In West Bengal, small scale industries were insignificant, in terms of comparative fixed investments, in all the major industry groups at the 2-digit level----food, metal, chemical and chemical products, machinery and parts, rubber and plastic products, and non-metallic mineral products. [The coverage of small scale industries require that (a) investment in fixed assets in plant and machinery is less than RS. 60 lakhs, and (b) for ancillary units, less than RS 75 lakhs.] {Report on the Second All India Census of Small-Scale Industrial units (Registered up to 31st March 1988)]. Moreover, the ratio of closed to working small-scale units is 80%. The government, in a statement made in July 1998, claimed that about RS 52,000 crores more than scheduled to be invested in Haldia alone. But the reasons why West Bengal lagged earlier behind six other states, need to be analysed.

The slow growth or stagnation in the processes of industrialisation in the state draws particular attention due to certain factors. First, at the time of independence, West Bengal was the most industrialised state in India. It is now lagging behind six other states. The slowing down has been particularly visible since the early 1970s when some other states continued to perform on a higher scale. But it is to be noted that it has a diversified industrial base. However, recent experience in the state has implied emergence of some advantages as far as industrialisation is considered. These can be listed below.

The state agriculture has been witnessing a growth rate of about 4% plus per annum during the last two decades. Again, the state has a long history of modern industry whereby the processes of learning-by-doing or learning-by-investment accumulated over decades has endowed the potential labour force with modern skill. Labour productivity in organised manufacturing is comparable to any other growth centres. It is also true that production losses due to labour unrest (strikes) have come down significantly, and are far behind such growth centres as Tamilnadu, Maharastra and Gujarat. Power deficit in the state is lowest among the top industrial states. The projected power deficit is also much lower as compared to the industrially advanced states Small savings are RS 2,600 crores per annum, which is considerably high.

These advantages have developed over the last two decades. But as against these advantages, disadvantages that hinder capital inflow or increased investment in the state also exist.Rural propensity to consume non-food, items in general, and durable goods, in particular, is disappointing when compared to the propensity of the entire country or any of the major states. However, urban propensity to consume non-food items in West Bengal is not only higher than Indian average but also than the other states. One of the factors determining the size of the market is the volume of state government expenditure. The rates of growth in real percapita expenditures (including social, educational, medical and public health, family welfare expenditures ) in the different states exhibit the state's disadvantage.

Again, so far as the investment of the 'big' capital that has transregional businesses is concerned it is found to have a regional bias, excepting the plantation and extracting industries. Most of the Gujarati investments(e.g., by the houses of Mafatlal, Walchabnd, Sarabhai, Kasturbhai, Kilachand) are concentrated in the Maharastra-Gujarat region, the Punjabi investments in the :Punjab -Delhi region, while investments by the Southern houses (e.g., Chidambaram, Iyengar, Chettiar, Ramkrishna) are confined primarily to the southern region. The largest part of investment of the Marwari industrial house (e.g., Birla, J.K., Bangur, Modi, Goenka, Sahu Jain) who replaced the British in West Bengal manufacturing was initially lodged in the state, and later diversified to states covering Uttar Pradesh,Maharashtra, Madhya Pradesh and Bihar. The Marwari business houses have further thinned out in recent times. 

It seems the regional literacy and similar custom, particularly language and work ethics, have induced indigenous investors to remain confined to their respective states. Both the controls over the labour process and proximity to state politics play crucial roles in the technology absorption process, and thereby in location choice. This kind of behavior of capital can be attributed more to strategic considerations than to consideration of higher return in the shortrun in the simple manner. Thus West Bengal, in particular, is affected because of non-emergence of an integrated and regionally orientated capitalist class.