Rajan Report, You & I

By Chharudutta Panigrahi*

The link between peace and stability on the one hand, and social and economic growth on the other, is dialectic. Peace, poverty, and backwardness cannot mix in one region……

– King Hussein I

 “The farther backward you can look the farther forward you are likely to see.”

–Winston Churchill

…………………..

Quite recently, the Raghuram Rajan-headed panel set up by the government to identify criteria to determine a state’s relative backwardness came out with its report. The aftermath of the report is wanton mud-slinging amongst the political bosses in Odisha. I would be writing about Odisha and its desirable response to such a measurement of backwardness. This panel created a new index, and ranked Indian states on it, with 0 being ‘not backward at all’ and 1 being ‘most backward’.

For the purposes of distributing Central funds, the committee recommended that states scoring more than 0.6 be declared as ‘least developed’, those scoring between 0.4 and 0.6 as ‘less developed’ and the seven states less than that as ‘relatively developed’. To create the index, the panel selected 10 sub-indicators that covered a range of development outcomes and weighted them equally. The sub-indicators are Income, Education, Health, Household amenities, Poverty, Female literacy ratio, Scheduled castes & tribes, Rate of urbanization, Financial Inclusion and Connectivity. There is no benefit in debating over the science of the measurement and trying to diagnose the problem in different ways.

Let us not wish the monkey off our shoulders by unnecessarily indulging ourselves in avoidable academic expeditions in chalking our alternative routes to arrive at the same hypothesis – backwardness. All of us, the civil society, let us admit that there is a gap to be bridged in the development of our state, Odisha. This need not be directed only at the lawmakers or the executives. This is a problem with all our lives and hence all of us, You & I are responsible and we should do our bit to drive development to new highs, which are measurable and accessible.

There are many experts I know who dwell on the thought that the report is an attempt to handle an extremely sensitive issue in Centre-state financial relations in the country and that this has been done without much depth and study. Another quarter is of the opinion that the report deals with the very significant issue of devolution of resources between the Centre and states which is constitutionally the function of the Finance Commission. In the budget of 2013-14, the central government has announced the constitution of the 14th Finance Commission under the chairmanship of former RBI Governor Y. V. Reddy, with the tasks of a) recommendations on the sharing of tax proceeds between the Centre and the States b) suggestions of steps for pricing of public utilities such as electricity and water in an independent manner c) review of the state of finances, deficit and debt levels of the Centre and States and d) suggesting measures for maintaining a stable and sustainable fiscal environment consistent with equitable growth.

At a time when the 14th Finance Commission has already been constituted, there are thoughts amongst the economic and political mandarins that the Union finance minister has committed constitutional impropriety and has deliberately sown the seeds of confusion in an already well-established mechanism of financial transfer from the Centre to the states evolved over the past several years. Such contrarian views are expected when it comes to the distribution of central resources amongst the states and moreso with increasingly fragmented polity and “federalism” in the country, growing “state voices” and weakening hegemony of central government.

This is the trend, irrespective of our comfort levels. How much the Rajan panel Report has stepped on the toes or not of 14th Finance Commission is not the context of this write up.

We believe in the sub-indicators and the methodologies adopted to arrive at the well-being index. And are more concerned with tackling the backwardness, invigorating growth and rising out of the “black hole”. The sobriquet of “the most backward” state doesn’t go down well with the people of Odisha, across age groups – below 35, below 50 and above 50. I have been meeting a cross section of the stakeholders including all sections of people, the poor, women, students, teachers, self help groups (SHGs), members of panchayati raj institutions (PRIs) and several others and have received their candid feedback. Students face a dent in their self esteem, young professionals are unsure about their careers in the state, the self employed are vacillating, middle class parents wish their wards to ‘escape” from the state for education and employment and probably only the pension-insured government employees numbering more than 3 lakhs are secured habitants.

Even in the government there is the mismatch between the rate at which employees are retiring from services and fresh blood being inducted into the state bureaucracy. This has resulted in a large number of vacancies in almost all the departments, directorates and district offices. There are not enough employees to implement the host of schemes being announced by the state government. On one hand Odisha is backward and on the other there is not enough equity being built in the profile of the state. The youth should be motivated to stay in the state, work inside the state, contribute to the state GDP by pursuing vocations, developing enterprises where they possess skills, and increase their share in the pie of state development.

They are also aware that “escaping” is unwarranted but inevitable in the scheme of things.

The way Odisha has steered a turnaround in its plummeting economy is praiseworthy. The 80s saw the state under a spell of dangerous crony capitalism, rampant and unprecedented corruption, complete erosion of social security, deliberate neglect of underdeveloped areas like the KBK region, and resulting decay in Odia traditional ethics, social culture & self-esteem. In the last 15 years, we as a state have limped back to normalcy, with some hiccups which are expected as a splinter of the macro national socio-political dynamics.

With a budget outlay of ₹60303.09 crore in 2013-14, the Non Plan ratio has gone up from about 27% in 2006-07 to about 59% in 2013-14. This is the highest ever ratio achieved by Odisha. A Revenue surplus of ₹1904.61 crore has been projected in the Budget Estimates for 2013-14 which is about 0.65% of GSDP and the Fiscal Deficit is projected at ₹5945.13 crore which is about 2.03% of GSDP.

Odisha has seen far-reaching changes in the last decade, and the state’s economic growth remains close to 9 per cent despite a global decline and its growth rate is one of the highest in the country. The state has also succeeded in reducing the poverty levels from 57.2 per cent of the households in 2004-05 to over 38 per cent in 2011-12. Between 2004 and 2010, Orissa recorded a 20.1% decline in poverty as against a national rate of 7.4%. In 2000, Odisha had the biggest fiscal deficit and debt:GDP ratio among all states. In 2002-03, Odisha had the worst Debt-GSDP ratio at 55.92%. Since then the ratio has fallen to 17.59% in 2011-12. It has fallen further to 16.55% in 2012-13. Presently, it has become a revenue-surplus state. But the capital account (loans for e.g.) need to fare better. Capital receipts have not been growing. In fact the receipts were much less than the budgeted Rs 6,606 crore at

Rs 2,362 in 2011-12; a shortfall of Rs 4,243 crore. There have been consistent overruns on the capital account. In 2011-12, capital expenditure was more than receipts by Rs 5,351 crore. Capital receipts are the funds received which are not part of the operating activities of the government. Capital receipts primarily include small savings (Post-Office Savings Accounts, National Savings Certificates, etc), provident funds and net receipts obtained from the sale of shares in Public Sector Undertakings (PSUs).

Capital expenditures are the funds spent on the acquisition of land, building, machinery, equipment, investment in shares, and loans and advances by the central government to state and union territory governments, PSUs and other parties. Fiscal management of the state, so far has been laudable, in spite of challenges.

With the state economy and governance heading the right way, why is the state still the most backward in the country.

The political parties and leaders need to refrain from slugfest and it is hightime they realise that learnings from the Rajan report need to be absorbed and be shared with major stakeholders at the state and sub-state levels for better performance in the current 5 year period, at least. The committee’s recommendations, even if efficiently implemented, are not likely to show results soon. But it is encouraging that GDP growth in Odisha has accelerated and has reduced the income gap. This has happened because the state government has realized that growth counts politically, not because of any additional assistance from the central government.

In the Income indicator in the Report, the Monthly Per Capita Expenditure (MPCE) derived from National Sample Surveys is used to measure income.

Odisha has double the per capita income of Bihar, which has the lowest per capita income. In the state an average person in rural area spends Rs 507 (around 62 per cent) per month on food and in urban areas this is Rs 749 (48.4 per cent). The monthly per capita expenditure in rural areas is Rs 818 as against Rs 1548 for urban areas. Higher percentage of expenditure on food indicates a lower standard of living.

Nationally food accounts for 57 per cent of the total expenditure in rural area and 44.4 percent in urban areas. In economics we know that as income rises, the proportion of income spent on food falls, even if actual expenditure on food rises. The government of Odisha, under the Panchayati Raj department & inter-sectoral alliances implements programmes like Gopabandhu Grameen Yojana(GGY), Sampoorna Grameen Rozgar Yojana(SGRY), Swarnajayanti Gram Swarozgar Yojana (SGSY),Rural Housing: Indira Awaas Yojana(IAY), Prime Ministers Gramodaya Yojana (PMGY). These programmes are intended to improve food security, additional wage-employment and village infrastructure as food grains provided etc. Besides the government, the civil society organisations, which number over 400 for a population of 4 crores, are supposed to work on development issues. Not all of them would demonstrate optimal capacity and bandwidth, but with so many CBOs (Community Based Organisations), Youth Clubs, NGOs,

Foundations and development organisations we expect faster growth to change lives at the last mile. We need to take stock of the situation, their performances and mentor them to be more effective.

In the Education indicator, the panel has considered a weighted average of attendance ratios and schools per capita. During 2011-12, there were about 55,106 functional primary schools including 51,163 government schools and of local bodies; 346 aided schools and 3,597 other schools. These schools have 1.33 lakh teachers and 44.33 lakh students. Out of a total 55,106 schools, about 49,744 are under the control of School & Mass Education Department, 1,416 are under SC/ST Development Department, and 3,946 others. In the Panel report, Odisha’s score stands at 6.43, while Kerala is 1.26.

In the Health indicator, the report considers one sub-indicator – the Infant Mortality Rate (number of deaths of children under the age of 1 per 1,000 live births) – which essentially indicates not just child health and nutrition, but also other factors like sanitation, disease environment, and access to health facilities. In Odisha the figure stands at 57 whereas Goa is 11 and MP is 59. Mother NGOs, NGOs, CBOs and a host of other agencies have been working in Odisha since the last 30-35 years with support from bilaterals /multilaterals like DfID, EC,USAID, World bank the government of Odisha and India, the corporates, and even now more than half of infant deaths occur during neonatal period (first four weeks of life). Most of these deaths are due to pre-maturity, low birth weight, respiratory infections, diarrhea and malnutrition. It is also acknowledged that infant mortality is higher in lower socioeconomic groups residing in backward tribal districts of Odisha. With several strategic interventions being implemented to reduce MMR and IMR, the decline has been but marginal. There is an urgent need to appraise the performance, monitor & strengthen the ongoing programmes to deliver desired output and design and implement new interventions to reduce neonatal deaths. Otherwise the programmes would keep being implemented on the ground, without any results thereof.

In the “Household amenities” indicator, the panel has considered a weighted average of a bunch of Census indicators that show access to basic household facilities, like – the percentage of households with No sanitation/No drinking water within the premises/No electricity as their primary source of lighting/No phone/None of the specified assets posessed by the household. In Odisha 78% of the households are bereft of the above mentioned facilities whereas in Kerala it is about 4.8% of households.

In the Poverty indicator, the panel has considered the recent numbers as per the Planning Commission, applying the Tendulkar Committee formula to 2011-12 consumption data where according to the Tendulkar Committee Report 2009, the poverty headcount ratio of Odisha, at 57.2 percent, has been the worst among all Indian states and much above the national average of 37.2 percent. If factors beyond income are considered (Multidimensional Poverty Index) then about 63.2 percent of the people in Odisha have been living below the poverty line. Rural poverty, at 60.8 percent, has been significantly higher than the urban poverty, which was 37.6 percent, and the worst in India. Further, the extent of poverty has not been evenly distributed in all the regions and among all social groups of our state. The Scheduled Castes and Scheduled Tribes of the state have a high incidence of poverty as compared to the SCs and STs in the country as a whole. Odisha at 32.59% presently, as per the Rajan report, has made outstanding efforts in reducing poverty by 20.2 percentage points from 57.2% in 2004-05 to 37% in 2009-10. This is the highest reduction in poverty by any state in India from 2004-05 to 2009-10. However a multiple stakeholder approach needs to be in place to reduce poverty on a mission mode.

In the Female literacy indictor, the rate of Female literacy, which is 64 in Odisha, has a direct correlation with a host of other development outcomes including child mortality. With power devolution at the Panchayat levels and a vibrant SHG (Self Help Group) movement on the ground we should make much bigger strides in getting the maximum female literacy in place in India. Today the Zilla parishad teams under the Presidents remain unused, in spite of budgetary autonomy and community influence. We have all the potential to do this with the help of below district development organisations assisting the government initiatives. But we need to build the synergies. Education & Women & Child Development departments are capable of invigorating the relevant stakeholders at the grassroots.

In the Scheduled castes and tribes indicator the report takes into account the state’s depth of historical deprivation, vis-a-vis the state’s proportion of scheduled caste and scheduled tribe citizens. As per 2011 population Census, there were 4.42 lakh SC households in the State, of which 74.4 % are rural. Out of a total 4.42 lakh households, 49 % were in livable condition and the roofs of 35.9 % households were made of grass/thatch/ polythene or were  of handmade tiles. About 98.5 % households used either electricity or kerosene for lighting. 62.1 % households do not have their own latrine and 62.9 % households use firewood for cooking. The districts with high concentration of SC population are Ganjam (5.87 lakhs), Cuttack (4.47 lakhs), Balasore (3.81 lakhs) and Jajpur (3.74 lakhs), while Gajapati district (0.39 lakhs) has the minimum numbers.

Odisha has the third largest concentration of tribal population comprising 9.66 % of the total tribal population of our country. The decadal population growth rate of STs since 1961 has been less than that of the total population and about 94.5 % of STs in Odisha are rural based as against 91.7 % in India.

Mayurbhanj district has the maximum ST population (12.58 lakhs) and the proportion of ST population in the total population is the highest in Malkangiri district (57.43 %). The outcome budget of ST & SC

Development is a pioneering initiative where the accent is on outcomes correlated with outlays by making expenditures more targeted and quantifying the deliverables. A total plan outlay of Rs. 1244.03 crore in addition to non-plan funds of Rs. 665.78 crore were provided in the budget of 2012-13. Solid systems have been put in place at different levels to monitor and review tribal developmentprogrammes on regular basis.

For example Project Level Committees have been formed for each ITDA, under the Chairmanship of the district Collectors. There are also Project Level Committees for each MADA/ Cluster Pocket under the Chairmanship of Sub-Collectors where other departmental officers and representatives of various line departments along with elected public representatives are members. The civil society organisations need to take a more proactive role in complementing the efforts of the government and getting development closer to the communities, specifically in areas like promotion of literacy & vocational skills among the ST and SC in general and promotion of female literacy in particular by way of providing scholarship to SC /ST students to pursue their studies, providing hostel accommodation at primary level, arranging amenities in these hostels and taking up special repair / renovation of existing school and hostel infrastructure.

In the rate of urbanization indicator, the panel considers the proportion of the state that is urbanized. By urbanization I mean the process of economic, spatial, and social transformation. Growingly cities/bigger towns/industrial towns like Angul, Jharsuguda, Bhubaneswar, Rourkela, Jajpur, Jagatsinghpur (in coming days) are being regarded as the focal points of economic and spatial development in Odisha, while tier III towns like Bhadrak, Barbil, Gopalpur, have started to play a leading part in social and economic progress. Much greater efforts need to be directed towards making urbanization systematic, planned and sustainable. There is a growing demand for holistic reforms in the governance of cities and towns, property tax reforms, E-Governance, devolution of various functions such as planning, municipal services, urban forestry and fire services to the Urban Local Bodies, setting up a pool of chief executives for urban local bodies, identification of the natural drainage channel and their proper protection, permission to build houses in low lying and floodprone areas after proper measures taken like drainage, higher plinth height and proper embankment among others.

There are presently many systemic failures to aggravate the challenges of growing urbanization of the state. The government should take necessary steps to prepare master plans for all the towns in the state and recruit town planners and architects to fill up the vacancies. Researches estimate that cities could generate 70 percent of net new jobs created, produce around 70 percent of GDP and effect a manifold increase in per capita incomes. But this needs careful planning and regulations with teeth.

In the Financial inclusion indicator, I rue the fact that with all big NGOs, MFIs, NBFCs of India having camped in Odisha for more than 10 years now, we still have an abysmally low proportion of households who use banking services (our score is 45 as against 89.1 in HP) . The time has come for the government to take a stringent and scientific assessment of the ground realities. Every bank worth its name has opened BC (Business Correspondence) in different districts of Odisha. With Ponzi schemes running havoc in the state, it is a perplexing to note that we have to amplify financial literacy among people and make the stakeholders realize that the financial inclusion will lead to an inclusive growth and it should be considered a business opportunity instead of a social obligation. While we know that the creation of basic infrastructure is also essential for expansion and diversification of banking services in the state, the adoption of appropriate technology coupled with dedicated human resource can make a big impact in achieving total financial inclusion. There are homegrown social enterprise agencies like FIDR and others who are working on low cost appropriate technologies in Odisha. Five As – Availability,

Affordability, Accessibility, Awareness and Acceptability are quintessential for the financial inclusion. A proper banking policy will help to create business opportunities and innovative/new products will encourage people to be part of the banking process. There are some key areas crucial for financial inclusion like — right to have account, affordable credit in rural areas, and remittance from one place to another in efficient way, insurance services and pension services. Pilot projects on micro pension and micro insurance are also underway in the state to include more and more people in the state but with mixed success. There is a need to expedite the process of financial inclusion seriously in the times to come. If Bangladeshcould do this, we could certainly make it happen.

In the connectivity indicator, the Rajan report considers both road and rail route lengths for physical connectivity. The road length of Odisha is pegged at 166.23 whereas in Kerala it is 517.77. Some initiatives of the government has been pathbreaking like the use of Odisha Sampad Atlas to identify gaps in rural connectivity with special emphasis on the districts in tribal sub-plan area. The Odisha Space Application Centre (ORSAC) plans to take up the work in the Districts like Koraput, Rayagada, Gajapati, Kandhamal, Phulbani and Nuapada in the 1st phase and gradually take up other Districts. The Block level resources atlas named as Odisha Sampad generated by ORSAC through GIS database generation is now working in web mode. Along with natural database the Atlas also contains the resources like High Schools, Urban Health Infrastructures, Post Offices, Banks, information on natural resources like secondary nutrients of soil etc. Work is on to identify the road connectivity gaps on priority in the areas where there is high incidence of malaria, poverty, mal-nutrition and extremism activities. Road connectivity in Odisha is much better than other states.

However, there are many villages and blocks which lack road connectivity and other basic amenities. With the government supported fair-weather roads taking time, commuting to the villages proves to be a very difficult task. For implementation of development projects in healthcare, education and other sectors lack of roads has been an impediment. As a result, the villagers remain stranded for six months in a year.

Lack of communication facilities has rendered the health centres and schools useless as doctors and teachers find it difficult to commute to the villages. The villages have no proper road connectivity, but only bamboo bridges over river tributaries, built by the villagers. Even these bamboo bridges fail to serve the purpose during rainy season when the river is rising. Concerned over slow pace of socio-economic development in Odisha’s tribal districts like Koraput, Mayurbhanj, Sundergarh districts,the civil society has been demanded passenger train services in the areas, highlighting the need for better rail connectivity in the most backward and underdeveloped area of the state. Many of these districts have one of the highest concentrations of Naxalites in the country and they still suffer from extremely low economic development. Unfettered passenger service on this segment will certainly help in quicker development of this entire region, which has now become even more critical and sensitive due to extremist activities. This would not only fulfill social commitment but would also significantly facilitate in normalising the situation in these areas and the state.

If Centre accepts the Rajan committee recommendations, Odisha should benefit the most. Central devolution would become 6.53 % against the present 4.6 %. The report has the potential to be a major instrument of the State Government to demand more funds from the 14th Finance Commission. But in the aftermath of the Report, this is not the time to squabble amongst ourselves in judging past & present Chief Ministers, Governments and Executives. With ever increasing awareness in the civil society, ever increasing accessibility to latest information tools and social media, ever increasing number of talented youths readying themselves as trained professionals, sprouting research and academic institutions in the state, this is Odisha’s time.

This is our state and we have to work to make it a better place. We can’t afford to pass on the buck to the government because the same government is essentially of the people, for the people & by the people.

We are the people.

 

[email protected]

 

*Chharudutta Panigrahi is a qualified management expert having national and international experience in Policy Leadership, Advocacy, Governance & Development Economics. In Odisha he has pioneered social entrepreneurship and has been mentoring the youth, since over 15 years, & has created support

organization for social entrepreneurs in the state in partnerships with industry bodies and institutions

like IITs and IIMs. A changemaker of international repute, Chharudutta regularly writes on diverse

subjects, is an impact investor and frequently participates in Talks and discussion forums, media

agnostic. He sits on the Boards of institutions like Enable Health, Cognitive Exchange US, SRP

Foundation, FIDR to name a few.