In the decades since independence, the jute industry underwent a sharp eclipse as exports and profits declined, technology remained stagnant, mills closed and workers were thrown out in large numbers. In 1986 a Jute Modernization Fund was created by the central government in order to revive the industry. Additionally, the government sought to sustain and expand domestic demand for jute by making jute packaging compulsory for certain sectors such as cement, sugar, etc. Almost all of jute manufacturing takes place in West Bengal. The Left Front government has been in power in West Bengal since 1977. As leader of the leftist coalition, the CPI(M), in order to reinvigorate West Bengal's ailing industrial scene, has sought to encourage private business in general and to some extent, neutralize labor. This paper examines the state's relationship to jute mill owners and to the industry's workforce in the context of the attempted restructuring of the jute industry. The paper does not present an economic analysis of jute restructuring: it locates the halting pace of jute industry modernization in the emerging presence of raw jute traders in the industry, and in the state's vulnerabilities both to mill owners and to workers. The dynamics of these relationships set the limits to the restructuring efforts that had begun in the mid 1980s. In the context of these findings, the paper ends with some reflections on received theories of the developmental state.