The Hindu Business Line : Real state of Orissa's economy

The World Bank's decision to choose Orissa for granting aid is more because of the dismal state of the economy than the false optimism about its growth trends.

Often, the World Bank's decision to invest in certain States seems to be merely an extension of US policies. On the eve of announcing aid to Orissa, World bank's senior economist and State Coordinator for Orissa ascribed the decision to the improving growth prospects and better performance of the State's farm sector. However, the facts are at variance with this perception.

Farm sector growth

At current prices, Orissa's per capita income for 2003 was Rs 12,388 against the all-India average of Rs 23,359. In percentage terms, Orissa's poverty rate for 1999-2000 was the highest among all States at 47.15 per cent. In a survey of 15 States in 2001, the Human Development Index ranking for Orissa was 11th.

The performance of the State's farm sector has not been too good, as the -6.8 per cent growth of State-wise Gross State Domestic Product from agriculture for the period 2000-01 to 2001-02 (at 1993-94 prices) indicates. The yield of foodgrains (kg/hectare) for the 1990-91 to 2000-01 period declined, at -0.54 per cent, against the all-India average of 1.79 per cent.

The State Domestic Product, which officials claim, grew at 8.4 per cent (real growth) for the above period actually grew 4.28 per cent for 1993-2003 at constant prices (1993-94) against the all-India average annual growth rate of 6.20 per cent.

The farm sector's share in the total workforce in 1999-2000 was 68.9 per cent — much above the all-India figure of 57.4 per cent.

These numbers, along with the dismal performance of the sector, contribute to Orissa's poor socio-economic conditions.

The industrial sector accounts for a mere 9.1 per cent of the total workforce and this doubts the trickle-down effect said to have been generated by the increasing levels of investments.

The annual growth rate of output for 1993-94 to 2003-04 was 1.75 per cent, which was significantly lower than the average for the country as a whole at 6.19 per cent.

Social indicators such as the literacy rate in the State for 2001 was 63.08 per cent against India's 65.20 per cent. When employment trends are compared, the State fares almost on a par with the country average; the daily unemployment rates for 1999-2000 being in the range of 7.1 per cent for rural Orissa and 9.5 per cent for urban Orissa against the national averages of 7.2 per cent and 7.7 per cent.

Why is there talk about Orissa showing revolutionary growth trends when much of the data is contrary to this general perception?

The much-talked-about investments in the steel sector, with the entry of key players such as Posco and Tata Steel, have created this feel-good factor about better investment conditions.

And the reasons given for the sudden rush of investments in this sector are the long-term reserves of high quality iron ore, surplus and cheap electricity, and easy access to major steel-consuming markets and raw material sources. At 4,013 million tonnes, Orissa accounts for about 17 per cent of India's iron ore reserves. The State Government has already signed 43 memoranda of understanding (MoUs) for steel plants, including six megaprojects, since 2002, with a combined capacity of 58.04 million tonnes per annum and projected investments of about Rs 23,000 crore.

Project implementation

But a closer assessment reveals that most projects are only in the first phase of implementation and would have to cross many hurdles.

The number of projects approved may require more resources than what the State is endowed with, both in terms of reserves and infrastructure.

Also, there has been opposition from activists to these projects on environmental grounds. According to a National Advisory Council (NAC) paper, the number of Adivasis displaced by development projects over the last 50 years exceeds nine million, with only 60 per cent of them having benefited from rehabilitation measures.

The displacement effect and the social consequences also pose serious threats to the execution of the projects.

A look at Orissa's history shows a period in the mid-1990s when a similar kind of a bubble was created with numerous announcements by various companies but which fizzled out. The reason attributed was the poor infrastructure of the State. But if that were the case, why should the situation be any different now.

A study of the Infrastructure Index, which takes into account the Power, Communications and Transport Indices, shows that Orissa's aggregate of 75 falls much below the national average of 107.

An `Investment Attractiveness and Climate' study of the various States by the Twelfth Finance Commission ranked Orissa 11th in 2001.

The claims of fiscal improvement do not hold water in the presence of about Rs 7,618-crore public debt, as per the revised Budget Estimates for 2004-05 given by the State Finance Ministry.

Under these circumstances, is the World Bank's decision to choose Orissa for granting aid more because of the dismal state of the economy than the false optimism of investments flooding the State?

(The authors are, respectively, Chairman and Research Assistant, Centre for Policy Alternatives Society, New Delhi.)

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