A step backward for Odisha’s economy

The Bharatiya Janata Party (BJP) government in Odisha presented the State Budget for 2025-26 in February, with a total Budget size of ₹2,90,000 crore. The Budget document underlines the government’s vision for ‘Samruddha Odisha’ by 2036, aiming to become a $500 billion economy. However, the BJP government’s fiscal performance over the last nine months has been unimpressive, giving an impression that its economic goals are like pie in the sky without an achievable action plan.

According to the recent figures presented in the State Legislative Assembly, the government’s spending in almost all sectors has been noticeably low. By January end, expenditure for the 2024-25 fiscal year remained below 50% in 16 departments, including key sectors such as Energy, Panchayati Raj and Drinking Water, Transport, and Housing and Urban Development. Other important departments, such as Mission Shakti, Disaster Management, and Sports and Youth Affairs, could not spend even 30% of their allocated funds, according to government data.

While ‘Odia Asmita’ (cultivating on the narrative that Odia culture and self-pride of Odias were under threat during the previous government) was a major election campaign for the BJP in 2024, the spending figure for the Odia Language Literature & Culture department stood at only 27.1% during this period. Such low spending indicates a lethargic governance in the State. Further, the government’s failure to publish the monthly fiscal report since coming to power raises concerns about transparency.

The borrowing figure under the BJP government in Odisha has gone up significantly. Two Budgets, presented during the BJP’s nine months stint, estimate borrowing at over ₹80,000 crore (₹42,495 crore budgeted and ₹34,495 crore revised estimate for 2024-25, and ₹46,400 crore budgeted this year). This marks a shift in policy adopted by the previous Biju Janata Dal (BJD) government. The State’s fiscal health underwent significant reforms during 2020-24, during which the BJD governed the State. As per the Reserve Bank of India’s ‘State Finances: A Study of Budgets’ report, Odisha once had one of the highest debt-to-GSDP ratios at the beginning of the millennium, but by 2023-24, had the lowest in the country.

The State’s disciplined borrowing pattern also led to a significant reduction in interest payments on the debt. Although the current borrowing is well under the target set by the Fiscal Responsibility and Budget Management Act, 2003, the growing debt trend is still problematic, not just for the government’s poor spending record, but also for the surge in borrowing from open market (37% of the overall borrowing in this year’s Budget).

The 2025-26 Budget’s focus on capital expenditure — projected at 6.1% of GSDP — is a welcome move. It is important to see how it translates into job creation. The government has focused on agriculture and allied sectors, with this year’s allocation showing a substantial 12% increase compared to last year’s. Road connectivity has also been given a big push with a pledge to build 75,000 kilometres of roads over the next four years.

However, other key departments have seen limited growth in allocations. For example, the micro, small, and medium enterprises sector, which employs the second-highest number of people in Odisha, has received only a minor Budget increase. Prioritising this sector is crucial to addressing the State’s high unemployment rate. Further, some of the critical schemes for the people at the bottom of the pyramid, such as the Pradhan Mantri Awas Yojana (PMAY) that provides houses for the marginalised, have received a big Budget cut. Despite the State government’s ambitious target for the PMAY, the allocation has been reduced significantly, from ₹6,090 crore last year to ₹4,500 crore this year. In this Budget, the government has also failed to explain why it has moved away from Odisha’s reformist tradition of presenting thematic Budgets, such as gender and climate Budgets.

While presenting the Budget, Chief Minister Mohan Charan Majhi stressed: “Samruddhi is more than just economic growth; it signifies job creation, inclusive development, and equitable opportunities for every citizen.”

The government needs to walk the talk on this and be more proactive in its economic management if it is committed to its 2036 goal.

Subhankar Nayak is a policy researcher. X: @subhankarnayak