Odisha economy to shrink by around 2% in 2020-21 fiscal year

Bhubaneswar: Odisha Budget for the financial year 2021-22 will be presented in the the State Legislative Assembly by third week of February next year.

The Finance Department has already begun preparations, including assessment for the Budget. To ensure timely presentation of the Budget, the department has written a letter to Secretaries of all departments. In the letter,  Finance Secretary AK Meena has mentioned the global economic scenario and the financial status of the country as well as Odisha amidst the COVID-19 pandemic.  

Odisha’s  economy is projected to contract by around 1 to 2 % in 2020-21 due to the COVID-19 pandemic, said Meena.  However, the state will see a a growth rate of around 7 %  in the  next financial year, he added. 

It is pertinent to mention here that Economic Survey 2019-20 had projected Odisha’s growth at 6.16% in 2019-20 as compared to 7.90% in 2018-19.

The Finance Secretary further said the state’s revenue collection will be adversely  affected due to the economic contraction at both state state and level. Since collection of direct and indirect taxes, during 2020-21 and 2021-22 will be low, it could affect inflow of shared tax and grant-in-aid from the Centre.

To ensure minimal effect of COVID-19 lockdown and shutdown on the state’s revenue,  the state Government has taken few timely measures like raising one-time revenue through renewal of mining leases and mopping up of unused money parked in bank accounts. Though the measures have substantially reduced the resource gap to some extent, most of the revenue items are underperforming except one-time collection, said Meena.

Considering the likely level of central assistance and expected receipts from own revenue, the estimated shortfall in revenue during the current financial year would be around 20 to 25%. Hence, the state may have to depend more on borrowings this year for management of COVID-19 pandemic.

The state will see a moderate growth in its revenue generation in 2021-22 financial year while GST compensation from the Centre will depend on the performance of the economy.

Reserve Bank of India (RBI) former Deputy Governor HR Khan said COVID-19 pandemic has seriously affected lives and livelihoods of disadvantaged population and has increased poverty and inequality.

Given the challenges that microfinance institutions mainly the smaller players, who provide support to marginalised sections, the risk of re-exclusion looms large. Hence more efforts from both central and state governments, RBI, NABARD.SIDBI, Living Lab and the banking sector which provide much needed funds to MFIs (Microfinance) have become urgent imperative, he added.

The state government should work on UN body UNCDF-Living Lab model. UNCDF’s work in financial health is centered on enhancing people’s financial security, independence and well-being, which in turn contributes to the achievement of the United Nations Sustainable Development Goals (SDGs).