Orissa has improved ...Moved up to fourth poorest State..But assistance goes down

Sustained reforms across the sector and pouring in of private sector investment has elevated Orissa from the most poor state to

fourth poorest state, according to the findings of the Thirteenth Finance Commission.[FC-XII]

The FC has estimated the average per capita gross state domestic product [GSDP] at Rs 21,280 ahead of three states, namely Bihar [Rs 8851], Uttar Pradesh [Rs 15,548] and Madhya Pradesh [Rs 18,137].

There was considerable improvement in the finances of the state following higher growth of its own tax revenues and increased transfers from the Centre. The revenue account of states turned surplus in 2005-06 and continued to remain in surplus till date. This is ahead of the target date of 2008-09 recommended by FC-XII. The process of fiscal consolidation in the states was helped in no small measure by the enactment of Fiscal Responsibility and Budget Management Act [FRBMA] by the state by bringing in rule-based management of public finances.

The state, however, is still not out of the woods as in some fiscal measures it has not achieved the target set by FC-X11. It continues to have a low tax-base. For instance, the average tax –GSDP ratio of the state was estimated at 6.1% against 7.6% for Chatisgarh, 10.2% for Jharkhand and 7.6% for Madhya Pradesh. This indicates that Orissa’s tax collection accounts for a lesser share of GSDP comparative to the above mentioned states.

FC-XII recommended that the debt-GSDP ratio be brought down to 28% over a period of time so as to be consistent with the fiscal deficit target. Though the state managed to bring down the net debt stock from 51.5% of GSDP in 2003-04 to 29.82% of GSDP in 2008-09, it still remains behind the target of 28% as recommended by FC-X11.

The state government had demanded 50% of the net proceeds of sharable central taxes on the ground that its fiscal deficiency evident from being the fourth largest per capita GSDP and fourth lowest tax –GSDP ratio limiting itself to provide equitable service to the people compared to the development states. The share of states in net proceeds of sharable central taxes has been increased to 32% from the level of 30.5%.

The percentage share of Orissa in central taxes has decreased by 0.38% (from 5.16% to 4.78%) in comparison to the recommendations of FC-X11. The share of all low income States like Orissa, Bihar, Jharkhand, Chhatishgarh has decreased but the share of UP, Rajasthan and MP has increased although they belong to the low income category. The decrease in relative share is owing to the higher weights assigned to new devolution criteria like fiscal capacity distance and fiscal discipline.

The FC-X111 has retained the existing sharing pattern of 75:25 for Calamity Relief Fund in case of the State Disaster Response Fund for general category states as against the sharing pattern of 90:10 demanded by the state government. The FC-X11 recommended the corpus of CRF at Rs.1599.16 crore, which has been enhanced to Rs.2163.75 crore although the state had demanded to increase the corpus to Rs.4000 crore in view of the vulnerability of the State to natural calamities and disasters. This factor has not been appreciated by the Commission while determining the corpus of State Disaster Response Fund.