There are many complicated answers to your question, especially involving the nature of industrialization and exploitation under the East India Company and British Raj, but I would start with two quick factors. First, many of the Bengal region's most important resources declined in value in the 19th and 20th centuries - especially jute, saltpetre, and iron. Second, the partition of Bengal severed the agricultural hinterland (modern day Bangladesh) from its most important trade route (the Hooghly and its ports) and city (Calcutta). Combine this with the British abandoning the capital in Calcutta in favor of Delhi, the violence and forced migration of millions during partition, several devastating famines in the 20th century (including the great Bengal famine of 1943, which killed millions), and the impact of the Bangladeshi Liberation War, and you have a region that was severely and repeatedly traumatized over the course of 300 years.

There are many books on the colonial and postcolonial histories of the region, including a very good scholarship on industry and the laboring classes in Bengal. I would recommend Partha Chaterjee's "The Nation and its Fragments" (Princeton University Press, 1993). For a more urban economics focused history, I would point you towards Racine's "Calcutta 1981: The City, Its, Crisis, and the Debate on Urban Planning and Development," which brings together a number of important urban economists and industrialists to discuss the decline of the city and region.

When the trade used to rely on sea routes, Bengal was situated perfectly. Trader from China to India/Africa and Arab traders to China stopped in the bay of Bengal. Bengal was a cross point from India to South East Asia. In the 16. Century Europeans appeared in the Indian Ocean and wanted to monopolize the trade. Before the Europeans non of the Asian Kingdoms attempted to monopolize the trade. After the British, Dutch etc. monopolized the trade routes, most of the money started to flow to the European Empires.

After India was incorporated in to the British Empire, Kolkata in Bengal was the capital city. Therefore, played politically a big role in the region but in the 1850s trade in the Indian Ocean did not really serve the interests of Asian states any more, if there was any independent Asian state. Of course colonization hurt India as well as Bengal because colonization is based on maximum exploitation and minimum investment. India's economical growth rate during the colonization was practically 0% ( According to my professor).

Ok brace yourselves, this in gonna be long. I'm not a historian, the information here are taken from high school textbooks, other guys have already talked about trade, so i'll just focus on agriculture and native industry

So as you may know bengal is now divided into west bengal (state under India) and Bangladesh. I'll try to explain it more from Bangladesh's perspective, since it's the independent entity.

History - I think bengal's fall is mostly related to it's unfortunate history

Bengal is formed out of Ganga-Brahmaputra delta. As a result there's a lot of arable, fertile land - great for agriculture. It's also very densely populated, and has always been. Due to it's resources Bengal would be constantly annexed by empires - there were some empires that formed out of bengal (i can only remember Gupta, Pala, Sena of the top of my head).

Bengal was fairly prosperous under Islamic and later mughal rule. Akbar did some changes to the system that benefitted Bengal - as a whole bengal was managed by a subadar (a viceroy/governor if you will). Aurangzeb was so impressed by bengal's production he called it a paradise. Travellers like Ibn Battuta mention how prosperous it was. So yes, I'd say there is merit to the claims of prosperity, considering the high output of tribute that bengal offered to the mughals.

I'd say bengal's fall started when British East India Company defeated Siraj ud doula (nawab of bengal) in battle of plassey. This resulted in mir jafar coming in power as a puppet to British. The bengal presidency as a whole was a bad time for bengal - british forced the farmers to cultivate more profitable crop such as indigo compared to things like rice (which the farmers preferred since it was edible, less draining for the land and gave better output). Most of the indigo profit would be taken by the zaminders - leading to the indigo revolt. This indigo incident is just an example, during bengal presidency bengal suffered from massives famines specially in 1770 (killing off some 10 million people) - caused by a mixture of crop failure, hoarding, bad company policy and unwillingness of company officers to take action.

The sepoy mutiny at 1857 also damaged the reputation. However Bengal was a centre of industry - Calcutta being the capital. West Bengal had most of the industrial and processing plants, while East bengal (now bangladesh) handled the production of raw materials. Jute and muslin were the main cash crop, however bengal's muslin industry was thwarted as british favored imported textiles from england and cut off the fingers of muslin producers.

Due to west bengal being more industrialized - this introduced large wealth disparity between the two bengals. The east saw west as the ones stealing their profits, while the west saw them as uncultured mussulmans. The religious conflicts were also escalating, the british instigated it to turn the situation to their advantage. In 1905 the british divided the two bengals, orissa and bihar for better governance - something the east supported as this would allow creation of industrial plants and infrastructure in east bengal with Dhaka as the capital. Due to hindu opposition in west bengal, british reunited the two bengals. This only served to strain the relationships further.

As a result of this plus the fact that east is mainly muslim - they opted for Muslim league. jinnah's direct action day only worsened the matter. In the end East bengal became part of pakistan, while west remained part of India.

This was good and bad, on one hand east finally got rid of west - meaning infrastructure would now be built in east bengal. But at the same time Pakistan's treatment to bengal wasn't much different to British's. They once again viewed bengal as inferior, still sticking to british martial race theory (bengalis weren't a martial race). The widespread disparity in industry, wealth; pakistan using bengals money to only improve pakistan, discrimination started to divide the two areas. Considering the distance and difference in culture this country wasn't probably going to last anyway. Final straw was Pakistan's reluctance to give Sheikh mujib prime minister's position (despite him winning majority vote. Pakistan struck first on 21st march and we had the Independece war of 1971 (with a side of genocide by pakistan).

Why is bengal no longer a rich and prosperous country? Because since British rule leading up to Pakistan - bengal has constantly been discriminated against, the infrastructure has never been built to that scale, bengal's profit in agriculture has been transferred and used to develop other areas. After independence - the nation has been marred by corruption and once again lack of development in important sectors, not to mention constant bullying by it's neighbours. Bad govt decisions, high unemployment rate, high population density, lack of natural resources - all make it a very hard situation to control.

Is there any hope for future? Well bangladesh is part of the next eleven economy, the economy as a whole is improving. But corruption is still rampant in country, export/import isn't properly regulated and trade isn't encouraged by govt as much as needed. bangladesh also suffers from a bad case of brain drain. Political climate is unstable. Global warming and rising water levels put the country in grave danger. - so as a whole, draw your own conclusions (i'm not a economist lol).

The British (and colonialism in general) has a lot to do with it. /u/unclaimed_wallet has already told about how the situation changed regarding the sea trade in the region ... but a lot also had to do with the East India Company and later the British Govt themselves.

Major Famines occured during British rule in bengal which wiped out huge portions of population. One of the people who were hardest hit, at least in the bengal famine of 1943 (estimated 1.5 - 4 million deaths ) were the traders, artisans, potters, etc. This hit the production of goods by the local people hard, something that bengal still hasn't recovered from.

Around the time of the famine of 1770 (estimated 10 million deaths), the land tax was increased from 10% to 50%. Farmers were also told to plant indigo and opium poppy instead of rice, and were told not to stock them too much (fear of 'hoarding'). They also introduced 'violent' tax collecting practices which increased the East India Company's revenue.

The famines also resulted in many agricultural lands being abandoned by people (most of the people from those places already ravaged by the famine) leading to those lands going waste.

Dwindling of sea trade, destruction of local manufacturing output, excessive land taxes, absolutely massive famines mishandled by the british, and the general colonial way of getting maximizing revenues for itself while leaving little to the local population led to the present situation.

The British happened. As already being pointed out in other answers, the British model of colonialism was maximum exploitation and minimum investment.

The Battle of Plassey of 1757 consolidated British Control of the region making it one of the first regions to have come under British control and also making it the region which has been the largest span under it. The British rule was marked by famines, one of them during world war 2 which took of toll of 3 million. There are even claims that this was an artificial one and food might have even been shipped to Britain to sell to other allied countries at throwaway prices at the extent of the local people of Bengal.

Moreover being a land hugely depending on agriculture of cotton and jute, it must have taken a toll when the products of industrial revolution arrived at much cheaper prices. It should be noted here that the raw materials were for such products were taken from India at cheap prices and forcibly imported to India. A boycott of British goods in fact was a major form of protest during the Indian independence movement. Such economic exploitation in tune with what had happened in India during the British rule, when its share of world income collapsed from nearly 23% in 1700 to just below 4% after independence. And ofcoure the partition at the time of independence took its toll with huge number of people being displaced from their home and basically being forced to start from the bottom again

Edit: Links for views that the 1943 Bengal famine was artificial. The rational wiki has quotations from books references supporting the view.

http://www.ibtimes.com/bengal-famine-1943-man-made-holocaust-1100525 http://www.ibtimes.com/bengal-famine-1943-man-made-holocaust-1100525 http://rationalwiki.org/wiki/Great_Bengal_Famine_of_1943

I've got tons of questions now, and I also have insights.

How does one take resources, in this case jute, from Bengal, without repatriating something else in return? The British should have either bought the jute in the form of salaries and wages for the labor, and actual money for the jute itself.

If this was the financial engagement back then, then the Bengalis still haven't learned from their mistakes of the past. All the Westerners have done is substitute "cheap labor in textiles" for "jute," and this is our current arrangement.

This isn't exactly pertinent to your question, but it is related to Bengal. New Books In History recently interviewed Sunil Amrith about his book Crossing the Bay of Bengal. It covers a pretty broad range of history, but you might like it since you're interested in the topic: http://newbooksinhistory.com/2013/12/09/sunil-s-amrith-crossing-the-bay-of-bengal-the-furies-of-nature-and-the-fortunes-of-migrants-harvard-up-2013/