Social Expenditures in Odisha: Populism Versus Human Capital Formation

This article examines the level, composition and trends of social expenditures at the subnational level in India using the secondary data of Odisha from 1990–91 to 2016–17 due to the low level of economic development in the state. The level of social expenditures of Odisha is better than those of the 14 major states of the country. However, it is not sufficient for the development of the state due to its declining trend and a small proportion of capital account social expenditures. Regarding the composition of social expenditures, a substantial proportion is incurred on populism rather than human capital formation. Social expenditures deviate from human capital formation to populism with time. Further emphasis is shifted towards economic services from social expenditures in the total expenditures. The ruling party used the strategy of populism to win seats in the state legislature keeping in mind the high proportion of the poor, illiterates and poor farmers in the state, where a direct relationship exists between human capital formation and winning seats in the legislature. To ensure economic development, the state should strive to improve its human capital formation and refrain from populist measures.