Poor nations that discover large quantities of natural resources, such as minerals or petroleum, within their borders often find their economic development hindered, rather than driven, by newly abundant extractive commodities. Various situations, from inefficient management to corruption and territorial disputes, can give rise to this “curse.” In India the Western states are relatively prosperous thanks to stable state governments since independence. In many western states, the presence of a traditional mercantile class since antiquity has helped create an atmosphere of thriving economic activity. Moreover, liberalization of economy helped those who were ready to adjust with times: new expertise, better production techniques & the boom of economy trickled down on a vast segment of mercantile class of western India. On the contrary, the Eastern half has had a hard time dealing with changing conditions over the past seven decades. Further, Eastern India suffered the most under the British Raj. Post independence, freight equalization policy of the union government through a perverse subsidisation of transport to make iron ore or coal available at more or less the same price across the country, killed the natural comparative advantage these states had in the setting up of industries. Although the policy was scrapped in the early 1990s, the damage from it was long-lasting. In an exclusive interview with Nageshwar Patnaik, economist and former director of Nabakrushna Choudhry Center for Development Studies, Dr Rajkishore Panda underscores the need for prioritization of development of human skill for the eastern Indian states to grow rapidly.

NP – Freight Equalization is said to have impacted the Eastern India adversely. Why the resource rich Eastern Indian states remain poorest in the country?

RKP – Freight Equalization was introduced in 1952 and continued till 1993. It was adopted by the Govt. of India to facilitate equal growth of industry all over the country. To implement the freight equalization policy the Central Govt. subsidized transportation of metal from the source to destination. The freight equalization policy did not help in establishing manufacturing industries in the Eastern Indian states including Odisha. Instead it took away the competitive advantage of these states. It drained away mineral resources of these states. Since this policy continued for a pretty long time in the post-independence period we can not deny its adverse effect on these state economies.

NP – Economists have found a strong correlation between natural resource abundance and poor economic growth. Does it hold true for Eastern India in general and Odisha in particular?

RKP – This is a Puzzle. Natural resources positively influence economic growth. But there are countries such as Japan, Singapore having minimal natural resources but have achieved higher growth. We are very much aware of “Learning by Doing”. This urge/incentive is lost with the people of the regions/ states having abundance in natural resources. More over, mining being a higher productive enterprise, it attracts more investment to get higher return and thus leads to rent seeking among powerful groups in the society. Public welfare is given less attention.

NP – States follow populist policies rather than pro-development policies. People are happy after getting two meals a day. Do you expect these kinds of people to build a wealthy state?

RKP – No. Populist policies are myopic in character. The State Governments are increasingly spending on various unproductive activities to garner public support for their existence ignoring the development need of the states. It is imperative that from welfare point of view government support is needed to certain sections of society. However utmost care needs to be taken to identify the needy and such support should be temporary and once for all. There should be strict monitoring to look into the end use of the support given by the Government. Indiscriminate financial support given under populist programmes does not built human asset to be used in the future development of the state.

NP – The Naxal problem in Eastern Indian states is a direct consequence of its endemic poverty, neglect and administrative apathy towards the masses. How has Naxal menace affected growth of the Eastern Indian states?

RKP – Rise of Naxalism is due to many factors. Most important being utter neglect and apathy by the administration about their basic living conditions. Naxal-hit areas are mostly tribal areas where there is higher incidence of poverty, illiteracy and dearth of basic amenities of life. Rise of Naxalism cannot be taken as the reason for low growth in Eastern India. Rather the reverse is considered to be true.

NP – We have countries which are resource rich and developed. Generally speaking natural resources help a country / state to get developed. What are other factors which ensure development?

RKP – Countries endowed with natural resources are found rich. However, in their process of development, human resources have played the catalystic role. Those countries took enough measures in developing human resources. In the present development context our states have not taken enough care for developing human resources. In contrast in recent years some retrograde steps have been taken in the education sector, particularly in higher education. Development of human skill needs to be prioritized in the development policy. Our youth population which constitutes nearly 50 percent of total population needs to be technically empowered.

NP – The Smera Rating Report and consequently the Indo-Asean Trade speak of importance of Eastern states for developing trade relations. Modi Government should try developing Eastern states as a conduit to South-East Asia?

RKP – Smera is an external credit rating agency approved by RBI. It ranks the micro, small and medium enterprises eligible to get credit assistance. During 1960s Biju Patnaik, the former Chief Minister took initiative in setting up Industries at Panchayat Level. He could visualize the pressure on land to come in future and thus thought of developing non-farm activities to improve the earnings of the farming community. Not much development has taken place in expanding non-farm sector in rural areas in the state. We have to think afresh in this context.

NP – The centre should put equal emphasis on developing industrial corridor connecting Eastern states. The Kolkata Metropolitan region too can act as a magnet for attracting the investment. The concerned state governments should also take initiative and enterprise. Is it right time to expect this happening?

RKP – The state suffers from high incidence of poverty and low development due mostly to infrastructural bottlenecks. However, the state being strategically placed between south and north and with abundant natural resources, creation of industrial corridor will fetch enough investment in developing manufacturing activities.

NP – The mineral rich states of Odisha, Chhatisgarh, Jharkhand have not been able to take advantage of metal boom. Mining scam has also affected development of these states. How should these states utilize resources?

RKP – The international market today suffers from too much uncertainty. There are frequent ups and downs in the international metal market. The state lacks in manufacturing industries. The latest Economic Survey reveals falling contribution of industry to State’s GSDP from 34.12 percent in 2004-05 to 33.08 percent in 2013-14. Within industry sector, manufacturing’s share is hardly 13 percent. Thus, instead of depending on exporting the raw mineral resources , we have to emphasize on developing manufacturing to efficient use of mineral resources. The state has to provide necessary incentive and support in transparent and ease way. The development of the state depends on extent of development of its manufacturing activities.