Odisha Budget 2021-22: Unlocking the New Odisha

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By- Anirudha Barik

At the predicament of Odisha’s revenue losses on account of share in central transfers, severe impact of the COVID-19 pandemic and contraction in GDP the most-awaited Odisha Annual Budget 2021-22 is presented.

State Finance Minister Niranjan Pujari presented the Budget for Odisha for the financial year 2021-22 on 22nd February, 2021. The context for Annual Budget 2021-22 continues to be the restoration of Odisha’s economy after the global pandemic COVID-19 emphasizing the need to captures people’s aspiration for a “New Odisha” by transforming from “Reactive Governance” to “Proactive Governance” along with accurate execution of the COVID management plan while minimizing the impact with better preparation. Additionally the state faces continued resource crunch on account of the Goods and Services Tax (GST) compensation, overall macro-economic slowdown, and severe impact of the COVID-19 pandemic.

There is also reduction in Central transfers and allocations from the divisible pool to the state as per 15thFinance Commission recommendations. As Odisha is a rural economy primarily, with the slowdown in economic conditions being affected by pandemic, it was expected that the budget would address the distress in agricultural, infrastructure, health & education, skilling the workforce, employment etc. through some expenditure policy measures.

At first glance of the budget documents of 2021-22, the real growth rate of the State’s Economy has registered a negative growth of 4.92% in FY 2020-21 as compared to positive growth of 5.21% in FY 2019-20. The contraction in real GSDP growth is less as compared to the contraction in all-India real growth rate of -7.7% in FY 2020-21. To maintain the growth momentum in the state economy, the State Government is focusing on investment in priority sectors.

First part of the State Finance Minister’s speech focused on agriculture and allied activities, mainly to move towards making agriculture remunerative and sustainable by reducing vulnerability of small and marginal farmers. The focus is also on commitment to health care to achieving universal health coverage and universal access to quality healthcare. Overall, the approach of health spending, through the state run flagship scheme Biju Swasthya Kalyan Yojana, was to ensuring timely and effective handling of the pandemic and, thereby, reducing the infection rate and casualty. While narrating the achievements in rapid poverty reduction, doubling of farmer’s income, and proficient management of calamities, the State has proposed to make substantial investment in health care infrastructure and services under Mukhya Mantri Swasthya Seva Mission to upgrade health care facilities with better equipment at major health institutions especially in District headquarter hospitals.

As part of the State’s rapid response to the COVID pandemic to provide wage employment opportunities to the urban poor, the government of Odisha has launched Urban Wage Employment Initiative-MUKTA especially for the unorganized workers and migrant labourers who have lost their livelihoods due to the pandemic. This has been implemented through the community-based institutions such as Mission Shakti Groups and Slum Dwellers’ Associations.

A preliminary glance through the Odisha budget numbers across different sector/departments indicate that the Budget has allocated sufficient outlays for different sector even the action points for these sectors are potentially in the right direction to revive the PRIs, education, agricultural sector, health sectors, etc. in the long run. The State has proposed a larger budgetary outlay of Rs.1,70,000 crore for 2021-22 recording a growth of 26% over the last year which includes an outlay of Rs.85,000 crore for Administrative expenditure, Rs.75,000 crore for Programme expenditure, Rs.3,050 crore for Disaster Response, and Rs.6,950 crore for transfer to local bodies and development authorities. Besides, it propose to invest about Rs.8,000 crore from off-budget resources like OMBADC, DMF, State PSUs, etc. to supplement the budgetary outlay. The outlay is proposed to be financed mainly through revenue receipts of Rs.1,25,600 crore and gross borrowing & other receipts amounting to Rs.44,400 crore.

In budget 2021-22 (BE), the highest resource allocation is in Panchayati Raj Department (11.6%)followed by School and Mass Education Department (10.8%), Agriculture and Allied Sector (10%) and Health & Family Welfare (5.4%). After enhancing the budget size for FY 2021-22,the top ten departments have taken together account for 56.2% of the total budgeted expenditure. These sectors are mainly from social services and economic services sectors. Agriculture is the primary source of livelihood for majority of the population. The importance of the agriculture sector and allied activities in this year’s budget allocation fixed at 10.0%, more than twice the Union government’s allocation (4.3%). Similarly, out of top ten departments such as Panchayati Raj and Drinking Water Department, Education, Agriculture and Allied Activities, Health and Family Welfare, Works Department, Home Department, Housing and Urban Development, Rural Development, Women & Child Development and Mission Shakti and STs & SCs Development, Minorities & Backward Classes Welfare Odisha’s share has remained much ahead of the Center’s allocation in its own budget except for Works Department and Rural Development. Other Departments account for 43.8% of the total expenditure, out of which the share of the Finance Department is 31.7%.Prima facie, it appears that the Odisha has made progress in assigning increased importance to the major sectors, higher than the Centre’s average share. The total size of the State budget has increased from 16% to 26% of GSDP between 1999-2000 and 2021-22.

Hence, this year budget would necessarily bring some paradigm change in the government’s vision during the global pandemic COVID-19. Under the visionary leadership of Chief Minister Naveen Patnaik, the State has done better than the rest of the world in minimizing the impact with better preparation. However, in this budget unlike the previous ones, the state government has given more importance to the rural economy as compare to the urban. Going by that, the government may give more importance to expenditures for employment of highly-educated youth.

Anirudha Barik work as an Economist at Centre of Excellence in Fiscal Policy, and Taxation (CEFT), Xavier University, Bhubaneswar and PhD Research Scholars of Jawaharlal Nehru University, New Delhi. Views are personal.

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