Economists have often emphasised on the role of the state governments to help correct the market in their region
The Eastern region is often described as one of the paradoxes of India, because it is perceived as the land of the poor with rich resources. Hence, it is necessary that this part of India receives government incentives – not just central, but also on the state level - for businesses to flourish in order to remove or substantially reduce the barrier of poverty.
While the central government has come out with several anti-poverty measures which included Integrated Rural Development Programme, Jawahar Rozgar Yojana /Jawahar Gram Samriddhi Yojana (JGSY), Employment Assurance Scheme, Food for Work Programme, Sampoorna Gramin Rozgar Yojana and Pradhan Mantri Gramin Awaas Yojana (PMGAY), among others, the story of economic development and poverty varies in each state. This is where state governments are expected to step up and complement the central government’s endeavour to eradicate poverty across the country.
Economists have often emphasised on the role of the state governments to help correct the market in their region. They are expected to adopt a two-pronged strategy – one, which increases the region’s capability through policies, education, health, infrastructure, protection of the vulnerable sections of the society as well as the environment; and secondly, to boost its institutional capacity by providing incentives to public officials to motivate them to perform better. The performance of the state government is also judged on factors like good governance, sustainable development and equitable development in the current context.
According to a report by KPMG, West Bengal, Bihar, Odisha, Jharkhand and Assam (in the north-east) are expected to contribute at least 25 percent of the country’s GDP by 2035. Given these findings, it’s not only important to incentivise industries, but necessary that state governments identify the extremely poor and help them out of poverty through sustainable measures.
This will ensure that benefits of economic growth in the region will percolate to the disadvantaged by way of more employment opportunities, greater productivity and higher wages that will help the economically-disadvantaged to rise above poverty line. State government must also focus on education, health and skilling which primarily come under their jurisdiction. These factors along with digital literacy and training will empower the marginalised section of the society, especially women.
What The Eastern Region Has To Offer
The eastern region covers the states of Bihar, Chhattisgarh, Jharkhand, Orissa and West Bengal.Understandably, an increasing level of industrialisation in these states can lead to lower rates of unemployment and impoverishment. The key industries that have the potential to drive its economy are jute, leather, tea, locomotives, steel and mining to name a few. However, as per Niti Aayog's Multidimensional Poverty Index (MPI), 51.91% of the population in Bihar and 42.16% in Jharkhand are poor.
Notwithstanding, Bihar’s economic growth can spur poverty reduction if the state government removes constraints on agricultural growth. It will impact Bihar’s food processing and agro-based industry which is expected to be a major growth driver for the local economy, creating large-scale employment in rural areas and high returns for the farmers.
Similarly, agriculture and services sectors are the high-growth zones in Chhattisgarh. It is also a leading producer of minerals such as coal, iron ore and dolomite.
In the industrial policy, the state government has created a land bank for mega industries, special packages for the deprived sections of the society, revival of the sick and closed industries among other initiatives. The emphasis is to encourage job creation through industrial growth with large private investments, as well as incentives for MSMEs, which is among the largest employment generators.
Next, Odisha also enjoys a lion’s share of the country's mineral reserves. Notably, the government is encouraging SMEs through incentives, which is the best way to earn additional income as well as develop entrepreneurship quality of the educated poor.
Although a poor state, Jharkhand is one of the richest mineral zones in the world. Almost 75 percent of its population depends on agriculture or agriculture-related occupations. A strong emphasis, therefore, is being placed on MSMEs here. The government intends to provide the best incentives, exemptions and concessions for industrial units to come up in the state.
In West Bengal, MSMEs are considered to be the driving force behind the state’s industrial growth and have been highly incentivised by the government. The state has had successful instances of infrastructure development leading to lower poverty. The building a national highway (NH2), reportedly, led to a reduction in the proportion of the population living below the poverty-line in the surrounding areas, and also positively affected the wage rates available to individuals residing in villages close to the highway.
Tourism can develop as a growth engine sector for the states in eastern India as it is essentially rich in natural beauty and heritage destinations. Given the burgeoning service sector, it can increase the per capita income of the region thereby raising the quality of life.
Incentives That Can Help The Eastern Region
It must be remembered that India is more focussed on a labour-intensive path of economic growth. Therefore, fiscal and monetary measures that provide incentives for using labour-intensive techniques are best suited to alleviate poverty.
As per reports of Montek Ahluwalia commission (former member of Planning Commission), agricultural growth and poverty are inversely related; higher agricultural growth leads to a lower poverty ratio. Thus, PLI schemes and export incentives for agro-based industries will make economic growth more pro-poor.
Furthermore, there is a need for a better understanding of the rural non-farm sector. These areas are of special importance for poverty reduction and growth of non-farm employment opportunities created in areas of sales, marketing, transportation, handicrafts, dairy farming, forestry, food processing and other agricultural products, repair workshops etc.
Incentives can include tax abatements, tax revenue sharing, grants, infrastructure assistance, no or low-interest financing, free land, tax credits and other financial resources. The government must focus on companies that will drive large-scale employment.
The state governments in the region have already started to focus on improving the waterway connectivity, especially in the north-east states which have resulted in access to Mongla and Chittagong ports. However, they must continue to develop it as it will not only improve connectivity in the region, but open up more avenues to generate revenues as well as jobs.
The Road Ahead
Notably, the eradication of poverty has been an integral component of the strategy for economic development in India. High poverty levels are tantamount to poor quality of life, deprivation, malnutrition, illiteracy and low human resource development.
Significantly, the first of the 17 UN Sustainable Development Goals (UN SDGs) calls for an end to poverty by 2030. Under the sustainable development goals, India aims to decrease, at least by half, the proportion of people of all ages living in poverty. It includes not just income poverty, but also multidimensional poverty such as education, infrastructure etc.
(The writer is the Secretary General of ASSOCHAM)