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International Journal of Management (IJM) Volume 11, Issue 9, September 2020, pp. 516-527, Article ID: IJM_11_09_047

Available online at http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=11&IType=9

ISSN Print: 0976-6502 and ISSN Online: 0976-6510

DOI: 10.34218/IJM.11.9.2020.047

© IAEME Publication Scopus Indexed

VOLUME AND COMPOSITION OF PUBLIC

EXPENDITURE ON SUBSIDIES: SUBSIDISING

SOCIAL AND ECONOMIC SERVICES IN

ODISHA

Umakanta Tripathy

Lecturer in Economics, Department of Economics,

Bapujee College, Chhendipada, Odisha, India

Pragnya Laxmi Padhi

Lecturer in Economics, Department of Economics,

Bhima Bhoi College, Rairakhol, Odisha, India

ABSTRACT

In any welfare state subsidies are provided to maintain income support for a

minimum subsistence level by providing basic necessity to the low income groups. The

aim is to stimulate economic growth by sectoral development for safeguard of

domestic supply and provision of accessing basic living conditions. Government

intervention is usually motivated people socially and economically that involve the

reduction of poverty, enhancing employment, economic growth and providing

infrastructures access. This study focuses on disaggregated level of government

expenditures on subsidies in social services and economic services. This research

paper attempts to examine the volume and composition of government subsidies on the

welfare of the society of Odisha over the period 2002-03 to 2016-17. The paper

focuses on the volume and functional composition of total government expenditure on

subsidy and its proportion of GSDP, subsidy in social and economic services sector in

Odisha. It measures the significance of growth performance of the state’s public

expenditure on subsidy by using Semi log model of Regression analysis. Given such a

scenario, the study has conformed to the alternative hypothesis that government

subsidy expenditure on different services in Odisha are in the differential growth rate

of Odisha state finances over the study period.

JEL Classification Code: E60, H25, H53, I31, I32, O47

Key words: government expenditure, economic growth, finance, subsidies, welfare,

poverty.

Volume and Composition of Public Expenditure on Subsidies: Subsidising Social and Economic

Services in Odisha


Cite this Article: Umakanta Tripathy and Pragnya Laxmi Padhi, Volume and

Composition of Public Expenditure on Subsidies: Subsidising Social and Economic

Services in Odisha, International Journal of Management, 11(9), 2020, pp. 516-527.

http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=11&IType=9

1. INTRODUCTION

Subsidies are provided to achieve certain goals that are considered to improve welfare in the

society such as providing basic goods and services for low-income groups and maintaining

the level of income. Budgetary support to financial institutions, inadequate returns on

investments and poor recovery of user charges from social and economic services provided

by the Government fall in the category of implicit subsidies as social objectives of subsidy

involve the reduction of poverty, protection of poor and economically vulnerable population

groups where as economic objectives of subsidy stands for stimulating economic growth,

enhancing employment, investments and providing infrastructures access. Subsidies are

delivered through various mechanisms such as Government provides income support for

basic living needs such as water, food, energy. Public subsidies are introduced to achieve

certain policy goals like reduction of poverty, support low income groups by safeguarding

their interest and provision of access to basic living conditions. However, the efficiency of

delivery mechanism is critical to improving the incidence profile of subsidies towards the

intended beneficiaries (Srivastava, et al, 2003). Governments in developing countries consider

subsidies necessary to secure food supply. In case of Odisha it is mostly concentrated on food

subsidy. The main beneficiaries of the food subsidies in the state are the ration card holders

under different categories. It is therefore interesting to find out how these subsidies are

targeted in the state.

2. REVIEW OF LITERATURE

Public subsidies are introduced to achieve certain policy goals of the welfare State. The policy

aims underlying many subsidy policies are stimulating economic growth by sectoral

development, protection of employment and investment, safeguarding domestic supply,

reduction of poverty and provision of basic living conditions. There are many studies relating

to subsidies which include social services and economic services. The government

expenditure on subsidies is classified into essential or less essential services (Mundle and

Rao, 1991; Tiwari, 1996; Srivastava and Sen, 1997; Srivastava and Nath, 2001), subsidies on

public good and non public goods towards certain sectors (Mundle and Rao, 1991 and Tiwari,

1996). Srivastava et al. (2003) studied various issues related to subsiding social and economic

Services of State and Central Governments in India. Central government subsidies have

grown over the years. The economic services subsidies are nearly five and half times as large

as those of the social services. On the other hand State budgetary subsidies have fallen. They

recommended that subsidy reforms should aim at limiting their volume relative to revenue

receipts and food subsidies should be delinked from policies to support agricultural incomes.

Subsidy reforms should focus on selected sectors in the first instance to obtain maximum

results. Kandu (1996) observed that public spending on education benefited males more than

females in 1999-2000 in India and all its states because households choose to enroll males

more than females at all levels of education, so, despite higher public spending, is not

properly targeted to the regions of higher gender disparities. The result is failure of public

spending in reducing gender disparity in India. The recommendation is that with increase in

level of per capita expenditure, the gain of subsidy for female also increases. Cusack and

Fuchs (2002) split government expenditure into five components. These are investment,

consumption expenditure, subsidies, social transfers and interest payments. Government

Umakanta Tripathy and Pragnya Laxmi Padhi


expenditure was further disaggregated into government consumption, transfers and subsidies

(Afxentiou and Serletis, 1996). The government expenditure on food subsidy has not been

considered because of ambiguity in fulfillment of its target objectives (Mooij and Dev, 2004).

The relationship between group size and political power are the two key elements for

explaining inefficient forms of redistributive public subsidies (Acemoglu and Robinson,

2001). Swinnen et al. (2000) and de Gorter and Swinnen (1998) examine the distributional

effects of both subsidies and research investment. Agricultural research benefits agriculture as

well as non agriculture, but the benefits for one sector may be larger than to the other, creates

inequality between societal groups. This induces greater subsidy spending by governments

seeking to maximize political support. On the expenditure side, better targeting of social

schemes and rationalization of subsides is required to make an impact. Government

expenditure is an effective instrument for reducing poverty and narrowing structural

inequality (Lopez et al., 2010). Shetty (1990) opined that the magnitude and incidence of

subsidies has a lot of burden on government finances which are becoming unbearable

resulting into declining public investment in agriculture and irrigation. Shikha (1992) used

cross-section regression to analyse the importance of different factors determine the allocation

of food subsidies in India for two different time point, 1970 and 1983. It is only for former

time point that she found statistically significant relationship in between PDS quantities

distributed and well-accepted criteria. Rao and Mundle (1992), undertaken a detailed analysis

of subsidies at the State level at two point of time 1977-78 and 1987-88. They concludes that

the rapid growth of expenditures on social services and declining rates of cost recovery for

economic services both have contributed to the rapid growth of subsidies. Price subsidies,

investment on irrigation certainly promotes income distribution and growth (Ratha and

Sharma, 1992). Karnik and Lalwani (1996) examined the influence of interest groups in

Indian agriculture and observed that there is reasonable evidence of interest group influences

in the framing of government policies with respect to supply of subsidies and agricultural

public goods. Srivastava and Rao (2002) opined that budget subsidies in India have sharply

risen in the late nineties. These have grown because of excessive participation of governments

in the provision of goods and services in the critical sector of education and health. Subsidies

for utility services are widespread in the water supply, sanitation, and electricity sectors

(Komives et al., 2006). The composition of public expenditure also differs between rich and

poor countries. The expenditure on schooling, infrastructure and R & D subsidies incurred

typically amount to less than one-fifth of public expenditure in OECD countries, while they

typically amount to more than half of public spending in less developed countries (Folster and

Henrekson, 1999).

3. RESEARCH METHODOLOGY

The area of study proposed here is the volume and composition of subsidy in public

expenditure of state finances in Odisha. The more focused area is the comparison between

functional composition of subsidy in social sectors and economic sectors in Odisha. The

methodology that has been adopted includes the collection of secondary data from sources

like research publication, different economic surveys and periodicals and other research

techniques. The time series quantitative data from 2002-03 to 2016-17 has taken for meeting

the objectives and testing the hypothesis.

3.1. Research Objectives

The main objectives of the study are as follows.

(A)To study the volume and composition of subsidy in total public expenditure of Odisha

State finances in terms of social and economic composition.


Services in Odisha


(B)To analyze the different composition of total public expenditure on subsidy in Odisha

State finances as % of GSDP.

(C)To find out the growth rate of composition of total public expenditure on subsidy and its

different components by using Semi log Regression Model.

3.2. Research Indicators

For analysing the volume and composition of public expenditure on subsidy in Odisha state

finances, the analysis will be carried out on the basis of two important parts. These are (A)

Social Classification of total Public Expenditure on subsidy and (B) Economic composition of

total public expenditure on subsidy. Further these two parts are divided into the following

major research indicators. The indicators are 1.Welfare of SCs, STs & OBCs, 2.Labour &

labour welfare, 3.Social security & welfare and 4.relief account of natural calamities,

5.Agriculture & allied activities, 6.Crop husbandry, 7.Food subsidy, 8.Cooperation,

9.Fishries, 10.Irrigation & flood control, 11.Energy, 12.Industry & minerals, and

13.Transport.

3.3. Research Hypothesis

The following research hypothesis is formulated on the basis of above objectives.

Ho: There is no difference of growth rate among all the indicators of total public expenditure

given on subsidy.

H1: There is the difference of growth rate among all the indicators of total public expenditure

given on subsidy.

3.4. Methods of Data Collection

In the present study the volume and composition of subsidy provided by government of

Odisha and its components are analysed for the period from 2002-03 to 2016-17. Data for

studying Public expenditure subsidy of Odisha are collected from Reserve Bank of India-State

Finances: A study on Budgets, Finance accounts, Government of Odisha and Economic

survey of Odisha. The objective here is to compare the significance of subsidy in public

expenditures of the state in more detail. Total subsidy expenditure is composed of social

subsidy expenditure and economic subsidy expenditure. The major part of state government

expenditure is reflected in the total subsidy.

3.5. Statistical Models Used

3.5.1. Simple Linear Regression Model

Simple linear regression model has been used to measure and establish a functional

relationship between public expenditure changes over period of time.

Let the linear model be Yi = + X + I

Here „i‟ ranges between „1‟ to „n‟; „x‟ is the independent variable and „Yi‟ the dependent

variable. „‟ here represents the intercept (Trend value of public expenditure, when t = 0) and

„‟ the slope coefficient of independent variable (rate of change in public expenditure per

year). If „‟ is well behaved, then it is possible to estimate and. Significance of ^

is tested

by Comparing calculated„t‟ value with the tabulated„t‟ value. If calculated‟t‟ value is more

than the tabulated„t‟ value for estimated „‟, then there is a significant effect of the

independent variable on the dependent variable.



3.5.2. Semi log Model

In order to find the growth rate of the different pattern of expenditure, the semi-log regression

model is applied. Let the exponential model be Y = t I.

Here „‟ and „‟ are parameters of the model. „t‟ represents the time (in years) and is an

independent variable. Similarly, „Y‟ here representing the state finance is a dependent

variable. Growth rate = [Anti log (log)-1] x 100. The coefficient „ ‟ measures the constant

proportional and it is the relative change in „Y‟ for a given absolute change in„t‟.

4. DATA ANALYSIS AND DISCUSSION

4.1. Functional Volume and Composition of Public Expenditure on Subsidy

Table-1 and Figure-1 show the functional volume and composition of public expenditure on

subsidy in Odisha from 2002-03 to 2016-17. It is categorised into two parts i.e. Social service

and Economic service. The total expenditure on subsidy was Rs. 41.93 Crore in 2000-01 has

increased to Rs. 2078.51 Crore in 2016-17. No expenditure on subsidy is sanctioned for social

services from 2002-03 to 2004-05. In overall comparison from 2002-03 and 2016-17, the

highest amount and percentage of subsidy has given to economic services rather than social

services.

Figure 1 Functional Volume & Composition of Public Expenditure on Subsidy

Table 1 Functional Volume & Composition of Public expenditure on Subsidy (Rs. Crore & %)

Year Social Services Economic Services Total Subsidy

2002-03 0.00(0.00) 41.93(100.00) 41.93(100.00)

2003-04 0.00(0.00) 20.33(100.00) 20.33(100.00)

2004-05 0.00(0.00) 45.09(100.00) 45.09(100.00)

2005-06 1.53(1.85) 81.18(98.16) 82.70(100.00)

2006-07 34.66(20.36) 135.55(79.64) 170.20(100.00)

2007-08 13.64(9.19) 134.75(90.81) 148.39(100.00)

2008-09 62.15(8.36) 681.33(91.64) 743.48(100.00)

2009-10 60.17(5.97)) 947.48(94.03) 1007.65(100.00)

2010-11 240.55(18.36) 1069.56(81.64) 1310.11(100.00)

2011-12 458.30(26.27) 1286.19(73.73) 1744.49(100.00)

2012-13 343.27(17.59) 1607.73(82.41) 1951.00(100.00)

2013-14 46.36(2.25) 2014.64(97.75) 2061.00(100.00)

2014-15 307.25(14.81) 1767.59(85.19) 2074.84(100.00)

2015-16 746.64(28.91) 1835.59(71.09) 2582.23(100.00)

2016-17 365.41(17.58) 1713.10(82.42) 2078.51(100.00)

0

500

1000

1500

2000

2500

3000

Rs.

in C

rore

Social Services Subsidy

Economic ServicesSubsidy

Total Subsidy


Services in Odisha


4.2. Functional Volume & Composition of Public Expenditure on Subsidy as

Proportion to GSDP

Table-2 represents the functional volume and composition of public expenditure on subsidy as

proportion of GSDP (Gross State Domestic Product) from 2002-03 to 2016-17. From the

table one can easily observe that, the total expenditure as % of GSDP is highest in economic

services expenditure as compare to social services in all the study periods. The government of

Odisha has incurred 0.55 % of total GSDP which is a very less amount of subsidy for social

and economic services.

Table 2 Functional Volume & Composition of Subsidy as Proportion to GSDP

Year Social Services Economic Services Total Subsidy

2002-03 0.00 0.08 0.08

2003-04 0.00 0.03 0.03

2004-05 0.00 0.06 0.06

2005-06 0.00 0.10 0.10

2006-07 0.03 0.13 0.17

2007-08 0.01 0.10 0.11

2008-09 0.04 0.46 0.50

2009-10 0.04 0.58 0.62

2010-11 0.12 0.54 0.66

2011-12 0.20 0.56 0.76

2012-13 0.13 0.61 0.75

2013-14 0.02 0.68 0.70

2014-15 0.10 0.56 0.66

2015-16 0.23 0.55 0.78

2016-17 0.10 0.45 0.55

4.3. Functional Volume & Composition of Subsidy in Social Services

Table-3 and Figure-2 show functional volume and composition of public expenditure on

subsidy in social services in Odisha. The social service consists of welfare of SCs, STs,

OBCs, labour & labour welfare and social welfare & nutrition where the social welfare &

nutrition again categorised into social security & welfare and relief on account of natural

Calamities.

Figure 2 Functional Volume & Composition of Subsidy in Social Services

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

Rs.

in C

rore

Welfare of SC, STs & OBCs

Labour & Labour Welfare

Social Security & Welfare

Relief Account of NaturalCalamities



The expenditure shows an initial amount of Rs. 1.53 Crore (100.00%) in 2005-06 has

increased to Rs. 365.41 Crore (100.00%) in 2016-17. From 2005-06 to 2016-17, the highest

amount of expenditure was incurred in relief account of natural calamities and the lowest

amount of expenditure in social security & welfare. In an overall comparison from 2008-09

more than 90% of total expenditure on subsidy is incurred in relief account of natural

calamities.

Table 3 Functional Volume & Composition of Subsidy in Social Services (Rs. Crore & %)

Year

Welfare of

SC, STs &

OBCs

Labour &

Labour

Welfare

Social Security & Welfare

Total Subsidy

in Social

Services

Social

Security &

Welfare

Relief Account

of Natural

Calamities

2002-03 0.00 (0.00) 0.00 (0.00) 0.00 (0.00) 0.00 (0.00) 0.00 (0.00)

2003-04 0.00 (0.00) 0.00 (0.00) 0.00 (0.00) 0.00 (0.00) 0.00 (0.00)

2004-05 0.00 (0.00) 0.00 (0.00) 0.00 (0.00) 0.00 (0.00) 0.00 (0.00)

2005-06 0.23 (15.03) 0.00 (0.00) 0.15(9.80) 1.15(75.16) 1.53(100.00)

2006-07 0.19(0.55) 1.08(3.12) 0.15(0.43) 33.24(95.90) 34.66(100.00)

2007-08 2.27(16.64) 4.17(30.57) 0.65(4.77) 6.55(48.02) 13.64(100.00)

2008-09 3.14(5.05) 0.00(0.00) 0.15(0.24) 58.86(94.71) 62.15(100.00)

2009-10 2.83(4.70) 1.73(2.88) 0.00(0.00) 55.61(92.42) 60.17(100.00)

2010-11 2.42(1.01) 0.00 (0.00) 0.52(0.22) 237.61(98.78) 240.55(100.00)

2011-12 2.02(0.44) 0.00 (0.00) 0.67(0.15) 455.61(99.41) 458.30(100.00)

2012-13 1.60(0.47) 0.00 (0.00) 0.60(0.17) 341.07(99.36) 343.27(100.00)

2013-14 1.62(3.49) 0.00 (0.00) 0.60(1.29) 44.14(95.21) 46.36(100.00)

2014-15 1.62(0.53) 0.00 (0.00) 0.60(0.20) 305.03(99.28) 307.25(100.00)

2015-16 2.10(0.28) 0.00 (0.00) 1.49(0.20) 743.05(99.52) 746.64(100.00)

2016-17 2.09(0.57) 0.00 (0.00) 0.90(0.25) 362.42(99.18) 365.41(100.00)

4.4. Functional Volume & Composition of Subsidy in Economic Services


subsidy in economic services in Odisha. The composition of economic services on subsidy

has 5 parts. They are 1.Agriculture and Allied activities (It is again divided into 4 parts i.e.

crop husbandry, Food subsidy, Co-operation and fisheries), 2.Irrigation & flood control,

3.Energy, 4.Industry & Minerals (It is divided into Village & SSIs (Small scale Industries),

Other Industries and Minerals), 5.Transport. The total expenditure subsidy in economic

services for the period 2002-03 shows an amount of Rs. 41.93 Crore (100.00%) that has

Increased to the highest amount of Rs. 1713.10 Crore (100.00%) by the end of 2016-17.

Figure 3 Functional Volume & Composition of Subsidy in Economic Services

0.00

500.00

1000.00

1500.00

2000.00

2500.00

Rs.

in

Cro

re

Agriculture & AlliedActivities

Irrigation & floodcontrol

Energy

Industry & Minerals

Transport


Services in Odisha


Table 4 Functional Volume & Composition of Subsidy in Economic Services (Rs. Crore & %)

Year

Agriculture &

Allied Activities

Irrigation &

flood control Energy

Industry &

Minerals Transport

Total Economic

Subsidy

2002-03 41.80(99.69) 0.00(0.00) 0.00(0.00) 0.00(0.00) 0.13(0.31) 41.93(100.00)

2003-04 20.20(99.36) 0.00(0.00) 0.00(0.00) 0.00(0.00) 0.13(0.64) 20.33(100.00)

2004-05 44.97(99.73) 0.00(0.00) 0.00(0.00) 0.00(0.00) 0.13(0.29) 45.09(100.00)

2005-06 49.90(61.47) 18.89(23.27) 3.00(3.70) 7.79(9.60) 1.60(1.97) 81.18(100.00)

2006-07 52.36(38.63) 20.59(15.19) 27.86(20.55) 33.14(24.45) 1.60(1.18) 135.55(100.00)

2007-08 56.36(41.83) 46.27(34.34) 0.00(0.00) 30.52(22.65) 1.60(1.19) 134.75(100.00)

2008-09 619.71(90.96) 28.00(4.11) 0.00(0.00) 32.02(4.70) 1.60(0.23) 681.33(100.00)

2009-10 893.43(94.30) 28.63(3.02) 0.00(0.00) 23.82(2.51) 1.60(0.17) 947.48(100.00)

2010-11 1005.75(94.03) 30.00(2.80) 0.00(0.00) 32.21(3.01) 1.60(0.15) 1069.56(100.00)

2011-12 1210.56(94.12) 30.00(2.33) 0.00(0.00) 44.03(3.42) 1.60(0.12) 1286.19(100.00)

2012-13 1507.299(93.75) 30.00(1.87) 0.00(0.00) 64.33(4.00) 6.11(0.38) 1607.73(100.00)

2013-14 1776.25(88.17) 186.72(9.27) 0.00(0.00) 50.07(2.49) 1.60(0.08) 2014.64(100.00)

2014-15 1677.24(94.89) 30.00(1.70) 0.00(0.00) 58.75(3.32) 1.60(0.09) 1767.59(100.00)

2015-16 1664.83(90.70) 32.44(1.77) 0.00(0.00) 138.32(7.54) 0.00(0.00) 1835.59(100.00)

2016-17 1602.15(93.52) 34.99(2.04) 0.00(0.00) 75.96(4.43) 0.00(0.00) 1713.10(100.00)

In 2002-03, the highest amount of expenditure subsidy was incurred in agriculture &

allied activities and the lowest amount of expenditure in transport whereas in 2016-17, the

highest amount of expenditure is in same agriculture & allied activities and lowest is in

industry & minerals. Except 2005-06 & 2006-07, the government has not incurred any

subsidy for energy sector. In overall comparison the higher amount of subsidy is incurred in

agriculture & allied activities for all study periods.

4.4.1. Functional Volume & Composition of Subsidy in Agriculture & Allied Activities


subsidy in agriculture & allied activities in Odisha. It is divided into 4 parts i.e. 1.crop

husbandry, 2.Food subsidy, 3.Co-operation and fisheries, The total public expenditure subsidy

in agriculture & allied activities for the period 2002-03 shows an amount of Rs. 41.80 Crore

(100.00%) that has Increased to the highest amount of Rs. 1602.15 Crore (100.00%) by the

end of 2016-17. In 2002-03, the total amount of expenditure subsidy was incurred in food

subsidy whereas in 2016-17, the highest amount of expenditure is in same food subsidy and

lowest is in fisheries. In overall comparison the higher amount of subsidy has incurred in food

subsidy in all study periods.

Figure 4 Functional Volume & Composition of Subsidy in Agriculture & Allied Activities

0.00200.00400.00600.00800.00

1000.001200.001400.001600.001800.002000.00

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

20

09

-10

20

10

-11

20

11

-12

20

12

-13

20

13

-14

20

14

-15

20

15

-16

20

16

-17

Rs.

in

Cro

re

Agriculture & AlliedActivities

Crop husbandry

Food Subsidy

Cooperation

Fishries



Table 5 Functional Volume & Composition of Subsidy in Agriculture & Allied Activities (Rs. Crore & %)

Year

Agriculture &

Allied Activities

Crop

husbandry Food Subsidy Cooperation Fisheries

2002-03 41.80(100.00) 0.00(0.00) 41.80(100.00) 0.00(0.00) 0.00(0.00)

2003-04 20.20(100.00) 0.00(0.00) 20.20(100.00) 0.00(0.00) 0.00(0.00)

2004-05 44.97(100.00) 0.00(0.00) 44.97(100.00) 0.00(0.00) 0.00(0.00)

2005-06 49.90(100.00) 2.69(5.39) 45.03(90.24) 0.09(0.18) 2.09(4.19)

2006-07 52.36(100.00) 4.92(9.40) 39.96(76.32) 0.28(0.53) 7.20(13.75)

2007-08 56.36(100.00) 14.85(26.35) 39.98(70.94) 0.03(0.05) 1.50(2.66)

2008-09 619.71(100.00) 47.87(7.72) 568.98(91.81) 0.46(0.07) 2.40(0.39)

2009-10 893.43(100.00) 39.75(4.45) 852.78(95.45) 0.40(0.04) 0.50(0.06)

2010-11 1005.75(100.00) 72.48(7.21) 931.93(92.66) 0.50(0.05) 0.84(0.08)

2011-12 1210.56(100.00) 123.27(10.18) 978.52(80.83) 102.00(8.43) 6.77(0.56)

2012-13 1507.29(100.00) 112.62(7.47) 1189.79(78.94) 200.33(13.29) 4.55(0.30)

2013-14 1776.25(100.00) 166.52(9.37) 1288.60(72.55) 308.19(17.35) 12.94(0.73)

2014-15 1677.24(100.00) 150.12(8.95) 1217.68(72.60) 304.28(18.14) 5.16(0.31)

2015-16 1664.83(100.00) 212.05(12.74) 1123.39(67.48) 323.38(19.42) 6.01(0.36)

2016-17 1602.15(100.00) 203.18(12.68) 962.92(60.10) 426.42(26.62) 9.63(0.60)

5. RESULTS OF REGRESSION ANALYSIS ON GOVERNMENT

EXPENDITURE ON SUBSIDY IN ODISHA

In the context of the profile of level of development of state finances in Odisha it is of interest

to examine the growth performance of the state‟s public expenditure on subsidy. The

following Table-6 presents the results of Regression analysis conducted on the various

indicators of public expenditure relating to subsidy in Odisha. At the outset it will be relevant

to examine the growth scenario taking the absolute values of public expenditure on subsidy.

The regression analysis has been conducted for the time series data and the growth rates have

been computed using the semi log model for a span of 15 years from 2002-03 to 2016-17.

Table 6 Results of regression analysis of Public Expenditure on subsidy in Odisha

Sl. No. Indicators Log a Log(b) g (%) R2

Functional Volume & Composition of Total Subsidy

1 Social Subsidy 0.84 0.17(4.28) 53.79 0.64

2 Economic Subsidy 1.39 0.14(9.42) 50.01 0.87

3 Total Subsidy 1.39 0.15(9.69) 52.97 0.87

Functional Volume & Composition of Social Sector Subsidy

4 Welfare of SC, STs & OBCs -0.22 0.05(1.93) 15.56 0.27

5 Labour & Labour Welfare 0.22 -0.20(-0.31) -24.28 0.05

6 Social Security & Welfare -1.05 0.90(2.13) 25.06 0.31

7

Relief Account of Natural

Calamities 0.71 0.18(4.25) 58.93 0.64

Functional Volume & Composition of Economic Sector Subsidy

8

Agriculture & Allied

Activities 1.25 0.15(8.31) 52.89 0.84

8.1 Crop husbandry 0.65 0.16(7.56) 50.03 0.85

8.2 Food Subsidy 1.27 0.14(6.82) 47.82 0.78

8.3 Cooperation -1.88 0.42(7.28) 185.08 0.84

8.4 Fisheries 0.13 0.06(1.88) 16.71 0.26

9 Irrigation & flood control 1.36 0.03(1.29) 6.81 0.14

10 Energy NA NA NA NA

11 Industry & Minerals 1.12 0.07(5.18) 19.86 0.73

12 Transport -0.72 0.10(3.83) 30.11 0.57

Figures in the parentheses represent the t-values Significant at 5% level of

significance


Services in Odisha


As observed from the table in terms of different indicators of public expenditure, one finds

positive growth rate and statistical significant in all indicators except labour & labour welfare

of social subsidy and positive growth rate and statistical significant in all indicators of

economic subsidy. In functional composition of expenditure on total subsidy the higher

positive growth rate is coming from social subsidy as compare to economic subsidy, higher

value of R2 and it is statistical significant. In the sphere of functional composition of total

expenditure on social subsidy, one notices that the higher growth rate arises from relief

accounts of natural calamities and statistical significant. There is a negative growth rate arises

in labour and labour welfare. Value is very low in all indicators of social subsidy except relief

account of natural calamities and statistical significant. In functional composition of economic

subsidy the higher positive growth rate is coming from agricultural & allied activities as

compare to other indicators and it is statistical significant. On the other hand the lower growth

rate is from irrigation & flood control which is statistical significant and very lower value of

R2. In the subsectors of agricultural & allied activities the higher positive growth rate is

coming from cooperation as compare to other indicators and it is statistical significant. On the

other hand the lower growth rate is from fisheries which are statistical significant and very

lower value of R2. The above analysis shows that higher growth rate is coming from

cooperation and relatively lower & negative growth rate in case of labour & labour welfare.

There is a differential with positive growth rate of public expenditure on subsidy except

labour & labour welfare over the study period as our alternative hypothesis satisfied the

analysis.

6. SUMMARY & CONCLUSION

The study clearly brings out the disaggregated level of government expenditures on subsidies

with respect to social and economic services in Odisha. Panel data evidence reveals that in

over all comparison from 2002-03 and 2016-17, the highest subsidies in both the services are

provided during the year 2015-16 where service sector has accounted about Rs.746.64 Crore

and economic services has accounted for Rs.1835.59 Crore. However in over all the economic

services are given more subsidies than the social services. The association between subsidy

and social services sector in Odisha shows since 2008-09 more than 90% of total expenditure

on subsidy is incurred in relief account of natural calamities where as the lowest amount of

expenditure in social security & welfare. In economic services maximum subsidy has

provided to agriculture and allied activities and the lowest to industry and minerals. It is

because as maximum labour in Odisha are engaged in agricultural and allied sector; providing

maximum subsidy to this sector can help to reduce the burden on primary agriculture

activities along with reduce disguised unemployment. Surprisingly energy sector has not

given any subsidies except in the year 2006-07. On the other hand transport sector has also

provided with minimum subsidy till 2014-15 and then it was not provided with any subsidy

amount. The regression analysis show that subsidy turns out to be a more significant in the

agricultural & allied activities and in the subsectors the higher growth rate is coming from

cooperation and relatively lower & negative growth rate in case of labour & labour welfare.

Needless to say that providing subsidies by the government has aimed to strengthen the poor,

unemployed and marginalized sections from the society and for this Odisha government is

making all possible effort like proper allocation of subsidy that must intended benefit not only

the poor and well off sections of the society but also end up ensuring jobs for millions as well.



ACKNOWLEDGMENTS

The authors are thankful to the anonymous reviewers of the present paper for their helpful

comments. However, we are responsible for the views expressed in the article as well for any

errors and shortcomings.

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Services in Odisha


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volume and composition of public expenditure on …...paper attempts to examine the volume and...

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