Post independence, freight equalisation policy of the Union Government through a perverse subsidisation of transport to make iron ore or coal available at more or less at the same price across the country killed the natural comparative advantage the mineral rich east Indian States had in the setting up of industries. Although the policy was scrapped in the early 1990s, the damage from it was long-lasting. In an interview with Nageshwar Patnaik, economist and former Director of Nabakrushna Choudhury Centre for Development Studies Dr Rajkishore Panda underscores the need for prioritisation of development of human skill for the eastern Indian States to grow rapidly.
* Freight equalisation is said to have impacted the eastern India adversely. Why the resource rich eastern Indian States remain poorest in the countryIJ
Freight equalisation was introduced in 1952 and continued till 1993. It was adopted by the Government of India to facilitate equal growth of industry all over the country. To implement the freight equalisation policy, the Central Government subsidised transportation of metal from the source to destination. The freight equalisation policy did not help in establishing manufacturing industries in the eastern Indian States, including Odisha. Instead it took away the competitive advantage of these States and drained away mineral resources of these States. Since this policy continued for a pretty long time in the post-independence period, we cannot deny its adverse effect on these State economies.
* Economists have found a strong correlation between natural resource abundance and poor economic growth. Does it hold true for eastern India in general and Odisha in particularIJ
This is a puzzle. Natural resources positively influence economic growth. But there are countries such as Japan and Singapore having minimal natural resources but have achieved higher growth. We are very much aware of “learning by Doing”. This urge/incentive is lost with the people of the regions/ states having abundance in natural resources. Moreover, mining being a higher productive enterprise, it attracts more investment to get higher return and thus leads to rent seeking among powerful groups in the society. Public welfare is given less attention.
* States follow populist policies rather than pro-development policies. People are happy after getting two meals a day. Do you expect these kinds of people to build a wealthy StateIJ
No, populist policies are myopic in character. The State Governments are increasingly spending on various unproductive activities to garner public support for their existence ignoring the development need of the States. It is imperative that from welfare point of view Government support is needed to certain sections of society. However, utmost care needs to be taken to identify the needy and such support should be temporary and once for all. There should be strict monitoring to look into the end use of the support given by the Government. Indiscriminate financial support given under populist programmes does not build human asset to be used in the future development of the State.
* The Maoist problem in eastern Indian States is a direct consequence of its endemic poverty, neglect and administrative apathy towards the masses. How has the menace affected growth of the eastern Indian StatesIJ
Rise of Naxalism is due to many factors. Most important being utter neglect and apathy by the administration about their basic living conditions. Maoist-hit areas are mostly tribal areas where there is higher incidence of poverty, illiteracy and dearth of basic amenities of life. Rise of Naxalism cannot be taken as the reason for low growth; rather the reverse is considered to be true.
* We have countries which are resource rich and developed. Generally speaking, natural resources help a country / State to get developed. What are other factors which ensure developmentIJ
Countries endowed with natural resources are found rich. However, in their process of development, human resources have played the role of a catalyst. Those countries took enough measures in developing human resources. In the present development context, our States have not taken enough care for developing human resources. By contrast, in recent years some retrograde steps have been taken in the education sector, particularly in higher education. Development of human skill needs to be prioritised in the development policy. Our youth population which constitutes nearly 50 per cent of total population needs to be technically empowered.
* The Smera Rating Report and consequently the Indo-Asean Trade speak of importance of eastern States for developing trade relations. The Modi Government should try developing eastern States as a conduit to South-East AsiaIJ
Smera is an external credit rating agency approved by RBI. It ranks the micro, small and medium enterprises eligible to get credit assistance. During 1960s, former Chief Minister Biju Patnaik took an initiative in setting up industries at panchayat level. He could visualise the pressure on land to come in future and thus thought of developing non-farm activities to improve the earnings of the farming community. Not much development has taken place in expanding non-farm sector in rural areas in the State. We have to think afresh in this context.
* The Centre should put equal emphasis on developing industrial corridor connecting eastern States. The Kolkata Metropolitan region too can act as a magnet for attracting the investment. The concerned State Governments should also take initiative and enterprise. Is it right time to expect this happeningIJ
The State suffers from high incidence of poverty and low development due mostly to infrastructural bottlenecks. However, the State being strategically placed between south and north and with abundant natural resources, creation of industrial corridor will fetch enough investment in developing manufacturing activities.
* The mineral rich States of Odisha, Chhatisgarh and Jharkhand have not been able to take advantage of metal boom. Mining scam has also affected development of these States. How should these States utilize resourcesIJ
The international market today suffers from too much uncertainty. There are frequent ups and downs in the international metal market. The State lacks in manufacturing industries. The latest Economic Survey reveals falling contribution of industry to State’s GSDP from 34.12 per cent in 2004-05 to 33.08 per cent in 2013-24. Within industry sector, manufacturing’s share is hardly 13 per cent. Thus, instead of depending on exporting the raw mineral resources, we have to emphasise on developing manufacturing to efficient use of mineral resources. The State has to provide necessary incentive and support in a transparent and ease way. The development of the State depends on the extent of development of its manufacturing activities.