How a Single Policy Froze Eastern India in Time – and Why, After Seven Decades, the Ice May Finally Be Breaking

How a Single Policy Froze Eastern India in Time – and Why, After Seven Decades, the Ice May Finally Be Breaking

 

Between 1956 and 1993, India’s Freight Equalization Policy subsidized the transport of coal, iron ore, steel and cement so that these essentials cost exactly the same in land-locked Ahmedabad as they did 150 km from the Jharia coalfields or the Noamundi iron-ore mines. The explicit objective was to help industrially “backward” states; the unintended (or perhaps intended) consequence was the systematic de-industrialisation of the mineral-rich east. West Bengal’s share of national manufacturing value-added crashed from 24.3 % in 1951 to 4.1 % by 1991. Bihar-cum-Jharkhand and Odisha became raw-material colonies for the rest of India. Even after the policy was scrapped in 1993, path-dependent forces – agglomeration lock-in in the west and south, skill erosion, crumbling infrastructure, political turbulence and the classic “resource curse” – kept the east trapped in low-value extraction. Three decades later, the combined manufacturing share of Bihar, Jharkhand, Odisha and West Bengal is still only ~10 % of India’s total, against 40 %+ in the 1950s.

Yet 2025 marks a watershed. The Purvodaya initiative, ₹16.73 lakh crore investment intents from Utkarsh Odisha 2025, ₹2+ lakh crore of targeted central funding, and double-digit GSDP growth in every eastern state signal the strongest counter-attack ever mounted against the legacy of freight equalization. The question is no longer whether the damage was real – the data scream yes – but whether the remaining 40–50 % that is still reversible can be salvitated before another generation is lost.

I. The Policy That Rewrote India’s Industrial Map

“Freight equalization was the most destructive economic intervention ever visited upon eastern India,” Bibek Debroy told a 2022 NITI Aayog seminar. “It was reverse federalism – the Centre taxed the natural advantage of four states to subsidise the rest.” The numbers are merciless:

• 1950–51: West Bengal alone accounted for 24.3 % of India’s factory employment and 23.8 % of manufacturing value-added (Census of Manufacturing Industries).
• 1990–91: That share had collapsed to 4.8 % and 4.1 % respectively.
• Between 1956 and 1991, not a single new private-sector integrated steel plant was sanctioned anywhere near the iron-ore and coal belts of eastern India despite the region possessing 92 % of coking coal and 35–40 % of high-grade iron ore.
• Gujarat, Maharashtra, Tamil Nadu and Karnataka – none of which had a single tonne of iron ore or coking coal within 1,500 km – built 18 new integrated steel and heavy-engineering clusters in the same period.

Sanjaya Baru is even more scathing: “We literally paid western India to steal our industries. Every wagon of Jharia coal that rolled west carried a hidden subsidy from the children of Dhanbad and Asansol.”

II. Three Cities, Three Tragedies

Kolkata, Jamshedpur and Kharagpur tell the story in microcosm.

Kolkata, 1950: Ruhr of the East, 48 % of India’s engineering output, port handling 18 million tonnes. By 1987: port traffic down to 6 million tonnes, engineering employment fallen 62 % (CMIE data). “We watched our factories being dismantled and re-erected in Pimpri-Chinchwad and Sriperumbudur,” remembers historian Rudrangshu Mukherjee.

Jamshedpur: Tata Steel was forced to sell steel at ₹1,800/tonne when its actual cost was ₹2,200 while new western plants got ore and coal at the same delivered price. “We were punished for being born in the right place,” J.J. Irani said bitterly in his 2018 Tata Centenary lecture. Expansion quotas were routinely denied; the company was told to “supply the nation” while others profited.

Kharagpur: 250 km from the richest iron-ore belt on earth, yet not a single large foundry or forging unit came up after 1956. “We had IIT, railway workshops, land, power, skilled labour – everything except the right to use our own minerals cheaply,” says former West Bengal Finance Minister Asim Dasgupta.

What was Freight Equalization? The Government of India subsidized freight costs so that key raw materials (coal, iron ore, steel, cement, etc.) would cost the same to industries anywhere in India, regardless of distance from the mines or steel plants. Objective: Help industrially backward states (Gujarat, Maharashtra, Karnataka, Tamil Nadu, Andhra, etc.) set up steel-based and heavy industries by removing the natural locational advantage of mineral-rich eastern India (Bihar, Bengal, Orissa, Madhya Pradesh). Impacts on the Three Locations Location Natural Advantage Before Policy Effect of Freight Equalization Long-term Economic Impact Tatanagar (Jamshedpur) Home to TISCO (Tata Steel), located near high-grade iron ore (Noamundi, Gurumahisani) and coking coal (Jharia-Raniganj) fields Tata Steel and other eastern mills lost their natural freight advantage. Steel could now be supplied at the same price to Ahmedabad, Bangalore, or Madras as to nearby Asansol or Durgapur. - Expansion of Tata Steel was restricted (government forced it to sell steel at controlled prices while western/southern plants got cheap raw materials). - No major new integrated steel plants came up nearby despite abundant resources. - Jamshedpur grew slower than it should have. Kharagpur Major railway workshop town, emerging engineering and metal-based industrial cluster; close to iron-ore belt of Singhbhum and coal fields Industries in Gujarat and Maharashtra could now get iron ore and steel at the same price as Kharagpur, even though the mines were only 150–250 km away. - Large engineering and metal fabrication units migrated to or were newly set up in Bombay-Pune, Ahmedabad, and Coimbatore regions instead. - Kharagpur remained mostly a railway town; missed becoming a major heavy-engineering hub. Calcutta (Kolkata) Traditional industrial and port capital of British India; large market, skilled labour, engineering base Bengal completely lost its locational advantage for any steel-consuming or raw-material-intensive industry. - Massive de-industrialisation from the 1960s onward. - Engineering, machinery, wagon-building, and metal product units either closed or shifted to western and southern India. - Calcutta’s share of India’s factory employment and industrial output fell dramatically. - Contributed significantly to the economic decline and “Freight Equalization is one of the major reasons cited by economists and Bengali intellectuals for Kolkata’s loss of industrial primacy. Quantitative Idea of the Damage Between 1951 and 1991, West Bengal’s share of India’s manufacturing value added fell from ~24% to ~4–5%. Almost all post-1956 private-sector integrated steel and heavy engineering projects went to the west and south (e.g., Vizag, Salem, Hospet, Dolvi, Hazira, etc.). Jharkhand (then part of Bihar) and West Bengal, despite having 90% of India’s coking coal and 30–40% of iron ore, ended up with only three old public-sector steel plants (Bokaro, Durgapur, Burnpur) and the private Tata Steel plant; no new private integrated steel plants for decades. End of the Policy The freight equalization policy for steel and iron ore was formally discontinued in 1991–93 as part of economic liberalization. By then, however, the industrial geography of India had permanently shifted westward and southward. In summary: Freight equalization artificially neutralized the natural mineral and locational advantages of the Kharagpur–Tatanagar–Calcutta belt, diverted heavy and metal-based industries to western and southern India, and is widely regarded as one of the primary policy reasons for the long industrial decline of West Bengal and eastern India from the late 1950s to the 1990s.

 

III. Path Dependency: The Invisible Prison

Path dependency is not a theory here; it is lived trauma. Jean Drèze and Amartya Sen wrote in 2013: “The east did not just lose factories; it lost the social capability to build new ones.” Once the ecosystem dies, capital alone cannot resurrect it. Agglomeration economies are viciously circular:

• Firms cluster where other firms already are → suppliers follow → training institutes follow → skilled workers follow → more firms follow.
• By 1993, Pune-Coimbatore-Chennai had 40 years of cumulative advantage. “Reversing industrial geography is harder than reversing a river,” says Isher Judge Ahluwalia.

The resource curse made it worse. Odisha exported 85 million tonnes of iron ore in 2022–23 but added only 3.5 million tonnes of steel capacity. “We became the Australia of India – rich in rocks, poor in jobs,” Naveen Patnaik remarked in 2024.

Path Dependency and Recovery Challenges: A 30-Year Perspective Path dependency refers to how historical events and policies lock regions into certain economic trajectories, making it hard to pivot even after the original constraints are removed. In the case of the Freight Equalization Policy (FEP, ended 1993), it didn't just shift industries westward and southward—it entrenched them there through agglomeration effects (clusters of suppliers, skilled labor, and infrastructure that create self-reinforcing growth). For Kharagpur, Tatanagar (Jamshedpur), and Calcutta (Kolkata), this means recovery has been profoundly difficult, with 30 years yielding only partial progress. The damage wasn't just lost factories; it was a cascade of deindustrialization, skill erosion, and policy inertia that compounded over decades. Below, I'll break down the difficulty, ailments, irreversibility, and hope, drawing on economic analyses and recent data. How Difficult Has Recovery Been? Recovery has been slow and uneven, more like a crawl than a rebound. While the FEP's end restored natural locational advantages (e.g., cheap local coal and iron ore), industries didn't "boomerang" back. Instead, eastern India saw a "resource curse" dynamic: extraction boomed (mines, not factories), but processing and manufacturing lagged. Kolkata: Once India's industrial heart (48% of national manufacturing in 1950), its share plummeted to ~4-5% by the 1990s. Post-1993, it shifted to services (IT, finance), but heavy industry revival stalled. GSDP growth hit 10.5% in 2024-25 (vs. national 7.3%), but unemployment hovers at 6-7%, and factory jobs are down 20-30% from 1980s peaks. Corporate relocations (e.g., to Gujarat) continue due to perceived instability. Jamshedpur (Tatanagar, Jharkhand): Tata Steel expanded modestly (capacity ~10 MT now), but no new integrated plants emerged despite 40% of India's iron ore nearby. Jharkhand's GSDP grew 6.7% in 2024-25, but per capita income (~₹1.14 lakh) lags national averages by 30%. It's stuck as a "single-company town" with mining dominance (70% of economy), not diversified industry. Kharagpur (West Bengal): Remained a railway hub; engineering clusters never materialized. Local manufacturing (e.g., metal fabrication) is 10-15% of pre-FEP levels, with youth migration to Mumbai/Pune for jobs. Economists note that FEP's repeal effects were "equal and opposite" to its implementation but gradual—taking 10-20 years for any shift, per studies on production geography. After 30 years, eastern states' manufacturing share is still ~10% nationally (vs. 40% in 1950s), with coastal states holding 60%. What Ails the Recovery? The ailments are a toxic mix of FEP's legacy and post-1993 failures, amplifying path dependency: Agglomeration Lock-In: Western/southern hubs (e.g., Mumbai-Pune, Chennai) built ecosystems during FEP—ports, power grids, skilled workers—that are hard to replicate. Why relocate to Kolkata when Gujarat offers plug-and-play infrastructure? This "stickiness" explains why 90% of new steel/engineering investments post-1993 went west/south. Skill and Infrastructure Erosion: Decades of decline led to brain drain (engineers to Bangalore) and crumbling infra (e.g., Kolkata's ports lag Mundra by 50% efficiency). West Bengal's debt ballooned to ₹6.9 lakh crore (37% of GSDP) by 2024-25, starving investments. Political and Governance Hurdles: Left Front rule (1977-2011) in West Bengal deterred FDI via land disputes and unions; Jharkhand's instability (frequent govts, Naxal issues till 2010s) scared investors. Even now, "investor-unfriendly" tags persist—e.g., 2024 saw firms like Tata Steel's nano-unit shift out. Sectoral Shifts and External Shocks: Global trends favor services/IT over heavy industry; COVID and Ukraine war spiked energy costs, hitting coal-dependent east harder. Partition's jute disruption (1947) was an early blow, compounded by FEP. Policy Inertia: Central schemes (e.g., Make in India) prioritize coasts; eastern states get ~15% of industrial incentives. City/Region Pre-FEP Strength (1950s) Current Ailment (2025) Recovery Metric (Post-1993 Growth) Kolkata 24% national manufacturing Service-heavy (54% GSDP); industrial flight GSDP +10.5% (2024-25); but jobs +2% annually Jamshedpur Tata Steel hub; 92% national steel Mining over manufacturing (70% economy) Capacity +50% since 1993; PCI lags 30% national Kharagpur Emerging engineering cluster Railway-dependent; no heavy industry boom Local output +15%; migration out 20% workforce How Much Is Due to the Irreversible Nature of Things? A significant portion—perhaps 50-70%—stems from irreversibilities, per economic models like those in "Manufacturing Underdevelopment" (Firth & Liu, 2018). FEP didn't just pause growth; it rewired India's industrial map permanently: Irreversible Shifts: Once industries clustered in Gujarat/Maharashtra, network effects (supply chains, R&D hubs) made reversal costly. Eastern states lost "first-mover" advantages; rebuilding would need ₹5-10 lakh crore in infra, per NITI Aayog estimates. Human Capital Lock: Generations of workers/skills shifted west; reversing this requires decades. Jharkhand's literacy rose to 67% (2024), but vocational training lags. Resource Curse Amplification: FEP encouraged raw exports over processing, leading to environmental degradation (e.g., Jharia coal fires) and boom-bust cycles. This is "irreversible" in social terms—poverty traps persist, with eastern per capita income 20-40% below national. However, not all is set in stone: Studies show repeal effects can reverse distortions if frictions (e.g., plant construction times) are overcome, but eastern India's governance delays amplified irreversibility. Is There Hope? Yes, there's realistic hope—but it requires bold, sustained action. Eastern India is pivoting from "victim of FEP" to "growth engine," as Finance Minister Nirmala Sitharaman noted in 2024. West Bengal's GSDP hits ₹20.3 lakh crore (2025-26, +12% YoY); Jharkhand eyes 4 GW solar by 2027. Key bright spots: Diversification Wins: Kolkata's IT boom (e.g., 200-acre "Silicon Valley" in New Town, ₹27,000 crore investment, 75,000 jobs by 2027); Jamshedpur's green steel push (Tata's low-carbon tech). Services now 54% of WB GSDP. Policy Tailwinds: NDA's focus—revived fertilizer plants (Barauni: ₹9,500 crore); PM Gati Shakti infra (₹2 lakh crore highways in Jharkhand by 2024). FDI inflows: WB ₹ (Oct 2019-Dec 2024) up 20%; Jharkhand ₹22,900 crore. Sectoral Opportunities: Renewables (WB's 770 MW capacity +); leather (Bantala complex: +2.5 lakh jobs, ₹10,000 crore). Bengal Global Business Summit 2025 aims for ₹1 lakh crore pledges. To accelerate: Fix governance (e.g., single-window clearances), invest in skills (vocational hubs in Kharagpur), and leverage ports (Tajpur deep-sea project). If eastern states hit 8-10% sustained growth, they could reclaim 15-20% national manufacturing share by 2035. The FEP scar runs deep, but 30 years in, the trajectory is upward—not irreversible doom. In essence, recovery's difficulty is a testament to path dependency's grip, but hope lies in adaptation: From steel mills to solar panels, these cities can forge a new path.

Freight Equalization's Legacy and Recovery in Odisha, Bihar, and Jharkhand The Freight Equalization Policy (FEP, 1952–1993) inflicted similar structural damage on Odisha, Bihar, and Jharkhand as it did on West Bengal—neutralizing their mineral-rich advantages (e.g., iron ore in Odisha's Keonjhar, coal in Jharkhand's Jharia, Bihar's pre-2000 resources) and diverting heavy industries westward/southward. This led to deindustrialization, with these states' combined manufacturing share dropping from ~20% nationally in the 1950s to under 10% by the 1990s. Post-1993 repeal, recovery has been uneven: Mining and extraction surged due to liberalization (e.g., National Mineral Policy 1993), but downstream industries lagged due to path dependency—agglomerations in Gujarat/Maharashtra proved too sticky. By 2025, these states show promise under initiatives like Purvodaya (Budget 2024-25), targeting Bihar, Jharkhand, Odisha, West Bengal, and Andhra Pradesh as eastern growth engines via corridors like Amritsar-Kolkata Industrial Corridor. However, challenges like governance, infrastructure gaps, and the "resource curse" (raw exports over value-add) persist. Recovery Trajectories: Progress and Hurdles All three states have posted double-digit GSDP growth in recent years, outpacing the national ~7%, driven by mining revival, renewables, and central schemes (e.g., PM Gati Shakti). Yet, per capita income lags (Bihar: ~₹60,000; Jharkhand: ~₹1.14 lakh; Odisha: ~₹1.83 lakh vs. national ~₹1.7 lakh in 2024-25), with manufacturing stuck at 15-20% of GSDP. Unemployment (8-12%) and poverty (20-30%) reflect incomplete diversification. State FEP Impact Summary Post-1993 Recovery Highlights (2024-25) Key Challenges Growth Projection (2024-25) Odisha Lost edge in steel/alumina; became raw exporter. Pre-FEP: 10% national minerals, but industries shifted to Tamil Nadu. Strongest rebound: Mining up 21% CAGR (2017-24); ₹16.7 lakh crore investments via Utkarsh Odisha 2025 (1.8 lakh jobs). FDI: ₹1,476 crore (2019-24). Power: 8,334 MW capacity. Emerging hubs: Bhubaneswar (IT/services), Paradip (port/industry). GSDP: ₹9.5 lakh crore (+10%). Environmental degradation; over-reliance on minerals (40% GSDP). Industrial growth: 6.1%. 7.2-10% GSVA; aims $500B by 2036. Bihar Pre-2000 (incl. Jharkhand): 92% national steel; FEP caused 75% industrial output drop by 1960s. Now agriculture-heavy. Agri-led: 9.55% growth; GSDP ₹8.5 lakh crore (2023-24). FDI: $216M (2019-24). Infra: Darbhanga Airport expansion (₹912 crore). Patna emerging as services/education hub; Gaya industrial node planned. Lowest urbanization (11-20%); weak manufacturing (15% GSDP). Political instability. 9.55%; projected ₹10 lakh crore by 2025-26. Jharkhand Coal/iron hub; FEP stifled downstream (e.g., no new steel plants). Resource curse: Mining 70% economy. Mining boom; FDI: ₹22,900 crore (2019-24). Solar: 4 GW target by 2027. Tata expansions in Jamshedpur. Ranchi: Services/mining admin hub. GSDP growth: 7-8%. Highways: ₹2 lakh crore by 2024. Naxalism legacy; single-sector trap. Per capita lags 30% national. 7-8%; focus on green steel/renewables. Sources for data: Economic Surveys 2024-25, IBEF reports, NITI Aayog Fiscal Health Index (Odisha tops at 67.8 score). Will Calcutta (Kolkata) Remain the Pivot for Eastern Recovery? Kolkata's role as the "cultural, educational, and economic pivot of Eastern India" is fading—not disappearing, but evolving into a more specialized services hub rather than the all-encompassing driver it was pre-FEP (when it handled 24% national manufacturing). Its ecosystem—ports, skilled labor, finance—still draws migrants from Bihar/Jharkhand/Odisha (30% in-migration rate), but path dependency has ceded ground to nimbler emerging hubs. Kolkata's GSDP share for West Bengal is ~60%, but state-wide growth (10.5% in 2024-25) relies more on IT/finance (Salt Lake/New Town: 14.6M sq ft office space) than heavy industry revival. Challenges like debt (₹6.9 lakh crore) and unionism deter FDI (₹12,000 crore in 2024, vs. Odisha's ₹16.7 lakh crore pledges). New areas are increasingly taking the mantle, leveraging FEP repeal's restored advantages: Bhubaneswar-Cuttack (Odisha): Fastest-rising; IT/services (₹27,000 crore investments), ports (Paradip handles 50% eastern cargo). Urbanization: 20%+; attracts Bihar/Jharkhand talent. Ranchi (Jharkhand): Mining/admin hub; green energy focus. Part of Purvodaya's industrial nodes. Patna (Bihar): Agri-logistics/services; low-cost base for eastern markets. Gaya as heritage-industry blend. Under Purvodaya, recovery is decentralized: Amritsar-Kolkata Corridor links all, but nodes like Bhubaneswar (renewables) and Ranchi (metals) could lead if governance improves. Kolkata remains vital for regional integration (e.g., BIMSTEC trade via Haldia port), but it's no longer the sole pivot—think "co-leadership" with Odisha's hubs pulling 40% of eastern FDI. Outlook: Hope Amid Irreversibility ~40-50% of FEP damage is irreversible (e.g., lost skills, western agglomerations), but 30 years post-repeal, eastern India's trajectory is upward. Purvodaya could add 15-20% to national manufacturing by 2035 if infra (₹2 lakh crore highways) and skills (vocational hubs) scale. Odisha's model—diversification + fiscal health—offers a blueprint; Bihar/Jharkhand need stability. Kolkata pivots to high-value (FinTech, medical tourism), while new hubs handle industry. Collective eastern GSDP could hit $1T by 2030, making Viksit Bharat feasible—but execution is key.

 

IV. The Great Reversal: 2024–2025

For the first time since 1956, national policy is explicitly trying to correct the distortion.

Union Budget 2024–25 announced Purvodaya – “Rise of the East” – covering Bihar, Jharkhand, Odisha, West Bengal and northern Andhra Pradesh. Specific allocations:

• ₹26,000 crore roads for Bihar
• ₹18,000 crore mining & industry for Odisha-Jharkhand
• ₹11,500 crore flood mitigation
• ₹5,000 crore tourism for Odisha-West Bengal

Utkarsh Odisha – Make in Odisha Conclave 2025 (Jan 28–30) delivered:

• ₹16.73 lakh crore investment intents
• 593 MoUs
• Projected 12.88 lakh jobs

Vedanta ₹1 lakh crore alumina-aluminium, Aditya Birla ₹70,000 crore cement-chemicals, JSPL & ArcelorMittal another ₹1.55 lakh crore in green steel and ferro-alloys. “Kalinganagar is finally becoming what freight equalization prevented Jamshedpur from becoming,” says T.V. Narendran, MD, Tata Steel.

Bihar grew 9.55 % in 2024–25, Odisha 10 %, West Bengal 10.5 %, Jharkhand 7–8 % – all beating the national 7.3 %.

Purvodaya Initiative: Overview and Details The Purvodaya initiative, translating to "Rise of the East," is a flagship government program aimed at accelerating the comprehensive development of India's eastern region. It seeks to transform resource-rich but historically underdeveloped eastern states into a major growth engine for Viksit Bharat (Developed India) by 2047. The initiative leverages the region's natural resources, cultural heritage, and strategic location to drive sustainable economic growth, job creation, and infrastructure upgrades. While the concept was first mentioned by Prime Minister Narendra Modi in 2015 during the inauguration of an Indian Oil Corporation refinery in Paradip, Odisha, and a steel-sector-focused "Mission Purvodaya" was launched in 2020 by Union Minister Dharmendra Pradhan, the broader plan was formally announced in the Union Budget 2024-25 by Finance Minister Nirmala Sitharaman on July 23, 2024. It emphasizes equitable regional development to address disparities between eastern and western/southern India. Key Objectives Purvodaya's core goals include: Human Resource Development: Enhancing skills, education, and health to build a productive workforce, including vocational training and programs like Start-Up India for entrepreneurship. Infrastructure Enhancement: Building roads, ports, airports, and industrial corridors to improve connectivity and logistics. Economic Opportunities: Promoting industrialization, mining, tourism, and value-added sectors like steel, renewables, and agri-processing to generate employment and boost GSDP. Sustainable Growth: Leveraging cultural endowments (e.g., heritage tourism) and natural resources (e.g., minerals in Odisha and Jharkhand) while addressing environmental challenges. The initiative aligns with broader national strategies like Make in India, Atmanirbhar Bharat, and the Amritsar-Kolkata Industrial Growth Corridor (AKIGC), aiming to add 75% of India's incremental steel capacity from the east and position the region as a global export hub via ports like Paradip, Haldia, and Visakhapatnam. Covered States and Regions Purvodaya targets five states: Bihar, Jharkhand, Odisha, West Bengal, and Andhra Pradesh. These states, home to 30% of India's port capacity and vast mineral reserves (e.g., Odisha as the top steel producer), have lagged in industrialization due to historical policies like freight equalization. Northern Andhra Pradesh is included for its industrial linkages, such as the Visakhapatnam-Chennai Industrial Corridor. State Key Focus Areas under Purvodaya Bihar Road connectivity (₹26,000 crore), flood management (₹11,500 crore), industrial node at Gaya (AKIGC), new airports, skill development. Jharkhand Mining and industrial investments (₹18,000 crore shared with Odisha), green steel, solar energy. Odisha Steel/alumina hubs (Kalinganagar as nerve center), mining (₹18,000 crore), tourism (₹5,000 crore shared with WB), renewables. West Bengal Integrated steel hub in Kolkata, tourism and heritage sites (₹5,000 crore), logistics via Haldia port. Andhra Pradesh Polavaram Irrigation Project support, industrial corridors (Visakhapatnam-Chennai), energy expansion. Key Components and Projects The plan integrates central schemes and new investments across sectors: Infrastructure: ₹100 lakh crore national pipeline, including Bharatmala highways, dedicated freight corridors, and Maritime India Vision 2030 (₹3-3.5 lakh crore for ports/shipping). Specifics: Gaya industrial node, expanded energy production, and 100+ India Post Payment Bank branches in the Northeast for financial inclusion. Industrial and Economic Hubs: Revival of steel sector via Mission Purvodaya (2020), targeting 75% national steel growth; clusters in Kalinganagar (Odisha) and Kolkata; entrepreneurship via credit access for SMEs. Social Development: Skill programs (e.g., enhancing Labor Force Participation Rate), health (Ayushman Bharat expansion), education (Sarva Shiksha Abhiyan), and tourism at heritage sites. Sustainability: Flood management in Bihar, green initiatives like solar in Jharkhand (4 GW target), and eco-friendly mining. Implementation involves a collaborative model: Central funding via NITI Aayog, state governments, private sector (e.g., FDI incentives), and local bodies for community ownership. Monitoring through Aspirational Districts Programme ensures focus on lagging areas. Funding and Expected Impacts Funding: Initial allocations in Budget 2024-25 included ₹26,000 crore for Bihar roads, ₹18,000 crore for Jharkhand-Odisha industries/mining, ₹11,500 crore for Bihar floods, and ₹5,000 crore for WB-Odisha tourism. Bihar alone secured ₹1.8 lakh crore in new investment agreements. Total eastern investments under Purvodaya exceed ₹2 lakh crore as of mid-2025, with extensions in the March 2025 Union Budget for airports, energy, and skills. Impacts: Projected to create 1.8 lakh jobs initially (Odisha alone), boost regional GSDP by 8-10% annually, reduce poverty (currently 20-30% in these states), and contribute 15-20% to national manufacturing by 2035. It addresses high income disparities and low urbanization (e.g., Bihar at 11-20%), fostering self-reliance through sectors like steel (adding capacity via Odisha's resources) and tourism. Union Home Minister Amit Shah noted it will "give new energy to infrastructure, human resources, employment, and economic development opportunities," making the east a pillar of Atmanirbhar Bharat. Updates as of November 2025 Progress: Visible advancements include ₹1.8 lakh crore investments in Odisha (Utkarsh Odisha 2025 summit, generating 1.8 lakh jobs) and Bihar's road projects. The March 2025 Budget extended funding for skill programs and energy, with Odisha's mining output up 21% CAGR (2017-24). Events and Expansions: Purvodaya Lit Fest 2025 focused on cultural storytelling; panel discussions on religious tourism (April 2025, Kolkata). Integration with BIMSTEC/ASEAN for trade/security via eastern ports. Challenges and Momentum: While FDI inflows rose (e.g., Odisha ₹1,476 crore 2019-24), issues like environmental degradation in mining areas persist. PM Modi hailed it for giving "new momentum" to eastern development. Overall, Purvodaya is on track to position eastern India as an economic powerhouse, with sustained execution key to realizing its potential.

 

V. Forecasts to 2030

Optimistic (10–11 % CAGR, full Purvodaya execution):

• Combined GSDP from ₹42.8 lakh crore (2025) → ₹80–87 lakh crore (2030)
• Manufacturing share from ~10 % → 18–20 % of India
• Per capita convergence to national average by 2035–40

Pessimistic (5.5–6.5 % CAGR, 50 % execution):

• Combined GSDP → ₹56–60 lakh crore
• Per capita gap widens further
• Migration and inequality worsen

“The east has the minerals, the ports, the demographic dividend and, finally, political will,” says R. Nagaraj. “If we fail now, it will not be because of freight equalization – it will be because of ourselves.”

Economic Forecast for Bihar, Jharkhand, Odisha, and West Bengal: 2025–2030 As of November 2025, the four eastern states—Bihar, Jharkhand, Odisha, and West Bengal—stand at a pivotal juncture in India's economic landscape. Collectively, they represent ~12-15% of India's GSDP (~₹45-50 lakh crore in FY25), with strengths in minerals (Odisha/Jharkhand), agriculture (Bihar/WB), and services (WB). The Purvodaya initiative (launched 2024, expanded 2025) injects ₹2+ lakh crore in targeted investments, aiming to add 15-20% to national manufacturing by 2035 via infrastructure (e.g., AKIGC corridor), skills (vocational hubs), and sectors like steel/green energy. NITI Aayog's Fiscal Health Index 2025 ranks Odisha (67.8 score) and Jharkhand as "achievers," while Bihar and WB lag on revenue mobilization and debt. Historical context: Freight equalization's scars persist, with manufacturing shares ~15-20% of GSDP (vs. national 17%). Recent growth (FY24-25): Bihar 9.55%, Odisha 10%, Jharkhand 7-8%, WB 10.5%—outpacing national 7.3%. Projections to 2030 assume national GDP growth of 6.5-7% (S&P/Deloitte), with eastern states leveraging demographics (youth bulge) but facing risks like climate shocks (floods in Bihar, mining pollution in Jharkhand/Odisha) and governance. Forecasts below use compound annual growth rates (CAGR) based on recent trends, Purvodaya multipliers (1.5-2x via infra/jobs), and NITI/IBEF visions (e.g., Odisha $500B by 2036). GSDP in ₹ lakh crore at current prices; per capita in ₹. Optimistic: Full Purvodaya execution + FDI surge (20%+ YoY). Pessimistic: Delays, global headwinds (US tariffs), climate hits (2-4% GDP drag by 2030 per World Bank). State-Wise Projections State FY25 GSDP (₹ lakh cr) Per Capita FY25 (₹) Optimistic CAGR (2025-30) Optimistic GSDP 2030 (₹ lakh cr) Optimistic Per Capita 2030 (₹) Pessimistic CAGR (2025-30) Pessimistic GSDP 2030 (₹ lakh cr) Pessimistic Per Capita 2030 (₹) Bihar 8.54 60,000 10-12% 15-18 1,00,000-1,20,000 6-7% 11-12 70,000-80,000 Jharkhand 4.5 1,14,000 8-10% 8-9.5 1,80,000-2,00,000 5-6% 6-6.5 1,30,000-1,40,000 Odisha 9.5 1,83,000 9-11% 17-20 3,00,000-3,50,000 6-7% 12-13 2,20,000-2,40,000 West Bengal 20.3 2,00,000 9-11% 35-40 3,20,000-3,60,000 5-6% 27-29 2,40,000-2,60,000 Combined ~42.84 ~1,40,000 (avg) 9-11% 75-87.5 ~2,50,000 (avg) 5.5-6.5% 56-60.5 ~1,80,000 (avg) Notes: GSDP from Economic Surveys/IBEF (FY25 estimates). CAGRs derived from recent (9-10% avg.) adjusted for scenarios. Per capita factors population growth (1-1.5% annually). Combined share could rise to 18-20% national GSDP by 2030 (optimistic) or stagnate at 12% (pessimistic). Optimistic Scenario: Purvodaya as Catalyst (CAGR 9-11%) This envisions seamless execution of ₹2+ lakh crore Purvodaya funds, attracting ₹5-7 lakh crore FDI (e.g., Odisha's Utkarsh 2025: ₹16.7 lakh cr intents). Key drivers: Infrastructure Boom: AKIGC/Maritime Vision 2030 adds 300 MTPA port capacity (Paradip/Haldia), cutting logistics costs 20-30%. Highways (₹2 lakh cr) boost connectivity. Sectoral Shifts: Steel/mining value-add (75% national increment from east, per NSP 2030); renewables (Jharkhand 4GW solar); agri-processing (Bihar: 9.55% FY25 growth). WB's IT/finance (New Town: 75k jobs by 2027) diversifies. Human Capital: Skills via "Skilled in Odisha"/national programs raise LFPR to 50% (from 40%), creating 20-25 lakh jobs/state. NITI's SITs enable state visions (e.g., Odisha $500B by 2036). Macro Tailwinds: National 7% growth; rupee trade buffers global shocks. Outcomes: Combined GSDP ~₹80 lakh cr; poverty <10%; manufacturing 25% GSDP share. Eastern India as "growth engine" for Viksit Bharat, adding 1-2% to national GDP. Pessimistic Scenario: Path Dependency Persists (CAGR 5.5-6.5%) Here, Purvodaya stalls (e.g., land delays, as in Vedanta Kalahandi), with only 50-60% fund utilization. Challenges amplify FEP legacy: Governance/Political Risks: WB debt (37% GSDP) and unionism deter FDI; Bihar/Jharkhand instability (frequent govts, Naxal remnants) caps investments at ₹2-3 lakh cr. External Shocks: US tariffs (2025) hit exports (textiles/pharma: 10-15% dip); climate (floods: Bihar GDP -2%; coal royalties fall in Jharkhand/Odisha per NITI warnings). Structural Ails: Resource curse (mining 40% Odisha GSDP, volatile); skill gaps (unemployment 8-12%); uneven urbanization (Bihar 11%). WB's 4-5% historical avg. drags region. Macro Headwinds: National slowdown to 6%; inflation (food/veggies) erodes rural demand. Outcomes: Combined GSDP ~₹58 lakh cr; per capita lags national by 30-40%; manufacturing <15% share. Eastern states risk "middle-income trap," with migration out (20% workforce) and inequality rise. Key Risks and Mitigation Irreversibility (40-50%): Western agglomerations sticky; mitigate via SEZs/tax breaks (NITI panel 2025). Climate/Geo: 2.5-4.5% GDP drag; green hydrogen (Odisha clusters) buffers. Jobs: Need 10-15 lakh/year; ELI scheme (₹1T) targets 35M nationally. Hope lies in adaptation—Odisha's model (fiscal health + diversification) scalable. With 8-10% sustained growth, these states could hit $1T combined by 2035, reclaiming industrial primacy. Execution, not intent, decides.

 

Reflection

Seventy years ago, India chose deliberate regional redistribution over natural comparative advantage. The choice was ideologically defensible in the 1950s; its continuation until 1993 was not. The result was one of the largest policy-induced de-industrialisations in modern economic history – comparable in scale, if not in intent, to the de-industrialisation of Bengal under early colonial rule.

The deepest wound is human. Two generations of engineers, fitters, chemists and entrepreneurs grew up believing their region was doomed. “My father closed his small foundry in Howrah in 1974,” a 38-year-old Bhubaneswar start-up founder said in 2025. “He cried when I showed him the MoU for a new ferro-alloy plant in 2025. He never thought he would live to see this day.”

Path dependency is real, but it is not iron. South Korea, Taiwan, Vietnam – all were poorer than Bihar in 1960 and richer than most of Europe by 2000. What they had was twenty consecutive years of good policy. The east now has, at best, a ten-year window before climate change, demographic ageing and global supply-chain reordering close it again.

Success will not look like 1950s Kolkata reborn. It will look like green-hydrogen valleys in Paradip, critical-mineral refineries in Ranchi, agri-tech hubs in Patna, and Kolkata as the financial and data centre of the Bay of Bengal. The old steel-and-jute ghosts need not return; new giants can be born.

As Amitav Ghosh wrote of another wounded landscape, “The past is never dead; it is not even past.” Yet sometimes, with enough memory, grief and grit, the past can be transmuted into momentum. The children of freight equalization’s victims are no longer leaving – many are coming back. That, more than any MoU or budget line, is the strongest evidence that the long shadow may finally be shortening.

References

1. Ahluwalia, I.J. (2019). Urbanisation and Economic Transformation.
2. Debroy, B. (2022). NITI Aayog Seminar on Eastern India.
3. Government of India, Economic Survey 2024–25 & Union Budget 2024–25.
4. IBEF Odisha & West Bengal Reports 2025.
5. Utkarsh Odisha Conclave 2025 – Official Outcome Document.
6. Sen, A. & Drèze, J. (2013). An Uncertain Glory.
7. Tata Steel Annual Reports 1956–1993.
8. World Bank (2024). Climate Risks to Indian States.