
Though Niti Aayog’s Fiscal Health Index (FHI) paints a worrying picture for many states, it only has praise for Odisha. The state, which topped the chart on five indices, has its fiscal responsibility and budget management (FRBM) vitals on target. The report assessed 18 states on the quality of expenditure, revenue mobilisation, fiscal prudence, debt index and sustainability in 2022-23. It found Odisha’s quality of spending judicious as its revenue expenditure on social sectors like health and education grew at 33.8 percent during 2020-22, faster than in other major states. Capital expenditure on education, sports, arts and culture also grew, as did spending on urban development.
The FHI pointed out that Odisha’s prudence reduced its fiscal deficit to 2 percent of the gross state development product in 2022-23. The state’s external borrowings have also been low compared to many others’. Hence, the ratio of outstanding liabilities to GSDP has been well within the FRBM target. Much of this financial discipline was achieved during the previous BJD regime, which had taken over in 2000, when the state’s finances were in dire straits and a vicious super cyclone had ravaged the economy. That explains the focus on welfarism, which the party took to higher levels during subsequent elections—a trend many other states are following now. Whereas earnings from mining gave Odisha the liberty to splurge on handouts, most others do not have such a steady and substantive stream of revenue.
However, Odisha’s focus has changed with the new BJP government. While it is mandated to push the pace of development through industrialisation, employment generation and spend on infrastructure, it has unfurled 16 new welfare programmes. The Subhadra Yojana alone needed a budgetary allocation of Rs 10,000 crore for 2024-25. The state’s main revenue source is a boon as well as a bane, as 90 percent of the non-tax revenue and 45 percent of own revenue receipts come from mining. Revenue from the sector crossed Rs 46,000 crore in 2023-24, mainly because of the high premiums paid at auctions. Such a dependence on one sector is a cause of concern as expenditure zooms. So, while other states can learn prudence from Odisha, the eastern state will do well to take note of the trouble others are facing in funding their populist schemes. Each side will be better off learning from the other.