Understanding the Economic Growth of West Bengal: A Multiple Structural Breaks Approach

Abstract

This article tries to understand the economic growth of West Bengal by using the Bai–Perron method of multiple structural break analysis. It is found that between 1960 and 2014, the Bengal economy had witnessed two breaks in its output growth. The first break occurred in 1983 and was influenced by a break in the agrarian sector, an outcome propelled by the shift in the political regime and changes in policy prescriptions. The second break happened in 1993; it was preceded by the break in the service sector and a shift in the policy paradigm within the same political dispensation. This study has further investigated the characteristics of the various growth phases in terms of sectoral composition and policies. It is identified that the West Bengal economy has moved from a low growth phase to a medium or balanced growth phase followed by a high growth phase. The low growth phase had witnessed an agrarian impasse, industrial deceleration and political instability. In contrast, the medium growth phase recorded an unprecedented agrarian growth and political stability. The high growth phase has seen a huge growth in the tertiary sector and political instability during its later half. JEL Classification: R11

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“…Also, tax rates are found not to contribute to the shift in tax returns. Biswas (2020) attempted to conceptualize economic development in the West Bengal state of India using Bai and Perron's multiple structural break technique. Between the periods considered, year 1960 to 2014, two structural breaks were found.…”