Odisha tops capital outlay-GSDP ratio, but reforms should continue: CEFT

The state has one of the highest per capita capital outlays and share of capital outlays in the country.
Odisha tops capital outlay-GSDP ratio, but reforms should continue: CEFT
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BHUBANESWAR : As Odisha aspires to transition from a low middle-income economy to a developed state by 2047, a study reveals that it has the highest capital outlay to Gross State Domestic Product (GSDP) ratio among all major states.

The state has one of the highest per capita capital outlays and share of capital outlays in the country. The average capital outlay to GSDP ratio that stood at 4.4 per cent during last decade is much higher than 18 major states, which have an average of 3.1 per cent.

Odisha’s average of capital outlay stood at 2.8 from 2001-02 to 2022-23 as against 2.2 per cent for the average of 18 major states. It reached up to 5.1 per cent and 6.2 per cent of GSDP in 2022-23 and 2023-24, respectively.

The study by the Centre of Excellence in Fiscal Policy and Taxation (CEFT) at XIM University found the coastal state has undertaken huge capital outlay for the creation of assets, which will ultimately lead to a high trajectory of growth.

Capital outlay on development purposes accounts for around 95 per cent and covers social and economic services. The remaining was for non-developmental purposes. While the majority 68.7 per cent share of total outlay was allocated towards economic services in 2023-24, social services accounted for 26.3 per cent.

“On an average, economic services have grown at 23.8 per cent annually between 2014-15 and 2023-24, while social services grew at 24.7 per cent. Education and health together account for 37 per cent of total social services capital outlay. However, economic services drove the pace of capital outlay with the provisioning of more than a third for roads and bridges,” the study said.

The fiscal study analysed per capita capital outlay at constant prices and per capita GSDP at current prices of major states. It indicated that Odisha has spent 34 per cent of capital outlay on transport and communications in the last 10 years, as another special attention of the government to upgrade social infrastructure.

Continued reforms needed for investment boost: Study

“Capital spending on various sectors can lead to more employment and the consequent rise in individual incomes. This in turn fosters higher demand leading to increased investment and growth through multiplier effect,” the report stated.

The study suggested that the state needs compositional shift towards social services, research and development, and green energy with continuous investment drives to provide a stronger boost to labour productivity to fully benefit from the capital outlay in the long run.

The state must act immediately in catalysing the investment boost for better output by supplementing governance reforms with a focus on the incentive structure, removing critical constraints, regulatory barriers, operational and production costs, and raising the level of entrepreneurship and skills, it added.

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