SPECIAL ARTICLE Economic & Political Weekly EPW APRIL 11, 2015 vol l no 15 69 Silver Lining in Odisha’s Organised Manufacturing Sector Chakradhar Bal, Amarendra Das, Subas Chandra Kumar The authors are thankful to the anonymous referee for valuable comments on revising the paper. Chakradhar Bal (chakradharbal@gmail.com) and Subas Chandra Kumar are with Prananath Autonomous College, Khordha, Odisha; Amarendra Das (dasamarendra@gmail.com) is with Utkal University, Bhubaneswar. Odisha’s industry sector began a phase of high growth in 2002–03. It contributed just 24% to the gross state domestic product in 1980–81, but 38% in 2007–08, before declining to 33% in 2012–13. This paper points out that organised manufacturing, especially in basic metal and alloys, has been the driver of growth in the last decade. The average productivity of labour in organised manufacturing increased during 1981–90, peaked in 1989–90, declined in 1991–2002, and has been rising again from 2002–03. Labour productivity has grown the most in basic metal and alloys, and capital accumulation in paper and paper products. Capital productivity shows a negative trend overall. Total factor productivity fell in manufacturing as a whole and three major sub-sectors, barring basic metal and alloys, and chemical and chemical products. 1 Introduction O disha remains one of the most backward states in India. With a per capita income of Rs 40,412 (of net state domestic product ( NSDP ) at current prices), it ranked 21 among 28 Indian states in 2010–11. The per capita income of the state is far below the net national average of Rs 53,331 at current prices. It was 76% of the national average and only 26% of the per capita income of the richest state, Goa. In addition, the monthly per capita consumption expenditure ( MPCE) of rural Odisha (Rs 905) was 70% of the average MPCE of rural India (Rs 1,287), and the MPCE of urban Odisha (Rs 1,830) was 74% of the average MPCE of urban India (Rs 2,477). The Raghuram Rajan Committee considered Odis- ha the least developed state in the country on the basis of the composite underdevelopment index ( GoI 2013). As per the pov- erty estimates provided by the Planning Commission (based on the Tendulkar Committee methodology), Odisha ranked sixth among all the Indian states in terms of the percentage of people living below the poverty line—32.59%—in 2011–12. The national average was 21.92%. Nevertheless, Odisha’s economy has grown at a high rate in the last decade. The state reported an average annual growth (of gross state domestic product ( GSDP ) at factor cost at 1999– 2000 prices) rate of 9.51% during the Tenth Five Year Plan period (2002–2007) against a target of 6.20%. Its GSDP (in real terms at 2004–05 prices) grew at the rate of 8.23% during the Elev- enth Five Year Plan period (2007–2012) and the anticipated growth rate in 2012–13 was 9.14%. The state economy contin- ued on a high-growth trajectory even after the global recession of 2008 and a slowdown in the national economy. Diversification of economic activities has led to a visible structural shift from an agriculture-based state economy to an industry-led and service- led one (Government of Odisha 2013). The high economic growth improved Odisha’s position from 24 in 2004–05 to 21 in 2010–11 in a ranking of 28 states on the basis of per capita NSDP . In poverty indicators (based on the Tendulkar methodology), its rank improved from 28 in 2004–05 to 23 in 2011–12. During this period, poverty declined from 57.2% to 32.59%, but a huge number in the state still lives in abject poverty. Providing employment is seen as a panacea to eradicating the disease of poverty. The economic literature emphasises in- dustrialisation as a way of providing employment to a vast population and raising the overall productivity of an economy and the incomes of its people. Conventional economic theories have it that people move from agriculture to industry to work