Even as the State's economy is said to have clocked a real growth rate of 10.1 percent in the current fiscal year 2021-22, the Eco Survey 2021-22 tabled in the Odisha Assembly on Tuesday expressed fears of the economic growth taking a hit by the ongoing war between Russia and Ukraine.
While the State's Economic Survey has predicted that the growth of the real GDP of Odisha will be around 9-9.5 percent in the coming fiscal year of 2022-23, the report, in an equal vein, talks about the Russia-Ukraine conflict that has brought in clouds of uncertainty.
"The conflict is likely to impact global trade and businesses with its ramifications on the domestic price level, exchange rate, commodity supplies and supply chain operations," the report observed.
Why does Survey think So?
As per the Eco-Survey 22021-22, historically, Odisha witnessed the highest rate of inflation in the country whenever disruption happened on the supply side. The inflation rate had been highest in the third and fourth quarter of 2019, though it was grounded during the lockdown phase.
However, the rate of inflation had again touched the roof during the second and third quarter of the year 2020.
The data shows the inflation rate in Odisha had been lowest in the second quarter of the year 2021. But the graph is shooting up since the last quarter of the year 2021 and has crossed 4 percent mark in January 2022.
With the Russia-Ukraine conflict simmering on for a longer duration, and its obvious impact on supply-side disruption has been conspicuously witnessed, the Survey sees a rise in inflation rate impacting the real GDP growth rate of the State's economy. (see the images above)
U-Shaped GDP Growth
A look at the Survey data shows unlike the country's steady growth in GDP, Odisha's GDP seems to have progressed like a 'U' curve- a wave growth chart with troughs and crests all the way. (see the image given below).
After witnessing ups and down, showing the signs of a volatile economy, the State GDP growth seems to have steadied from the year 2017-18, only to get knocked down by the pandemic wave. However, post-pandemic, the State's GDP growth is following the V-shaped recovery witnessed by the country's economic growth.
Volatile Growth And Per Capita Income
The stamps of volatile growth on Odisha's per capita income is clearly visible. As per the Eco Survey, Odisha had been at 22 rank in 2011-12 in the Per Capita income index.
But in the long period of nearly a decade, the State could improve by a mere 2 ranks to occupy 20th rank in 2019-20.
Why Odisha Economy Volatile?
A look at the data given in the Economic Survey 2021-22 suggests that 60 percent of Odisha's GDP is contributed by sectors that are prone to cyclic slowdowns.
While agriculture contributed around 22 percent of gross value addition to the State's economy, nearly 38 percent was from the industrial sector.
And in the industrial sector, the basic metal sector takes the lion's share in Odisha. Since both the main growth engines - farm and metals - are vulnerable to cyclic growth, the State's economy exhibited a volatile trend.
Except for Gujarat, the engine of economic growth in all other high-income states has been the service sector which contributed 60 percent gross value addition to their respective economies.
But Gujarat stands in a different league. The industrial sector has been its growth engine. The sector sees the highest gross value addition to the economy.
Unlike Odisha's base 'Metallic' engine, in Gujarat petroleum, petrochemicals and plastic products account for 41.62 percent share of total Industrial output in the State. This is followed by Chemical & Chemical Products with 10.98 percent share.
While the metallic sector is prone to cyclical growth, this is not the case with other industries. Therefore, Gujarat maintains a resilient GDP growth rate against volatile growth by Odisha.
The Key Takeway
In order to have a steady growth rate, Odisha has to take a cue from Andhra Pradesh, where agriculture has been a major growth engine for the state.
Since agriculture still accounts for 55 percent of employment creation in rural areas in Odisha, the State has to take effective measures to increase the sector's gross value addition to the economy. Besides, Odisha has to undertake faster infra growth to see a booming services sector.Russia-Ukraine War May Shadow Odisha's Real GDP In 2022-23, Says Economic Survey