Silver Lining in Odisha’s Organised Manufacturing Sector

SPECIAL ARTICLE Silver Lining in Odisha’s Organised Manufacturing Sector Chakradhar Bal, Amarendra Das, Subas Chandra Kumar Odisha’s industry sector began a phase of high growth in 2002–03. It contributed just 24% to the gross state domestic product in 1980–81, but 38% in 2007–08, before declining to 33% in 2012–13. This paper points out that organised manufacturing, especially in basic metal and alloys, has been the driver of growth in the last decade. The average productivity of labour in organised manufacturing increased during 1981–90, peaked in 1989–90, declined in 1991–2002, and has been rising again from 2002–03. Labour productivity has grown the most in basic metal and alloys, and capital accumulation in paper and paper products. Capital productivity shows a negative trend overall. Total factor productivity fell in manufacturing as a whole and three major sub-sectors, barring basic metal and alloys, and chemical and chemical products. The authors are thankful to the anonymous referee for valuable comments on revising the paper. Chakradhar Bal (chakradharbal@gmail.com) and Subas Chandra Kumar are with Prananath Autonomous College, Khordha, Odisha; Amarendra Das (dasamarendra@gmail.com) is with Utkal University, Bhubaneswar. Economic & Political Weekly EPW APRIL 11, 2015 vol l no 15 1 Introduction O disha remains one of the most backward states in India. With a per capita income of Rs 40,412 (of net state domestic product (NSDP) at current prices), it ranked 21 among 28 Indian states in 2010–11. The per capita income of the state is far below the net national average of Rs 53,331 at current prices. It was 76% of the national average and only 26% of the per capita income of the richest state, Goa. In addition, the monthly per capita consumption expenditure (MPCE) of rural Odisha (Rs 905) was 70% of the average MPCE of rural India (Rs 1,287), and the MPCE of urban Odisha (Rs 1,830) was 74% of the average MPCE of urban India (Rs 2,477). The Raghuram Rajan Committee considered Odisha the least developed state in the country on the basis of the composite underdevelopment index (GoI 2013). As per the poverty estimates provided by the Planning Commission (based on the Tendulkar Committee methodology), Odisha ranked sixth among all the Indian states in terms of the percentage of people living below the poverty line—32.59%—in 2011–12. The national average was 21.92%. Nevertheless, Odisha’s economy has grown at a high rate in the last decade. The state reported an average annual growth (of gross state domestic product (GSDP) at factor cost at 1999– 2000 prices) rate of 9.51% during the Tenth Five Year Plan period (2002–2007) against a target of 6.20%. Its GSDP (in real terms at 2004–05 prices) grew at the rate of 8.23% during the Eleventh Five Year Plan period (2007–2012) and the anticipated growth rate in 2012–13 was 9.14%. The state economy continued on a high-growth trajectory even after the global recession of 2008 and a slowdown in the national economy. Diversification of economic activities has led to a visible structural shift from an agriculture-based state economy to an industry-led and serviceled one (Government of Odisha 2013). The high economic growth improved Odisha’s position from 24 in 2004–05 to 21 in 2010–11 in a ranking of 28 states on the basis of per capita NSDP. In poverty indicators (based on the Tendulkar methodology), its rank improved from 28 in 2004–05 to 23 in 2011–12. During this period, poverty declined from 57.2% to 32.59%, but a huge number in the state still lives in abject poverty. Providing employment is seen as a panacea to eradicating the disease of poverty. The economic literature emphasises industrialisation as a way of providing employment to a vast population and raising the overall productivity of an economy and the incomes of its people. Conventional economic theories have it that people move from agriculture to industry to work 69 SPECIAL ARTICLE as skilled labourers with higher wages. The shift of surplus labour from agriculture to industry raises labour productivity in the farm sector and also the wage rate for labourers (Lewis 1954). And given forward and backward linkages, both industry and agriculture sectors experience faster growth. In recent years, Odisha has become a major destination for industrial investment. The main reason is the state’s rich mineral resources, and Odisha had the highest share (12%) in the value of the country’s mineral outputs in 2010–11 (Government of Odisha 2013). The state is richly endowed with chromite, bauxite, graphite, iron ore, manganese ore, limestone, clay, quartz and quartzite, nickel, copper, lead, coal, and many precious stones. Thus, it has all the potential to become a highly industrialised state. Promotional efforts and a conducive investment climate have attracted major players in the steel, cement, power, aluminium, and chemical and petrochemical sectors (Government of Odisha 2011). By the end of 2011–12, the state government had signed memoranda of understanding (MoU) with 94 reputed investors—50 for steel; 30 for power; three for aluminium; four for cement; one each for auto components, oil refining and titanium dioxide; and four for ancillary and downstream industries. These entail an investment of Rs 4,62,768.74 crore and will create employment for more than 89,340 (29,780 direct and 59,560 indirect) people. The 50 MoUs signed with various steel promoters involve an investment of Rs 2,30,421 crore and an estimated production of 83.66 million tonnes per annum (MTPA). Of these, 30 projects have begun partial production with an investment of Rs 80,506.17 crore, producing 12.66 MTPA of steel, 11.45 MTPA of sponge iron, and 4.23 MTPA of other products. These industries provide employment to 27,690 people directly and 60,390 indirectly (Government of Odisha 2013). In this context, the overall performance of Odisha’s industrial sector merits a detailed enquiry. Some pertinent questions arise in the minds of researchers and policymakers alike. Has the contribution of industry increased the GSDP of the state? How has the manufacturing sector performed in recent years? Has the productivity of the manufacturing sector increased? Did liberalisation have a favourable impact on Odisha’s economy? This paper attempts to answer these research questions. The rest of the paper is organised as follows. Section 2 reviews the literature on the growth of Odisha’s industry sector, and states the objectives of the study. Section 3 describes the methodology and data used for the analysis and defines the variables used for it as well. Section 4 presents the results of the data analysis on the structural change of Odisha’s economy, the growth of sub-sectors in the industrial sector, the state’s position on the all-India industrial map, and the growth trends of selected variables, and partial and total factor productivity. Section 5 presents the environmental and social concerns that accompany rapid industrialisation. Section 6 summarises the findings and concludes. 2 Review of Literature In this section, we review selected works that have examined the growth of Odisha’s manufacturing sector. Pattnaik (1988) 70 presented a detailed picture of industrial growth in the state and highlighted the role played by the Industrial Development Corporation of Orissa Limited (IDCOL) and the Industrial Promotion & Investment Corporation of Odisha Limited (IPICOL). He argued that a mere multiplication of industrial units over a period of time, irrespective of their commercial success and impact on the economy in terms of contribution to income, employment, and economic and social progress, was not an index of industrialisation. Given the natural resources and constraints, he posited that prospects of industrial development in Odisha lay in mineral-based industries. Pattnaik (1991) pointed out that the contribution of the secondary sector to state income declined during the 1980s. He observed that it included not only industry, but also construction and electricity, which were fast-growing sectors. If we exclude the contribution of these sectors, the share of industry to state income would be much less. He pointed out that the multiplication of industries without a backwash effect on other sectors of the economy would create only islands of prosperity in a vast ocean of poverty, or the growth of a dual economy. Industrialisation can thrive only when it produces spread effects on the economy. Das (1991) highlighted the importance of small-scale industries in the state. He suggested a “big-push effort” to reduce regional imbalances and sectoral concentrations. Singh (1991) looked at Odisha’s geographical boons and the problems that characterise industrial development in the state. He was of the opinion that with a proper assessment and commercial exploitation of natural resources, the state could emerge as a top exporter of various industrial products. Vyasulu and Kumar (1997) examined the growth and structure of industries in Odisha at the state and district levels from 1966 to 1989. They also calculated the partial factor productivity and capital intensity of seven selected industries at the state and district levels. The analysis brought out the limited growth of dominant industries in the state. The negative value addition in some of the industries merits deeper study. Besides that, the rise in the growth rates of value addition and fixed capital without adequate growth in employment and number of factories has to be looked into. In the district-level analysis, they found Cuttack, Puri and Sundargarh had grown faster than the state as a whole. On the other hand, annual average growth rates in Koraput and Sambalpur were quite low compared to the state average. So far as partial factor productivity was concerned, in 1966–89, labour productivity in the state grew at an annual average rate of 8.29%, capital productivity at 6.87% and capital intensity at 3.51%. At the district level, Sundargarh recorded faster growth both in labour productivity and capital productivity than other districts. Das (2006) blamed political–bureaucratic factors for the underdevelopment of infrastructure in Odisha, which, in turn, has curbed mineral-based industrial growth. He pointed out that the utter neglect of vital infrastructure (Paradeep Port and the proposed railway line linking the mineral belt to the port) in the state has constrained harnessing the vast and rich mineral resources of the hinterland, which has immense potential to generate income and employment locally. Senapati APRIL 11, 2015 vol l no 15 EPW Economic & Political Weekly SPECIAL ARTICLE and Paltasingh (2010) presented growth and productivity trends in the organised manufacturing sector in three states— Andhra Pradesh, Odisha and Tamil Nadu—for 1980–2005. They found that organised manufacturing value addition fell in Odisha from 20.77% in the pre-liberalised period (1980–90) to 7.21% in the post-liberalised period (1991–2005). The labour force in organised manufacturing grew at 1.73% per annum in the pre-liberalised period and declined at 3.70% in the postliberalised period. The growth rate of capital stock in Odisha declined from 15.63% per annum in the pre-liberalised period to 3.11% in the post-liberalised period. In analysing the partial productivity of factors of production, Senapati and Paltasingh make the following observations—capital productivity declined in both the pre- and post-liberalised periods at 1.72% and 2.05% per annum, respectively; labour productivity grew faster (11.33% per annum) in the pre-liberalised period compared to the liberalised period (6.34%); and capital intensity also increased faster (13.66% per annum) in the pre-liberalised period compared to liberalised period (7.08% per annum). The authors observed that total factor productivity (TFP) in the organised manufacturing sector witnessed faster growth in the pre-liberalised period (trend growth rate (TGR) of 1.32% per annum) than the liberalised period (TGR of 0.67%). Mishra (2010) found that for a 1% change in the share of registered manufacturing in total NSDP, per capita income changed by 2% in the same direction in 1993–2004. However, he observed a very low correlation (of 0.35) between registered and unregistered manufacturing in this period. His findings were consistent with those made by Samal, Meher and Rath (1997), who pointed to the weak forward and backward linkages of large industries in Odisha. The authors said, for example, that while only 2% of the total sales turnover of a sample of manufacturing units spread all over the state went to Nalco and only 0.64% of the total sales of manufacturing units in undivided Dhenkanal District to Nalco, Angul, the linkages of the informal sector with the formal sector in Sambalpur town, which is surrounded by industrial towns such as Hirakud, Brajarajnagar, Belpahar and Rajgangpur, were negligible. Mishra (2010) argued that Odisha had become a very attractive destination for private investors in large-scale, capital-intensive projects, particularly in mineral-based industries. However, he was very critical of investments that do not benefit the people of Odisha all that much. For example, he pointed out that wooing private investment has included the state government using the police to eliminate local opposition to industrial projects, and evicting people with a loss of livelihoods. Big private investors try to grab public and private land in the name of development projects. Mishra also cautioned that the spurt in Maoist violence should be seen as a sign of the frustration of the Adivasi people in the state’s natural resource-rich areas. Noting the uncompensated losses of the local people and the environmental damage caused by industry, he wrote that Odisha is pursuing a “berserk journey on the path of the dangerous kind of industrialisation.” Although Senapati and Paltasingh (2010), and Mishra (2010) have attempted to examine the growth of organised Economic & Political Weekly EPW APRIL 11, 2015 vol l no 15 manufacturing in Odisha in the last two or three decades, they have not carried out a comprehensive analysis of the sub-sectors in manufacturing. They also miss out many important positive developments in organised manufacturing and its sub-sectors. Therefore, this study seeks to provide an in-depth analysis of registered manufacturing and its subsectors in Odisha. 2.1 Objectives This study seeks to answer the following research questions. (1) Has the share of industrial output increased in the GSDP of Odisha? (2) How have the sub-sectors of industry grown from the 1980s to 2000s? (3) Which specific industry drives the growth of registered manufacturing in Odisha? (4) What is the contribution of Odisha to India’s registered manufacturing sector? (5) What has been the growth trend of leading industries in the registered manufacturing sector in the pre-liberalised and liberalised periods? (6) How has the productivity of registered manufacturing grown in Odisha? 3 Data and Methodology We use secondary data on macro indicators, such as the percentage share of the manufacturing sector and its sub-sectors in the GSDP, from the Odisha Economic Survey. Detailed data on the organised manufacturing sector was obtained from the Annual Survey of Industries (ASI). We cover the period from 1980–81 to 2012–13 for analysing the structural change of GSDP, and the growth of sub-sectors of industry. For analysing the sub-sectors of organised manufacturing, we cover the 25 years from 1981–82 to 2005–06. The period is long enough to record real structural change and growth of manufacturing productivity in Odisha. Further, to capture the impact of economic reforms on the process of industrialisation and productivity growth, the entire period of study has been divided into two sub-periods—from 1981–82 to 1990–91 (pre-liberalised period) and 1991–92 to 2005–06 (liberalised period). For categorising industries, we have followed the National Industrial Classification (NIC) at the two-digit level. The growth rates for different periods have been estimated from the semi-log regression equation ln Y =  + βt + ε. Where Y is the variable concerned (for example, the number of factories, total value added and so on) and t is time period and ε is error term. The growth rate for each period has been derived from the expression gr = [exp (β) –1] × 100. In the first section, trend growth rates of some selected parameters have been calculated and a comparative analysis has been done for the pre-liberalised and liberalised periods. Factor intensity (capital–labour ratio) and partial productivities (labour and capital productivities) are estimated and their growth rates computed. Capital productivity is calculated by dividing the real net value added by real capital stock. Labour productivity is calculated by dividing the real net value added 71 SPECIAL ARTICLE by the number of persons employed. Capital intensity has been calculated by dividing the real capital stock with the number of persons employed. Further, total factor productivity growth (TFPG), which measures technological changes, of the aggregate manufacturing sector and its major subsectors has been computed on the basis of the translog index of TFP: ΔP TFPG= t = Δ log Vt – ( wt × Δ log Lt + -rt × Δ log Kt) Pt where ΔPt is translog index of the rate of technological change Pt Δ log Vt = log Vt+1 log Vt , Δ log Kt = log Kt+1 – log Kt, Δ log Lt = log Lt+1 – log Lt, wt = (wt+1 + wt)/2 and r t (r t+1 + r t)/2 wt and rt are the respective labour and capital share in the value added. emoluments w = wageshare = real net value added r t = capial share = 1 – wt Here we assume that there is constant return to scale. V is the value added, L is the number of persons engaged, and K is the real net capital stock. From the estimated series of ΔPt , Pt we can derive the TFP growth trend pt by using the following identity Pt+1 = Pt (1+Pt/Pt), where pt is the productivity in the period t. 3.1 Variables Defined Manufacturing Units: Manufacturing units comprise registered factories. It refers to working places where there are 10 or more labourers working with power, or 20 or more workers working without power, or as defined in the ASI. In this paper, we use “units” to refer to manufacturing units. Total Emoluments: Total emoluments are defined as wages paid to all employees plus the imputed value of benefits in kind, that is, the net cost to the employer on goods and services provided to employees free of charge or at a markedly reduced cost, which are clearly of benefit to employees as consumers. Depreciation: Depreciation is consumption of fixed capital due to wear and tear and obsolescence during the accounting year, and it is taken as provided by the factory owner or estimated on the basis of the cost of installation and working life of fixed assets. Total Persons Engaged: It relates to all persons engaged by a factory whether for wages or not in work connected directly or indirectly with the manufacturing process, and includes all administrative, technical and clerical staff, as also the labour engaged in the production of capital assets for the factory’s use. This includes persons holding supervisory or managerial positions and those engaged in administration, store keeping, 72 welfare and sales. It also includes those engaged in the purchase of raw materials and the production of fixed assets for the factory, and its watch and ward staff. All working proprietors and their family members who are actively engaged in the work of the factory even without pay and unpaid members of cooperative societies who work in or for the factory in any direct and productive capacity are also included. Net Value Added: This is obtained by deducting the depreciation from the gross value added as reported in data sources. In the present study, net value added is taken as output since the trends are not affected significantly by the use of net value added. Also ambiguity in the calculation of depreciation can be overcome if net value added is taken as a measure of output. Measurement of Capital: The most intricate problem in productivity analysis is the calculation of capital input. The measurement of capital raises various problems of definition and measurement, besides the usual problem of aggregation and heterogeneity. It is obvious that there is no entirely satisfactory or universally accepted way of measuring capital stock. “The capital stock is the one that will really drive a purist mad” (Solow 1957). This study does not go into details about the definition and its theoretical aspects. Net fixed capital stock at constant prices has been taken as a measure of capital input. For estimating the capital input series, we use the perpetual inventory method (PIM) followed by Banga and Goldar (2004). This method of capital estimation involves the following steps. (1) An implicit deflator for gross fixed capital formation for registered manufacturing is derived from the data on gross fixed capital formation in registered manufacturing at current and constant prices published in the National Accounts Statistics (NAS). The deflator series is constructed from 1972–73 to 2005–06. The base is shifted to 1993–94 so as to be consistent with the price series used for other inputs and output. (2) In the second step, we estimate the benchmark capital stock. For this, we take the book value of fixed capital stock (at historical prices, net of depreciation) from ASI data in 1981–82 for each industry group. This is adjusted for price changes by using the average value of the deflator for the previous 10 years (1972–73 to 1981–82). This provides the benchmark capital stock.1 (3) Gross investment in fixed capital is computed for each year by subtracting the book value of fixed assets in the previous year from that in the current year and adding the reported depreciation in fixed assets in the current year to that figure.2 To obtain real gross investment, the gross fixed investment series at current prices is deflated by the price series mentioned above. (4) Real net investment in fixed assets is derived by subtracting depreciation of fixed capital from real gross investment in fixed assets. The rate of depreciation is taken as 5%, which the same as assumed in Unel (2003). (5) Starting from the benchmark fixed capital stock and adding real net fixed investment for successive years, the net fixed capital stock series is constructed. APL: Average productivity of labour is calculated by dividing the real net value added with the number of persons employed. APRIL 11, 2015 vol l no 15 EPW Economic & Political Weekly SPECIAL ARTICLE APK: Average productivity of capital is calculated by dividing the real net value added with the real capital stock. the GSDP), followed by banking and insurance (7%), transport other than railways (7%), and real estate and ownership of dwellings (5%). K/L: Capital intensity has been calculated by dividing the real capital stock with the number of persons employed. Figure 1: Share of Agriculture and Allied Activities, Industry, and Service Sector in Odisha’s GSDP (in %) 60 4 Analysis and Findings Agriculture and allied activities Industry 50 Service sector 4.1 Structural Transformation of Odisha’s Economy 40 (in %) Table 1: Average Share of Three Sectors in Odisha’s GSDP Year Agriculture and Allied Activities Industry Service Sector 46.9 33.4 22.9 17.3 25.2 32.1 33.8 34.0 27.8 34.6 43.3 48.7 1980–81 to 1989–90 1990–91 to 1999–2000 2000–01 to 2009–10 2010–11 to 2012–13 Source: Odisha Economic Survey 2012–13. The average share of the three sectors—agriculture and allied activities, industry, and services—in Odisha’s GSDP in the last three decades is shown in Table 1. During the 1980s, the share of agriculture and allied activities in the GSDP was high (46.9%), followed by the service sector (27.8%) and industry (25.2%). During the 1990s, the service sector had the largest share (34.6%), followed by agriculture and allied activities (33.4%) and industry (32.1%). From the early 2000s, the share of the service sector and industry in the GSDP rose steadily and the share of agriculture and allied activities declined. The share of the service sector rose from 43.3% in 2000–10 to 48.7% in 2010–13. The share of industry increased from 33.8% in 2000–10 to 34% in 2010–13. The importance of agriculture and allied activities declined steadily and its share dipped from 22.9% in 2000–10 to 17.3% in 2010–13. In the service sector, trade, hotel and restaurants had the largest share (14% in Economic & Political Weekly EPW APRIL 11, 2015 vol l no 15 30 20 10 0 1980–81 1981–82 1982–83 1983–84 1984–85 1985–86 1986–87 1987–88 1988–89 1989–90 1990–91 1991–92 1992–93 1993–94 1994–95 1995–96 1996–97 1997–98 1998–99 1999–2000 2000–01 2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09 2009–10 2010–11(P) 2011–12(Q) 2012–13(A) Kuznets (1971) hypothesised that in the course of economic development a country usually undergoes a structural change from a predominantly agricultural economy to an industriallydriven one, and then a service sector-driven one. However, Odisha shows a different path of structural transformation. This has been presented in Figure 1, which depicts the share of agriculture and allied activities, industry and the service sector in Odisha’s GSDP. From this, we can see that the structural transformation of the state’s economy took place in 1995–96 when the share of the service sector in GSDP (35%) surpassed that of agriculture and allied activities (33%). The share of agriculture and allied activities declined steadily and that of industry rose in subsequent years. The share of industry in GSDP (32%) exceeded that of agriculture and allied activities (31%) in 1996–97. However, in the next two years, the share of industry declined marginally. Again, in 1999–2000, the share of industry exceeded that of agriculture and allied activities. The share of industry in the GSDP rose to 38% in 2006–07, before declining to 33% in 2012–13. The rise in the share of industry in 2006–07 is explained by high growth in all sub-sectors of the industrial sector. In spite of a rise in the share of industry, it has not been able to exceed the share of the service sector in the GSDP, which increased steadily from 26% in 1980–81 to 50% in 2012–13. 4.2 Composition of Industrial Output In this section, we present the growth of the industrial sector and its different sub-sectors. Industry includes mining and quarrying (M&Q), the registered manufacturing sector, the unregistered manufacturing sector, electricity, gas and water supply (EGWS), and construction. Therefore it is important to look at the contribution of each sub-sector to the overall growth of the secondary sector. Figure 2 (p 74) shows the share of the sub-sectors in Odisha’s industrial sector from 1980–81 to 2012–13. Within industry, construction had the lion’s share in the 1980s, 1990s and mid-2000s. Registered manufacturing, which was in second position up to the mid-2000s, took the lead from 2007–08. M&Q, which was behind all the other sub-sectors, surpassed the share of unregistered manufacturing in 1993–94 and EGWS in 1996–97. Although M&Q surpassed the contribution of registered manufacturing during 2002–04, the latter regained its position in subsequent years. Thus, in 2012–13, registered manufacturing remained the largest contributor to industrial output, followed by construction, M&Q, EGWS and unregistered manufacturing (Table 2). Table 2: Average Share of Sub-sectors in Industry in Odisha, 1980–81 to 2012–13 (in %) Time Period 1980–81 to 1989–90 1990–91 to 1999–2000 2000–01 to 2009–10 2010–11 to 2012–13 Mining and Quarrying Registered Manufacturing 6.9 12.8 21.3 19.1 16.7 18.2 27.6 39.3 Unregistered Electricity, ConstrucManuGas and tion facturing Water Supply 13.2 9.4 7.7 6.4 14.4 13.8 10.1 8.9 48.9 45.9 33.4 26.3 Source: Computed from Odisha Economic Survey 2012–13. The construction sub-sector contributed an average of 49% in the 1980s, but it declined steadily—46% in the 1990s, 33.4% in the 2000s, and 26.3% in 2010–13. Registered manufacturing was the second highest contributor to industrial output with an average share of 16.7% in the 1980s. It got a major boost in the 2000s and its share jumped from 18.2% in the 1990s to 27.6% in 2000–10 and 39.3% in 2010–13. M&Q witnessed a boom during the 2000s and its share tripled between the 1980s (7%) and the 2000s (21.3% ). However, its share declined 73 SPECIAL ARTICLE marginally in 2010–13 due to a ban on illegal mining. The share of EGWS declined from 14.45% in the 1980s to 9% in 2010–13. The share of unregistered manufacturing also declined from 13.2% in the 1980s to 6.4% in 2010–13. Figure 3: Growth in Aggregate Output of Industry and Its Sub-sectors in Odisha, 1980–2013 (in Rs lakh) 50,00,000 45,00,000 High-growth phase Low-growth phase 40,00,000 (in %) Figure 2: Share of Sub-sectors in Industry in Odisha 60 Construction Manufacturing unregistered 25,00,000 Manufacturing registered 40 20,00,000 15,00,000 10,00,000 30 Electricity, gas and water supply 0 Mining and Quarrying 10 1980–81 1981–82 1982–83 1983–84 1984–85 1985–86 1986–87 1987–88 1988–89 1989–90 1990–91 1991–92 1992–93 1993–94 1994–95 1995–96 1996–97 1997–98 1998–99 1999–2000 2000–01 2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09 2009–10 2010–11(P) 2011–12(Q) 2012–13(A) Manufacturing unregistered Table 3: Trend Growth Rates of Odisha’s Industry and Its Sub-sectors 1980s 1990s 2000–01 to 2012–13 1980–81 to 2001–02 2002–03 to 2012–13 1980–81 to 2012–13 (in %) Mining Registered Unregistered Electricity, Construc- Industry and ManuManuGas and tion Quarrying facturing facturing Water Supply 9.7 12.2 9.3 11.5 7.2 11.2 13.4 4.3 17.6 6.7 17.0 9.4 Manufacturing registered Construction Mining and Quarrying Electricity, gas and water supply 5,00,000 20 Time period Industry 2.9 3.6 5.3 2.4 5.6 3.2 Source: Computed from Odisha Economic Survey 2012–13 data. 4.3 Growth Trends in Industrial Output 6.7 1.1 6.4 4.2 6.5 4.0 4.0 1.7 4.3 4.2 5.3 3.5 6.2 3.5 9.2 5.1 9.3 6.0 1980–81 1981–82 1982–83 1983–84 1984–85 1985–86 1986–87 1987–88 1988–89 1989–90 1990–91 1991–92 1992–93 1993–94 1994–95 1995–96 1996–97 1997–98 1998–99 1999–2000 2000–01 2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09 2009–10 2010–11(P) 2011–12(Q) 2012–13(A) 50 0 35,00,000 30,00,000 Source: Data from Odisha Economic Survey 2012–13. Registered manufacturing had the highest TGR (17.6%) in 2000–13, followed by the 1980s (13.4%) and the 1990s (3.6%). Construction and EGWS saw relatively high growth in the 1980s and the 2000s, and a slowdown during the 1990s. Unregistered manufacturing had the highest TGR in 2000–13 (5.3%), followed by the 1990s (3.6%) and the 1980s (2.9%). M&Q recorded the highest TGR during the 1990s (12.2%), followed by the 1980s and the 2000s. Based on our observations from Figure 3, we estimate the TGR for the two growth phases. Aggregate industry recorded a TGR of 9.3% in 2003–13 and 5.1% in 1980–2002. Among the five sub-sectors, except for M&Q, the others recorded higher growth in 2003–13 compared to 1980–2002. Registered manufacturing recorded the highest TGR (17%) in 2003–13. However, M&Q had a TGR of 11.5% in 1980–2002 and a TGR of 7.2% in 2003–13. The growth of output of industry and its sub-sectors is depicted in Figure 3. The vertical line demarcates the two phases of growth of industry in Odisha. The first phase is a low-growth one from 1980–81 to 2001–02, and the second is a high-growth 4.4 Composition of Registered Manufacturing Output one from 2002–03 onwards. We see that the industry sector in Within registered manufacturing, which industry was the aggregate entered a high-growth phase from 2002–03. The largest contributor? Table 4 presents the share of each industry high growth was basically driven by the growth of registered in the total output of the manufacturing sector. We see that the manufacturing and M&Q. Based on this, we estimate the TGRs industries that were dominant in 1981–82 remained so in for 1980–2002 and 2003–13. Table 4: Share of Industries in Total Output and Employment of Aggregate Industry The TGRs for aggregate NIC Code and Name of the Industry Output Share Employment Share 1981–82 1991–92 2001–02 2005–06 1981–82 1991–92 2001–02 2005–06 industry and its five sub-sec6.08 5.75 16.59 9.44 7.25 6.51 15.72 14.07 tors are presented in Table 3. (20–21): Food products (22): Beverages, tobacco and related products 0.74 0.35 1.13 1.00 1.27 0.71 2.51 7.22 We also show the growth (23+24+25): Cotton textiles, wool silk and man-made rates for the high- and low- fibre textiles , jute and other vegetable fibre textiles 1.82 2.76 0.27 0.26 7.00 10.03 3.40 1.33 growth phases, and the en- (26): Textile products (including wearing apparel) 0.09 0.13 0.35 0.18 0.16 0.51 1.26 0.85 tire period of our study. If we (27): Wood and wood products, furniture and fixtures 1.26 0.58 0.60 0.59 3.14 1.85 1.79 1.18 compare the growth rates (28): Paper and paper products 6.47 3.91 4.31 3.03 9.80 6.41 5.95 4.62 0.06 0.02 0.07 0.01 0.20 0.15 0.11 0.06 for different decades, we see (29): Leather and leather products 6.99 13.67 12.00 7.75 3.70 5.39 6.67 4.94 aggregate industry had the (30): Chemical and chemical products 0.60 1.94 6.10 5.60 0.53 1.56 5.41 3.30 highest TGR (9.2%) in 2000– (31): Rubber and plastic products 9.30 9.13 6.66 6.34 11.53 10.70 12.38 11.56 13. The 1980s were also a (32): Non-metallic mineral products (33): Basic metal and alloys 53.55 47.89 44.65 59.84 25.77 24.35 38.21 45.08 time of high industrial (34): Metal products and parts 0.54 0.81 1.96 1.04 1.45 2.38 2.41 2.49 growth in the state. Howev(35–36): Machinery and machine tools 4.71 3.38 2.91 1.11 3.11 3.65 2.85 1.58 er, this slowed down during (37): Transport equipment and parts 0.23 0.49 0.05 0.01 0.23 0.23 0.17 0.07 the 1990s. The TGRs of the (38): Other manufacturing industries 0.10 0.02 0.01 0.00 0.20 0.15 0.04 0.02 five sub-sectors, however, All 92.53 90.83 97.67 96.19 75.34 74.60 98.86 98.36 show a different picture. Source: Computed from ASI data. 74 APRIL 11, 2015 vol l no 15 EPW Economic & Political Weekly SPECIAL ARTICLE 2005–06. Basic metal and alloys, which had a share of 53.55% in 1981–82, went down during the 1980s–1990s. But from the early 2000s, it strengthened its position by raising its share in aggregate output to around 60% in 2005–06. Paper and paper products, which had 6.47% of the aggregate manufacturing output, fell to 3.03%. The share of chemical and chemical products went up during the 1990s, but fell after that. Nonmetallic mineral products, which had nearly a 10% share in aggregate output, went down to 6%. The rubber and plastic products industry, which had a less than 1% share in 1981–82, expanded its share to 5.6% in 2005–06. Thus, organised manufacturing is largely driven by basic metal and alloys, followed by food products, chemicals and chemical products, and non-metallic mineral products. In employment generation, basic metal and alloys play a leading role, offering 45.08% of the employment of the organised manufacturing sector, followed by food products (14.07%), non-metallic mineral products (11.56%), and beverages, tobacco and related products (7.22%). can expect a substantial rise in the share of output and net value added in the near future. The rise of organised manufacturing in Odisha urges us to examine whether it has been driven by expansion of scale or a rise in productivity. Table 5: Odisha’s Share of the All-India Total in Different Indicators Industry Groups Characteristics All India (Rs lakh, others in numbers) 1981–82 Factories Fixed capital Productive capital Invested capital Workers Total persons engaged Wages to workers Total emoluments Total inputs Total output Depreciation Net value added Rent paid Interest paid 2000–01 Odisha’s Share (%) 2011–12 (p) 1981–82 2000–01 2011–12 (p) 105,037 131,268 217,554 34,70,300 39,960,422 19,49,76,922 49,75,700 105,20,839 25,38,56,368 53,99,100 571,79,940 28,40,31,345 6,106,000 6,135,236 10,438,522 1.71 2.52 2.87 2.72 1.75 1.27 2.87 1.20 2.59 1.62 1.23 8.25 6.72 6.46 2.14 7,894,000 7,987,743 13,430,117 439,400 29,34,792 99,85,579 677,800 50,71,873 2,14,73,349 56,94,900 748,55,152 48,01,00,486 73,67,200 926,90,185 57,77,94,392 216,900 34,72,893 1,40,65,505 14,55,500 143,62,141 8,36,28,401 16,900 407,862 16,19,529 326,900 41,98,659 1,20,65,632 1.77 1.99 2.04 1.81 1.77 1.96 1.59 0.57 1.26 1.61 2.00 1.90 1.36 1.43 2.10 1.64 1.01 2.81 2.12 2.92 2.35 1.90 2.00 4.27 2.18 2.10 5.17 P – Provisional estimates. Source: Computed from Annual Survey of Industries (2009–10) data; EPWRF for 1981–82 data. 4.5 Odisha’s Position on the All-India Industry Map Has the fast growth of industry in Odisha improved its position at the all-India level? The answer to this is it has. Table 5 shows the share of Odisha in the all-India total in different indicators during 1980–81, 2000–01 and 2011–12. It presents a very encouraging picture of industrial progress in the last decade. Odisha’s share in total registered manufacturing output declined from 1.77% in 1980–81 to 1.43% in 2000–01 before rising to 2% in 2011–12. In net value addition, the state’s share went up steadily from 1.59% in 1980–81 to 2.18% in 2011–12. In fixed capital, the share rose substantially from 2.52% in 1980–81 to 8.25% in 2011–12. Similarly, there was a substantial rise in Odisha’s share in productive capital and invested capital. The rise in capital investment furthers optimism about the state’s industrial growth. The flow of investments to Odisha has increased substantially and this is expected to raise industrial output in the years to come. Given gestation periods, we Economic & Political Weekly EPW APRIL 11, 2015 vol l no 15 4.6 Growth Trend of Selected Variables Table 4 shows that the major organised manufacturing industries in Odisha belong to five major groups—basic metal and alloys, chemicals and chemical products, non-metallic mineral products, food products and paper and paper products. During 1980–81 and 2005–06, the average share of these groups in aggregate organised manufacturing output were 48.58%, 9.64%, 8.20%, 7.86% and 4.66%, respectively. These five groups of industries represent 78.94% of the total output of the organised manufacturing industry. Our analysis of growth trends, partial productivity, and total factor productivity will focus on these major groups of industries. Table 6: Growth Rates of Selected Parameters during 1981–82 and 1990–91 Food products Paper and paper products Chemicals and chemical products Non-metallic mineral products Basic metal and alloys Organised manufacturing sector Units Fixed Labour Emolument Output Capital Employed Paid Produced VAM –2.76*** 10.30* –0.8 7.36* 4.29** 1.31 –1.19 15.84* –3.34** 0.9 2.22*** 1.82 4.08** 25.86* 8.11* 12.98* 20.08* 22.88** 5.55* –0.1 15.37* 0.6 17.94* –0.3 3.15* 8.22* 6.18** 2.02** 9.20* 21.29* –0.7 16.65* 3.98* 9.86* 11.52* 1.61* * Represents significance at the 1% level, ** represents significance at the 5% level, *** represents significance at the 10% level based on t statistics. VAM: Value Added by Manufacturing. Source: Own computation. The growth trends of these industries are estimated in the pre-liberalised (1981–82 and 1990–91) and liberalised (1991– 92 and 2005–06) periods on six parameters—manufacturing units; fixed capital; labour employed; emoluments paid; output produced; and net value added. Trend growth rates for the pre-liberalised period are presented in Table 6. During this period, the number of manufacturing units in chemical and chemical products and non-metallic mineral products grew while the food products industry lagged behind. The growth trends for the other two groups of industries and in the aggregate organised manufacturing sector were insignificant. Fixed capital, emoluments paid, output produced, and net value added show a positive growth trend in all the five groups and in aggregate organised manufacturing. Chemical and chemical products had the largest growth in output growth and fixed capital, followed by basic metal and alloys, in the preliberalised period. In the liberalised period (Table 7, p 76), the number of manufacturing units shows a positive trend in basic metal and alloys, non-metallic mineral products, and food products, but is negative in paper and paper products. Growth trends in the other two groups of industries and in the aggregate organised manufacturing sector were insignificant. Fixed capital, emoluments paid, and output produced in food products, 75 SPECIAL ARTICLE Table 7: Growth Rates of Selected Parameters during 1991–92 and 2005–06 Units Food products 3.25* Paper and paper products –2.18* Chemicals and chemical products 0.10 Non-metallic mineral products 2.63* Basic metal and alloys 5.02* Organised manufacturing sector 0.30 Fixed Capital Labour Emolument Output Employed Paid Produced 8.55* 3.36* 4.71* –6.67* 2.748* 8.00* 0.70 –4.59* 0.50 –1.88 3.77** –1.98*** 1.01 5.87* –2.18** 6.18* 1.71* 2.02** –3.15* VAM 1.21 –10.68** 1.21*** 2.22** 1.41 6.82* 4.08* 7.79* –0.10 –0.50 –0.60 * Represents significance at the 1% level, ** represents significance at the 5% level, *** represents significance at the 10% level. Source: Own computation. Figure 4: Labour and Capital Productivity and Capital Intensity in Organised Manufacturing, Odisha, 1981–2006 non-metallic mineral products, and basic metal and alloys show a positive growth trend during this period. Basic metal and alloys had the maximum growth (7.79%) in value addition in the liberalised period. Chemical and chemical products experienced a negative growth in net value added during the liberalised period. Organised manufacturing in aggregate recorded negative growth in value addition during the liberalised period. From 1981–82 to 2005–06, we see a positive growth trend in all industries, barring paper and paper products (Table 8). The aggregate organised manufacturing sector does not show any significant growth trend in output produced and value added. Labour employment in organised industry shows a negative trend, but is insignificant. Table 8: Growth Rates of Selected Parameters during 1981–82 and 2005–06 Industry Groups Food products Paper and paper products Chemical and chemical products Non-metallic mineral products Basic metal and alloys Organised manufacturing sector Units Fixed Capital 1.92* 11.96* –1.19* 1.51* Labour Emolument Output Employed Paid Produced 4.50* 9.86* –3.15* 9.75* 2.12* 6.18* 4.81* VAM 9.86* –1.19*** 1.41 6.50* –0.80 8.76 2.53 3.77* 10.52* 0.40 2.94* 4.92** 4.19* 3.87* 10.52* 1.71* 4.29* 5.65* 9.64* 1.71* 0.50 0.90 0.80* 7.57* –0.40 * Represents significance at the 1% level, ** represents significance at the 5% level, *** represents significance at the 10% level. Source: Own computation. 4.7 Partial and Total Factor Productivity In this section, we present the results of partial and total factor productivity for the aggregate organised manufacturing sector and the five major groups of industries. Table 9 (p 77) presents the growth of labour productivity, capital productivity and capital intensity in the aggregate manufacturing sector and the five major groups. Labour productivity in industry as a whole followed a volatile path in the 1980s and the 1990s (Figure 4). However, from 2002–03 onwards, labour productivity has consistently increased. The trend growth estimates for labour productivity in the pre-liberalised period show a nearly 10% growth. However, the labour productivity growth trend does not show significant growth in the liberalised period. This result has to be read cautiously and the turnaround in labour productivity from the early 2000s should not be discounted. 76 In Figure 4, we see that the average APL increased during 1981–90 before declining during 1991–2002. It showed an increasing trend from 2002–03, peaking in 2005–06. Capital productivity, on the other hand, fell during the entire period. The rate of fall was as high as 6% per annum. The maximum growth was seen in the capital–labour ratio of aggregate industry. The growth trend estimates also reflect that capital accumulation was higher in the pre-liberalised period (around 15% per annum) than the liberalised period (around 5% per annum). The average trend growth rate during the entire period is 8.11% per annum. 700 K/L Index 600 500 400 300 APL Index 200 APK Index 100 0 1981–82 1982–83 1983–84 1984–85 1985–86 1986–87 1987–88 1988–89 1989–90 1990–91 1991–92 1992–93 1993–94 1994–95 1995–96 1996–97 1997–98 1998–99 1999–2000 2000–01 2001–02 2002–03 2003–04 2004–05 2005–06 Industry Groups Food and Food Products: Labour productivity in food products saw a very high rate of fluctuation during the entire period. Therefore, the growth trend is not significant in both the pre-liberalised and liberalised periods. Nevertheless, the aggregate growth trend shows a marginal rate of growth at 1.92% per annum. Capital productivity in food products also shows negative growth during the entire period. But capital accumulation in it has consistently risen. The accumulation rate was high in the pre-liberalised period (11.29% per annum) and moderate during the liberalised period (5.02% per annum), making the overall trend growth rate 7.14% per annum. Paper and Paper Products: Labour productivity in paper and paper products saw a high rate of fluctuation till the late 1990s. However, from 2002–03, it has been rising steadily. Due to the high fluctuation in the 1980s and 1990s, the trend growth does not show any significant growth. However, during the entire period, labour productivity on an average grew at 2.43% per annum. Like all other industries, productivity of capital went down substantially. The group has, however, witnessed the maximum capital accumulation compared to the other groups of industries. During the entire period, the capital–labour ratio grew on an average of 13.31% per annum. Capital accumulation gathered momentum from 1997–98 and has continued to grow fast, with minor fluctuations. Chemical and Chemical Products: Chemical and chemical products witnessed a substantial fall in both labour and capital productivity. Among the five major groups of industries, APRIL 11, 2015 vol l no 15 EPW Economic & Political Weekly SPECIAL ARTICLE the fall in capital productivity was highest in this group. However, like all other industries, the capital–labour ratio has grown steadily. the pre-liberalised period. Capital productivity in this group has declined drastically. However, capital accumulation has grown steadily, as in all the other groups. Table 9: Growth of Labour Productivity, Capital Productivity, and Capital Intensity in Aggregate Manufacturing and Five Major Groups of Industries in Odisha Periods APL 1981–82– 1990–91 1991–92– 2005–06 1981–82– 2005–06 2.12 (0.74) –2.66 (–1.19) Food Products APK K/L Paper and Paper Products APL APK K/L Chemical and Chemical Products APL APK K/L –8.24* 11.29* 5.55 –12.28* 19.84* 13.54 (–4.14) (7.25) (1.81) (–4.97) (10.65) (1.84) Basic Metal and Alloys APL APK K/L Aggregate Manufacturing Sector APL APK K/L –1.09 16.42* 5.65*** –7.50** 14.11* 21.65* 3.87 17.47* 9.75** –4.3 14.80* (–0.13) (5.401) (2.05) (–2.64) (8.56) (4.40) (0.80) (11.56) (3.32) (–1.81) (14.54) –7.13* 5.02* 5.02 –6.11*** 12.19* –9.06*** –10.15** 5.87* 3.67*** –2.27 5.97* 5.97* 3.36** 2.43** 2..63 –2.47 5.34* (–3.46) (3.82) (1.76) (–2.04) (11.08) (–1.906) (–2.78) (3.74) (1.77) (–1.24) (5.53) (3.66) (2.26) (2.93) (1.36) (–1.07) (10.60) 1.92*** –4.88* 7.14* 2.43** –9.43* 13.31* 0.3 (1.89) (–5.64) (12.09) (2.16) (–8.13) (23.27) (0.13) –4.88** 7.47* 3.77* –4.40* 8.44* 7.90* 0.7 7.04* 1.31 –6.29* 8.11* (–2.62) (8.89) (4.53) (–5.38) (14.56) (6.94) (0.73) (9.15) (1.41) (–6.46) (16.95) Table 10: Translog Index of Total Factor Productivity Growth in Selected Industry Groups Year Non-metallic Mineral Products APL APK K/L Organised Food Paper and Chemical and Non-metallic Basic Manufacturing Products Paper Chemical Mineral Metal and Sector Products Products Products Alloys 1981–82 100.0 100 100 100 100 100 1982–83 112.9 107.57 66.02 53.32 118.14 94.71 1983–84 89.5 157.4 146.56 12.21 59.75 142.62 1984–85 60.1 156.12 79.44 114.39 79.82 57.05 1985–86 75.8 103.74 62.37 84.84 129.26 91.76 1986–87 78.9 88.44 65.26 86.79 96.56 172.55 1987–88 59.3 106.3 66.98 108.3 92.94 147.24 1988–89 89.7 101.83 78.59 141.14 85.95 277.86 285.97 1989–90 103.1 80.82 69.93 137.5 64.7 1990–91 87.8 89.68 59.19 195.78 91.64 331.81 1991–92 79.4 113 61.56 210.56 106.33 190.58 1992–93 73.8 90.52 46.36 165.88 87.74 219.37 1993–94 31.6 180.26 42.67 148.95 52.24 188.44 1994–95 30.3 87.04 55.5 153.78 56.65 212.75 1995–96 32.7 114.33 65.35 214.89 64.3 203.43 1996–97 42.7 159.73 37.22 140.02 59.72 144.87 1997–98 45.1 167.96 38.26 60.88 83.11 150.96 1998–99 29.5 87.07 12.37 184.64 108.03 248.57 1999–2000 37.6 78.39 42.55 65.09 114.32 296.24 2000–01 32.3 88.61 66.89 130.33 85.76 244.78 2001–02 27.2 58.42 77.21 144.6 41.96 162.42 2002–03 35.6 84.77 70.01 158.87 61.02 273.12 2003–04 37.6 73.78 80.15 126.83 64.92 258.75 2004–05 64.7 36.34 46.37 75.53 72.36 420.77 82.96 103.17 145.34 93.34 319.93 2005–06 58.4 Trend rate of growth 1981–82 to 1990–91 –1.09 (–.438) 1991–92 to 2005–06 –1.00 (–.452) 1981–82 to 2005–06 –4.30* (–4.637) –3.82 –4.69 (–1.784) (–1.761) –5.64** 3.46 (–2.900) (1.160) –2.27** –1.88 (–2.640) (–1.507) 16.18*** (2.068) 4.19 (.821) 5.97** (2.764) –1.78 16.65* (–.673) (3.848) –0.30 4.08** (–.180) (2.775) 1.29*** 4.39* (–1.714) (4.396) * Represents significance at the 1% level, ** represents significance at the 5% level, *** represents significance at the 10% level. Source: Own computation. Non-metallic Mineral Products: Labour productivity in nonmetallic mineral products grew more than three times during the period of study. Productivity entered a high-growth trajectory from 1997–98 with a slight slowdown during 2000–01 and 2001–02. On an average, however, labour productivity has grown at a slower pace in the liberalised period compared to Economic & Political Weekly EPW APRIL 11, 2015 vol l no 15 Basic Metal and Alloys Industry: The maximum labour productivity growth was in the basic metal and alloys group. Labour productivity grew steadily in the 1980s and 1990s. But it embarked on a path of higher growth from 1998–99. The slowdown of labour productivity in the early 1990s pulled down the trend growth rate in the liberalised period to 5.97% from 21.65% in the pre-liberalised period. Capital productivity did not show any trend during the pre-liberalised period, but was positive in the liberalised period. Capital accumulation grew steadily, but the rate of capital accumulation was higher in the pre-liberalised than the liberalised period. A large part of the output growth in modern economies is because of the adoption of superior technology. Therefore, apart from measuring labour productivity, capital productivity, and the capital–labour ratio, it is pertinent to examine the trend of technological growth in the organised manufacturing sector in Odisha as well as in the five major groups of industries. Table 10 reports the translog index of growth of total factor productivity in aggregate organised manufacturing and the five selected groups of industries. Aggregate organised manufacturing witnessed negative TFP growth during the period of our study. Food products, paper and paper products, and non-metallic mineral products also witnessed negative TFP growth between 1981–82 and 2005–06. But chemical and chemical products and basic metal and alloys recorded positive growth during the entire period. The TFP indices for basic metal and alloys show higher growth rates than those for chemical and chemical products. 5 Environmental and Social Concerns of Industrialisation The rapid expansion of the manufacturing sector driven by mineral-based industries has undoubtedly raised the aggregate output and income of the state. However, questions arise over whether the rise in manufacturing output will translate into welfare for the people of the state. Given that most of the industries have chosen to adopt capital-intensive methods of production, the rise in industrial output does not proportionately increase the employment opportunities of the people. There are many instances of violation of environmental legislations by manufacturing firms. For example, Bhusan Steel was slapped with a case in a district court in Dhenkanal for 77 SPECIAL ARTICLE undertaking an expansion without the necessary approvals (Kumar 2012). There are numerous instances of violation of environmental regulations by firms across the state. This has increased pollution levels in the industrial towns of the state. For assessing the pollution of air, water and land in the major industrial clusters in India, the Central Pollution Control Board (CPCB) has a Comprehensive Environmental Pollution Index (CEPI). In its report published in 2009, the CPCB ranked the Angul–Talcher industrial cluster, which is a mineral-based industrial town, seventh among 88 industrial clusters in the country. Ibvaley ranked 28, Jharsuguda 33 and Paradeep 44 (CPCB 2009). The local people have frequently opposed industrial projects, which have often led to the forced acquisition of private and public land, degradation of natural resources, and pollution of the environment. Acquisition of common property resources (CPR) such as forest or grazing lands, village ponds, and mountains threaten the livelihood of the Adivasis residing in these places. Industrial projects that acquire or degrade such CPRs seldom compensate the local people for their loss of livelihood. In examining the environmental performance of public and private mining firms, Das (2013) has pointed out that both public and private mining firms have violated environmental standards. Similarly, in examining the compensation paid by public and private mining firms, he has pointed out that households who surrendered land to these firms were unhappy with the compensation paid to them. Therefore, while going for industry-led economic growth, the state government has to strengthen the regulatory and enforcement mechanism for protecting the environment. Moreover, adequate steps should be taken for redistributing the benefits of industrialisation to all sections of society. 6 Conclusions From early this century, Odisha’s economy has been on a high growth path and this raises optimism about raising incomes and employment in the state. The rich mineral resources of the state and promotional efforts by state governments have attracted entrepreneurs to set up major industries in the steel, cement, power, alumina and aluminium, and chemical and petrochemical sectors, which has resulted in industry showing a rising trend from 2002–03. This is reflected in the growing share of the industry sector in the GSDP. The secondary sector contributed only 24% to the GSDP in 1980–81, but its share went up to 38% in 2007–08, before declining to 33% in 2012–13. The contribution of the three sectors of economy—agriculture and allied activities, industry, and services—to GSDP were 50%, 24% and 26%, respectively in 1980–81. This changed drastically to 17%, 33% and 50%, respectively by 2012–13. We observed that the growth of the industry sector can be classified into two phases—from 1980–81 to 2oo1–02, and from 2002–03 to 2012–13. The aggregate industry sector recorded a TGR of 5.1% in the first phase and 9.3% in the second phase. The high growth in the second phase was driven by ADVERTISEMENTS APPOINTMENTS/PROGRAMMES/ANNOUNCEMENTS Subscribe to the Print edition + Digital Archives When you subscribe to the Print + Digital Archives, you get... t 50 issues of the print edition every year delivered to your door t All special and review issues t Archival access on the website for all content published since 1949 to date (including the Economic Weekly) t Web Exclusives t Featured themes – articles on contemporary issues from our archives t And a host of other features on www.epw.in To subscribe, visit: www.epw.in/subscribe.html Attractive subscription rates are available for students, individuals and institutions. Postal address: Economic and Political Weekly, 320-321, A to Z Industrial Estate, GK Marg, Lower Parel, Mumbai 400 013, India. Tel: +91-22-40638282 | Email: circulation@epw.in 78 APRIL 11, 2015 vol l no 15 EPW Economic & Political Weekly SPECIAL ARTICLE registered manufacturing, which recorded the highest TGR of 17%. Within the industry sector, except M&Q, all the other subsectors—registered manufacturing, unregistered manufacturing, EGWS, and construction—had higher growth in the second phase. Within industry, the share of organised manufacturing has gone up substantially to surpass the share of construction. Construction was the major contributor to industrial output in the 1980s with a share of 49%. However, it declined steadily in subsequent decades. Registered manufacturing was the major contributor to industrial output in 2010–13 with an average share of 39.3%, followed by construction (26.3%), M&Q (19.1%), EGWS (8.9%), and unregistered manufacturing (6.4%). Organised manufacturing output was largely driven by basic metal and alloys, followed by food products, chemical and chemical products, and non-metallic mineral products. The fast growth of the organised manufacturing sector in Odisha has improved the state’s position on the country’s industrial map. Odisha’s share in total registered manufacturing output of the country declined from 1.77% in 1980–81 to 1.43% in 2000–01 before rising to 2% in 2011–12. In net value addition, Odisha’s share went up steadily from 1.59% in 1980–81 to 2.18% in 2011–12. In fi xed capital, it went up substantially from 2.52% in 1980–81 to 8.25% in 2011–12. The state’s share in productive capital and invested capital of the country has increased substantially. As more investments have come to Odisha in recent years, it is expected that Notes 1 2 The bulk of the assets existing in the benchmark year, 1981–82 (in terms of net book value), would have been bought in the previous 10 years. This is the rationale for using the average value of the deflator for the previous 10 years for making price adjustments. It may be pointed out that assets acquired in the previous five years would constitute a much bigger part of the net book value of assets than the assets acquired between the fifth and 10th year. Thus the use of a simple average of the fi xed assets price series for the previous 10 years for making price correction introduces an upward bias in the benchmark estimate of the capital stock. It should be noted, however, that the depreciation rate used by firms for accounting purposes (allowed by the income tax authorities) is much higher than the true depreciation (taken here as 5%). The implication is that the reported capital stock in the ASI understates the true value of net fixed assets at historical prices. These two bias tend to cancel out each other to some extent. Let Bt denote the book value of fixed assets in year t and Dt the reported depreciation in that year. Then, the gross investment in year t, denoted by It may be obtained as It = Bt – Bt-1 + Dt. It should be noted here that the ASI reports book value of fixed assets net of cumulative depreciation. References Banga, Rashmi and Bishwanath Goldar (2004): “Contribution of Services to Output Growth and Productivity in Indian Manufacturing: Pre And Post Reforms,” Working Paper No 139, Indian Council for Research on International Economic Relations, New Delhi. Economic & Political Weekly EPW APRIL 11, 2015 output will increase when the new firms start full-fledged production. Labour productivity in the aggregate industry was up and down in the 1980s and 1990s. However, from 2002–03 onwards, it has increased consistently. The trend growth estimates for labour productivity in the pre-liberalised period show a 10% growth per annum. However, the labour productivity growth trend does not show significant growth in the liberalised period. This result needs to be read cautiously and the turnaround of labour productivity from the early 2000s should not be ignored. Capital productivity, on the other hand, fell during the entire period of study. The rate of fall in capital productivity was as high as 6% per annum. The maximum growth was observed in the capital–labour ratio of aggregate industry. Labour productivity and capital accumulation in most industries show a positive trend, barring chemical and chemical products, which experienced a fall in labour productivity and a rise in capital accumulation. Labour productivity grew the most in basic metal and alloys. Maximum capital accumulation was recorded in paper and paper products. Capital productivity in most industries shows a negative trend. The maximum fall was in chemical and chemical products. 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