural picture. The chart below plots each state's agriculture share of GSVA1 (Gross State Value Added) against its industry share, using FY2021-22 data from NITI Aayog's Macro and Fiscal Landscape state briefs.
Gujarat and Odisha sit in the top-left & the top-right: high industry, moderate-to-high agriculture. Both have grown their industrial base significantly. Gujarat at 49.3% industry GSVA is an outlier even among large states nationally. Odisha has taken a resource-and-steel path to a similar position.
Karnataka and Maharashtra sit in the bottom-left: low agriculture, low-to-moderate industry. Tamil Nadu is nearby.
Telangana sits closer to West Bengal than to any other state on this chart. Both carry higher agriculture shares and lower industry shares than their peers. They share a quadrant.
Both sit in the high-agriculture, low-industry quadrant. But Telangana's agriculture share has been declining as its economy grows. West Bengal's has not moved as decisively. High agriculture at 21.1%, comparable to Odisha. Low industry at 24%, comparable to Karnataka. The structural transformation, in both possible directions, is incomplete.
This is not a value judgment. These are the coordinates. What they mean is that WB's economy is organised around a different model, or more precisely, has not yet committed fully to any model.
Manufacturing's signal
Here is where the WB story gets counterintuitive. And it adds to the previous point.
18.8% of West Bengal's workers are employed in manufacturing. That is higher than Karnataka (10.4%), Maharashtra (12.4%), and Tamil Nadu (16.8%). On workforce share alone, WB looks like a manufacturing economy.
The scatter plots manufacturing workers as a share of workforce against manufacturing's share of GSVA. States above the 45-degree line get more output per worker than their employment share suggests: high-productivity manufacturing. States below get less.
West Bengal is below the line. 18.8% of workers in manufacturing, 13.3% of GSVA from manufacturing.
Gujarat sits well above. Gujarat's manufacturing workforce generates 37% of its GSVA from 23.8% of its workers. West Bengal's generates 13.3% of GSVA from 18.8% of workers. The gap in manufacturing productivity is visible even from these ratios.
The gap is explained by composition. 47.12% of West Bengal's informal enterprises are in manufacturing, the highest share in India (ASUSE 2023-24). West Bengal alone employs 40% of all women working in tobacco manufacturing nationally. Half of India's unorganised tobacco enterprises are in the state. The average registered MSME in WB employs 10 workers. For Telangana, that figure is 143.
WB's manufacturing is wide but shallow. Bidi, handloom, jute, cottage metalworks. These are industries with high labour intensity and very low value addition per worker. They show up in the employment data without showing up proportionally in output.
The manufacturing growth rate of 8.1% per annum over the last decade is real, higher than the national average of 5.5%. But it is occurring primarily in a thin formal layer on top of a vast informal base that has not been upgraded.
The formal economy that never scaled
The IT exports chart is the starkest in this series.
Karnataka exports ₹6.20 lakh crore in software annually. West Bengal exports ₹0.36 lakh crore. The ratio is roughly 17:1, with a state accounting for 2/3 of West Bengal’s population.
Kolkata had, and still has, credible inputs for an IT economy (as we can see - more than Gujarat & Odisha). Salt Lake Sector V and New Town have established IT parks. Real estate costs remain lower than Bengaluru or Hyderabad. The English-speaking graduate workforce is large. TCS, Wipro, and Infosys all have established presences.
The formal economy of WB (the organised manufacturing sector, the IT sector, the parts that generate corporate tax, attract large-scale private investment, and create salaried employment) has not grown fast enough to become the dominant story. West Bengal’s economy is disproportionately concentrated in sectors that are difficult to tax and difficult to attract large-scale private capital into: informal manufacturing, low-productivity services, and agriculture.
What the data says
The four charts tell one consistent story - if we examine closely.
Capital flows to Maharashtra and Karnataka at a scale West Bengal has not approached in any recent year. The structural position shows an economy carrying high agriculture and low industry, having not moved decisively toward either an industrial or a knowledge-services model. Manufacturing employment is large but productivity per worker is low, concentrated in informal micro-enterprises rather than factory-scale production. And in the formal knowledge economy, the gap with the leading states is not narrow.
None of this makes West Bengal a failing economy (at least, yet). Its manufacturing is growing faster than the national average. Its FDI is at a five-year high. It absorbed ₹4,416 crore in central capital investment loans, the fifth highest among all states. The public sector capacity and willingness to invest is present.
What is less present is the private sector conviction that follows. The investment data, the structural position, the manufacturing productivity gap, and the IT export numbers all point in the same direction. West Bengal is a large economy organised around sectors that are hard to scale, hard to tax, and hard to attract large-scale private capital into.
That is where things stand today. Whether the next decade changes the composition is an open question.
The next piece in this series looks at health parameters.
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Data Sources:
Sectoral GSVA shares from NITI Aayog Macro and Fiscal Landscape state briefs (2025), based on MoSPI data for FY2021-22.
FDI figures from DPIIT quarterly factsheets; some FY21-23 figures are approximate.
Manufacturing workers from PLFS 2022-23 via NITI Aayog briefs.
IT exports from STPI and SEZ official data, FY2023-24.
MSME firm size from DC-MSME Udyam Registration Bulletin. Informal enterprise share from ASUSE 2023-24 via Factly.
1 GSVA (Gross State Value Added) is the total value of goods and services produced within a state, after subtracting input costs. Think of it as the state's contribution to national output. If a factory in Gujarat buys ₹60 worth of raw materials and sells output worth ₹100, it adds ₹40 to Gujarat's GSVA. It is the primary measure used to calculate GSDP.