<b>Ashok K Lahiri:</b> Lessons from Odisha

Odisha’s growth betters national average at 7.94 per cent reported this newspaper last Sunday. In 2016-17, India grew at about 7.1 per cent. Even in terms of per capita net state domestic product (NSDP), Odisha moved up from being the second or third lowest state, during 1993-94 to 2002-03, to third or fourth lowest from 2003-04 to 2014-15. With its immense potential, has Odisha finally hit the sweet spot of growth?

The recently published The Economy of Odisha, a rich collection of essays, edited by three reputed professors of economics is relevant in this context. In the introduction, the editors show how 2003-04 marks a structural break in Odisha’s growth performance. Annual growth jumped from 3.4 per cent during 1981-82 to 2002-03 to 7.9 per cent during 2003-04 to 2012-13. 

The chapter on industry describes how, during the 1950s and 1960s, came the ferromanganese plants at Joda and Rayagada, cement factory at Rajgangpur, tube factory and paper mill in Choudwar, and aluminium and cable factory at Hirakud and Machkund hydroelectric project in Odisha. And, of course, there was the largest public sector steel plant at Rourkela. Then there were handlooms and handicrafts. 

But, despite the panchayat industries scheme of promoting industrial cooperative societies, concessions to the industrial units in procuring licence and inputs, preparing project report, availing technical and financial assistance, and marketing of products, ancillary small and medium industrial units did not take off. Only capital-intensive, large scale units came into the rich mineral sector. The ninth largest state of India, with the eleventh largest population, in 1969-70, had a share of only 1.9 per cent in the country’s industrial production, a share almost half its population share of 3.4 per cent. 

Post-liberalisation, from 1991, the state government tried to promote a business-friendly environment, gave land at concessional rate, exemption from electricity duty, interest subsidy, and tax concessions, and rationalised labour laws to attract industry. Share of industry in NSDP went up from 20.2 per cent in 1981-90 to 25.1 per cent in 1991-2000 and further to 28.4 per cent in 2001-12.

Clearly, there is need for more research to understand what really made a difference. Was it a different government attitude to industry? The emphasis on infrastructure such as the new ports at Dhamara, Kirtania and Gopalpur? Or, the end of the freight equalisation scheme in 1993? The central subsidies for transportation of minerals under the equalisation scheme from 1952 may have denied mineral-rich Odisha, like Bihar, West Bengal, and Madhya Pradesh, the natural benefits of economics of location. 

Did inadequate infrastructure hold back industrial growth? There was hardly any increase in the total road length in the state during the 1990s, proportion of surfaced to total road length was the second lowest in the country and railway route length per 1,000 sq. km the third lowest, only above the hill states of Jammu & Kashmir and Himachal Pradesh. The peak power deficit was 23.9 per cent, compared to national average of 18.8 per cent in the 1990s.

Odisha started its economic transformation late, but is catching up fast with the national trend. The share of agriculture in gross state domestic product (GSDP) is still high, but declined sharply from 54.6 per cent in 1980-81 to 17.3 per cent in 2009-10. Furthermore, this decline in GSDP share is sharper than the drop in agriculture’s share in employment from 73.3 per cent in 1983 to 59.3 per cent in 2009-10. And this is a problem. With so many people still employed in agriculture, a sector with a much diminished share of GSDP, relative deprivation is inevitable.

The chapter on Odisha’s development paradigm is interesting in this context. It highlights how, relative to the rest of the country, Odisha has better nutrition, despite higher poverty. It attributes this paradox to the state’s higher per capita foodgrain output of 174 kg compared to 147 kg for India (including Odisha but excluding Punjab and Haryana). Foodgrain output, especially of rice, helps nutrition through two channels — it augments supplies and, because of its labour-intensive nature, also provides employment and hence income. The chapter laments the decline in per capita calorie intake in Odisha between 1993-94 and 2009-10 from 2,199 to 2,126 in rural, and from 2,261 to 2,096 in urban areas. It attributes it to the decline in per capita foodgrain output, for example, from 189 kg to 183 kg between 2003-04 and 2009-10. 

As a solution, the chapter prescribes “grow more foodgrains”. This is problematic at best. First, as another chapter of the same book explains, “the problem in Odisha lies in the composition of food and not so much in the quantum of food which often refers to adequacy of the calorie intake.” Second, non-vegetarianism is rising mostly through consumption of chicken and some fish. In fact, from 1993-94 to 2011-12, the proportion of goat-meat/mutton-eaters has fallen significantly from 30 per cent to 15 per cent, and the proportion of population consuming beef and buffalo meat is constant around six per cent. A very efficient convertor of energy, chicken has a feed-to-meat ratio of 1.6:1 compared to 5:1 for pork and 7:1 for beef. Thus, even with rising incomes, relative to other countries, demand for foodgrains as feed is likely to remain subdued. 

Illustration by Binay Sinha

Furthermore, India is suffering not from a shortage, but a surfeit of foodgrains. Nutritional deficiency and the simultaneous substantial excess of stocks of rice and wheat with the Food Corporation of India over strategic buffer norms indicate problems, not with production, but with procurement, stocking, distribution and pricing policies.

Industrialisation and creating industrial employment to reduce the number of people employed in agriculture may hold the key to the solution. Diversification to high value crops, improving yields and productivity, and better enforcement of tenurial rights on land must continue to improve the lot of those employed in agriculture. But, in spite of these, the development process will witness a declining share of agriculture in GSDP. For a more balanced sharing of the gains of growth, Odisha has to industrialise, create industrial employment and reduce the number of people dependent on agriculture for employment.

A book on Odisha could not have come at a better time. For states to learn from each other and also to initiate fruitful debates on development policy, there is a need for many more books, not only on Odisha but all the other states.
 

The writer is an economist