Nilmadhab Mohanty

With the general elections less than a year away and following the proactive stance of the Bihar chief minister Nitish Kumar, the politics of “special category state” status for Odisha has warmed up, with both the BJD and Opposition Congress engaged in intense shadow-boxing.

Eleven states located across the northern Himalayan border have the special category status for higher central assistance.

Odisha’s backwardness is not due to its geographical location. Rather it is the result of governance and policy-cum-implementation failures over the years coupled with the attitudes of a predominantly rural and religion-obsessed people most of whom prefer rent-seeking to entrepreneurial behaviour in their economic pursuits.

Of the three forms in which the Centre gives financial assistance to the states — share of central taxes on the basis of the Finance Commission recommendations, plan assistance from the Planning Commission and funds from the central ministries for various development schemes — the concept of a special category state is relevant only in respect of a portion of plan assistance. Plan assistance generally comes in two ways — normal plan assistance for the state plans and special plan assistance for specific purposes. The states with the special category status get 30 per cent of the normal plan assistance and the rest 70 per cent is distributed among the general category states.

Against this background, therefore, wasting one’s breath for getting the special category state status does not make much sense. This, however, does not mean that Odisha does not deserve special financial assistance from the Centre.

The economic reforms since 1991 have enabled the states with better infrastructure and developed market and social institutions to have faster growth. Further, more urbanised states, where reform had an impact on industry and service sectors, have grown faster than Odisha. As a result the inequality between the advanced or high-income states and the backward or low-income states is widening. Inclusive growth requires this trend to be reversed through the creation of physical and social infrastructure in the backward states and raising adequate financial resources.

Following Union finance minister P. Chidambaram’s announcement, the Centre has appointed an expert committee to determine new criteria for backwardness among states. It may be worthwhile for states such as Odisha to press for the creation of a new category of “Specially Backward States” distinct and separate from the present “Special Category States”. For, unlike the latter group the backward states in the central part of the country have shown development potential that can be further developed through accelerated central assistance.

No doubt, the new criteria would take into account the distance of the backward states from the national average under indicators such as per capita income, population under the poverty line, tribal population, literacy and other human development achievements. A particularly significant criterion that may be relevant for Odisha and a few other states is the extent of forest cover (with minerals) compared to the national average. Nearly 31 per cent of Odisha’s geographical area is under forests which also contain valuable minerals. The Centre should compensate such states through special financial assistance.

In the ultimate analysis, however, the economic and social development of Odisha depends on the attitudes and efforts of the people and government. More than financial assistance what is needed is good governance, a proactive administration with adequate institutional capacity to deliver, proper maintenance of law and public order, a congenial business climate for private sector development and developed markets. Industrialisation and urbanisation will surely accelerate economic growth.