DEVELOPMENT / ECONOMY
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Orissa in a globalised economy - Challenges ahead
"The government has signed more than 60 Memorandum of Understanding (MoUs) with different players. The setting of new projects has led to a large-scale displacement of the marginal farmers because of their land being snatched away with the collusion of State machinery and the corporates."
Nageshwar Patnaik and Sai Prasan : May 21, 2008
Globalisation and economic reforms have made a direct impact on all the segments of the backward states like Orissa. The industry, agriculture and the financial sector have been impacted alike. The market forces have forced several small and medium scale industries and Public sector undertakings out of race. The rural sector is also not getting a proper price for their agricultural produce because of the traditional farming. And, the poor economic factors have led the financial sector specially the banks to squeeze their operations.
Contrary to this, a new trend has emerged in the state over the year. The abundance of natural resources and cheap labour has attracted the global players like Posco and Vedanta along with local mega players like Tata to set up their shops in the state. The government has signed more than 60 Memorandum of Understanding (MoUs) with different players. The setting of new projects has led to a large-scale displacement of the marginal farmers because of their land being snatched away with the collusion of State machinery and the corporates. Local people are still putting lot of resistance in these areas.
It is a challenge for the government to safeguard its own industry from getting further effected due to the opening of the economy. And, it must be very careful while entering into any MoU with any mega player. The government machinery must take the advice of the professionals in accounting and legal sector while giving a final shape to the project.
Here, challenge lies before the state to develop a proper infrastructure for the development of agriculture sector of the state. The farmers need a proper warehousing to keep their agricultural produce which demands a regular supply of electricity. Proper roads are also required to transport these agricultural
A strong political will is required on the part of the government to develop a local market place where farmers can sell their produce on the lines of rayatu bazaru in Andhra Pradesh. At present, the marketing of paddy only is being done in Orissa which can be extended in other agricultural crops like rice, oil seeds etc.
The globalization has weakened the financial sector to a great extent. The tough competition has wrecked the financial conditions of the co-operative banks. According to the "Report of the Committee on Financial Inclusion January 2008" prepared under the chairmanship of Dr C Rangarajan, chairman, economic advisory council to the Prime Minister shows that only two districts out of 30 have a strong presence of the commercial banks. The overall indebtness to formal sources of finance is only 20% in the Eastern region including Orissa meaning thereby the grip of the traditional moneylenders is very strong in the state.
The implementation of Basel II in the year 2009 will further make the weak banks difficult to operate in the State. The weak banking network is responsible for the mushrooming of the micro-finance institutions in the state who charge abnormal interest rate ranging from 20% to 28% as against an average interest rate of 15% by the banking network.
The state government should convince both the Union finance ministry and Reserve Bank of India (RBI) to take special measures so the banks will open new branches in the backward regions of the state.
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The state allocation on social sector too has come down drastically.
• Allocation for School and Mass Education as a share of total state expenditure reduced to 10.66 percent in 2008-09 from 12.20% in 2005-06 and as a share of GSDP it hovered around 2.5%. It is worth mentioning here that the expenditure on education sector should be a minimum of 6% of GSDP. During 2006-07, Rs. 1341.86 cr was allocated to this sector and in the current budget estimates, this has gone up to Rs. 1837.62 cr., which is a meagre 1.78 % of GSDP.
 As a percentage of total state expenditure, the projected expenditure on elementary education decreased to 6.58% in 2008-09 budget while it was 6.94 during 2006-07. During the last 5 years the allocation towards elementary education as a percentage of total state expenditure has been decreasing which in turn will affect the quality of primary education in the state.
 Allocation for higher education decreased from 2.27 percent of the total state expenditure in 2005-06 to 2.04 percent in 2008-09 budget estimate. As a percentage of GSDP it gives no such encouraging increment (0.53 percent during 2006-07, 0.55 during 2008-09).
The State government should pay proper attention in developing good professional and vocational workforce for a competitive market place. It should work with the private sector for imparting English language and IT education which has become a pre-requisite for getting a job in a market economy.
• During 2006-07 Rs. 590.51cr. was earmarked for health and family welfare department and this has increased to 1004.79 cr. In 2008-09 BE. The total allocation is less than 1% of the GSDP (0.97%). To achieve the target specified in Millennium Development Goals (MDGs) declaration towards health sector, that the expenditure on health sector should be a minimum of 3% of the GSDP.
• What is worse is that the distribution of funds within the health department in 2007-08 is quite discriminating towards the rural health services. The share of rural health expenditure has decreased to 30.55 percent in 2007-08 from 41.29% in 2005-06. There is a scope for changing the prioritization of rural health over urban health in allocation of fund to the health sector at the stage of passing of the budget. Rural health sector needs prioritization to overcome the problem of high Infant Mortality Rate (IMR), which is now 75 per 1000 as against the national average of 58.
 Health status is an essential part of people's well being and health shocks are a major cause of sinking into poverty. One key way of making growth inclusive is helping the benefits of economic growth and prosperity translate into concrete gains in survival of children and their mothers, improving their nutritional status; and reduced exposure of households to economic vulnerability from health shocks.
The must pay enter into public and private partnership for meeting the expectation of the people in the health sector.
Participatory Democracy - Need of the Hour
The state government needs to meet the challenges in different fields. All the concerned agencies – state government, media, NGOs and other similar agencies - must launch a massive awareness campaign related to various issues. The change of mind-set is important to overcome all the challenges.
Only a participatory democracy can help in meeting the challenges of the globalization. And, the participatory democracy can be possible by intensifying the democratic process and bringing transparency across the board.
A paradigm shift is also needed from an individual centric operations to the structural-functional functioning to establish a just social order with double digit growth with equity or what they call Inclusive Growth in the state.
(A senior Journalist, Nageswar Pattnaik is the Chairman of 'Focus Orissa' and Sai Prasan is its Spokesperson. The article was presented as a paper in the Focus Orissa Summit held in April - 2008)