Since 2002, the Left-led government of West Bengal has embraced economic reforms to attract industry and IT companies and ensure the state and its capital Kolkata keeps up with other Indian states riding a national economic boom.

The aim of the reforms were also to help the Communist Party of India (Marxist) to stay in power by winning over voters.

But the Leftists now face the worst crisis in decades, experts say, after an unsuccessful move to forcibly acquire land for industry sparked violent protests, while riots have erupted over corruption in food distribution for the poor.

West Bengal has suffered more than a dozen strikes since January.

"These regular strikes are definitely damaging the image of the state as a potential investment destination," said Aditya Jajodia, chairman and managing director of Jai Balaji Industries Ltd.

The crisis has centred in Nandigram, a name synonymous in India with successful opposition to government policies to encourage industries with the creation of special economic zones (SEZs).

At least 34 people have been killed in Nandigram since January after the government tried, and failed, to acquire land for an SEZ for a chemical hub.

"A general strike over violence in Nandigram at the beginning of this week was very damaging," Jajodia said, referring to the latest strike against ongoing violence by Left party cadres and police against Nandigram villagers.

The steel-maker plans to invest $4 billion in setting up a steel, power and cement plant in the state. West Bengal wants to attract investment worth over $25 billion in the steel sector in the next few years, officials said.

BACK TO THE PAST?

A number of companies, including the Videocon Group, are also set to invest $3.8 billion to set up a 3-million tonne steel and a 1,200 MW captive power plant.

JSW Steel is investing $9 billion to set up a 10 million-tonne steel plant, the biggest in India.

"Obviously any disturbance in the city or a state always makes the investor wary, as no one puts investment in a state where the state is not stable," Biswadeep Gupta, Chief Executive Officer of JSW's West Bengal operations said.

A $255-million small-car factory by Tata Motors coming up near Kolkata, is still facing sporadic protests from farmers.

"Investors will be forced to think twice, maybe over a short period, because it depends on perception," Rajeev Singh, the secretary-general of the Indian Chamber of Commerce said.

The problems facing the Left government contrast with its success nationally at stalling a historic civilian nuclear deal with the United States.

"We are straightaway heading towards doom," said Sandip Ray, the renowned film maker-son of India's only Oscar-winning film director Satyajit Ray.

Dozens of intellectuals of the city, known for their leftist ideas, protested against the government this week, many comparing officials with fascists.

"We seem to be going back to the dark days when there was no industry," Ray said.

In the late 1970s and 1980s, the strength of unions led to a flight of capital, making West Bengal a ‘no-go-zone’ for many firms.

With protests back, the future may be bleak.