Nagaland's economy presents a paradox: despite its rich
natural resources, cultural heritage, and strategic location, it remains one of
the most underdeveloped and financially dependent states in India. The economy
is largely government-driven, with limited private sector participation, weak
industrialisation, and an over-reliance on agriculture, much of which is still
subsistence-based.
Nagaland got its statehood in 1963. Today we are in 2025.
Decades have passed and yet our economy is in shambles. As the state’s budget
after budget has shown, there is still heavily reliance on central government
funds. 90% of Nagaland’s projected revenue of INR 24,699.01 crore for the
Financial Year 2025-26 is expected to come from central grants and allocations!
Imagine the dependency of the state’s existence on central government support.
Resources from the centre will be in the form of state’s share in central taxes
(40% of revenue receipts) and grants (50% of revenue receipts).
Again the bulk of the state’s revenue – at 76% or INR
18,879.77 crore – is allocated for committed expenditure items that typically
include expenditure on payment of salaries (40%), pensions (20%, and interest
(8%). A larger proportion of budget allocated for committed expenditure items
limits the state’s flexibility to decide on other expenditure priorities such
as capital outlay and asset creation. The Nagaland 3rd State Finance Commission
(2024) noted that the proportion of government employees to the population of
the state is among the highest in the country. On the contrary, the private
investment from outside the state has not been able to bloom due to unfavorable
business climate and land ownership restrictions.
The absence of a robust tax base due to a weak industrial
and commercial sector makes the state financially unsustainable in the long
run. Presently, two-thirds of the state’s own revenue generation comes from the
State GST which itself is very small. Unless the state is able to ensure a
sustained growth in its own tax revenue from other tax sources, Nagaland will
not be able to transform its economy.
With the efforts of the Modi-led government, there has been
significant improvement in infrastructure and security environment (of course
more needs to be done), however, the industrial, manufacturing and services
landscape of the state have remained nascent. The land ownership laws prevent
private and external investment. Consequently, in spite of potential in mineral
and forest resources, the state has failed to attract large-scale industries or
export-oriented businesses. The economy remains stuck in a cycle of low
productivity and informal sector dependence, preventing real growth. On the
agriculture front, a combination of factors like the nature of terrain, low
mechanisation and weak market linkages have prevented our farmers from scaling
production. This has sustained a vicious cycle of over-reliance on government
jobs and high unemployment. Nagaland urgently needs private sector-led job
creation. Otherwise the state will not be able to wriggle out of its decade-old
economic impoverishment.
The argument I am making here regarding Nagaland’s economy
is not at all political. Nor I have any intent of finding faults. Chief
Minister Neiphiu Rio heads the NDPP-BJP government in Nagaland and as a BJP’s
foot soldier I too am part of the ruling dispensation in the state.
The moot question here is with so much of reliance on
central government for funds and the heavy burden of debt servicing that is
there upon the state exchequer, are we the citizens of Nagaland doing enough to
improve the economic condition of the state?
I have, from time to time, stated in earlier articles also
that the politics of populism and freebies are to be discarded. There are
states now in India where people are showing preference to good governance and
discarding the culture of freebies. But it is also true that ours is a state of
populism and day-dreaming. Sometime we talk 'big things' with useless and
impractical argument. The more the central government gives, the more eager are
our people to grab more — preferably without hard work. These are the bitter
pills that we need to swallow!
Structural reforms the inevitable reality
India undertook major economic reforms in 1991 which boosted
its GDP growth, foreign investment and industrial expansion. The benefits of
those reforms are felt till date. To unlock its true economic potential,
Nagaland also needs its own structural reforms.
Foremost is Land. Nagaland follows a unique land tenure
system where land is owned by communities and tribes, making it difficult for
investors and industries to acquire land. Nagaland needs to introduce long-term
lease models that allow private investors to set up industries without changing
ownership rights and create industrial land banks in designated areas with
clear land policies to encourage investment. This can be done ensuring land
rights of local communities are protected while allowing economic development.
The land records database itself needs to be first adequately sanitised and
digitised. Then a method of land taxation needs to be developed and introduced
around commercial use of the land which can be recovered from the user agencies
and re-distributed to land owning communities.
Next, to promote MSME growth, the Modi government has
already initiated many schemes like PMEGP, Stand Up India, etc. with emphasis
on SC/ST and women population. Nagaland government can complement these efforts
by setting up Special Economic Zones (SEZs) for industries like bamboo
processing, handicrafts, and agro-based industries, encouraging public-private
partnerships (PPPs) for infrastructure and industrial projects, and
strengthening the Ease of Doing Business framework by simplifying registration,
licensing, and compliance processes. The digital infrastructure also needs to
be deepened to promote IT-based businesses which can sustain themselves around
the industries.
Thirdly, the education system will need alignment with the
evolving market demand. Partnerships with private companies and industries for
apprenticeship and skill development programs will enable a ready skilled
workforce and productivity improvements. Vocational courses on IT, hospitality,
tourism, and modern agriculture etc. will make sense only when it is backed up
by local industries.
Fourthly, in agriculture, a sustained campaign is required
to shift cultivation from subsistence-based to profit orientation. This not
only requires shift in cultivation techniques and methods but also in the
organization of farmers. Considering the marginal land holdings, cooperatives
and Farmer Producer Organisations (FPOs/FPCs) need to be promoted and supported
with subsidised modern equipment, irrigation, and credit facilities so that
they can generate economies of scale and bargain better. Subsidies and tax
benefits will also be needed for private investment in cold storage, food
processing units, and market linkages so that these players can pare the high
business costs associated with Nagaland geography.
Lastly, but not the least is the reform needed in governance
and financial management. There is an immediate need to improve transparency in
governance by digitizing government services and fund allocations. The
bureaucratic inefficiencies in business approvals and policy implementation need
to be cut. The local governance also needs empowering with community-led
economic planning.
Nagaland's economic future depends on bold, strategic
reforms in land policies, industrialization, agriculture, and governance. With
policy reforms, private investment, and sustainable development, the state can
achieve long-term economic transformation on revenue generation, employment
outlook and poverty reduction. But if the Naga citizenry don’t align and adapt
themselves to these realities, Nagaland risks remaining a financially dependent
state rather than emerging as a self-sustaining economy with long-term
prosperity.
A Matter of Talents
I would like to conclude with the Parable of Talents from
the Gospel of Matthew in the Holy Bible. A master entrusts three of his
servants with varying amounts of "talents" before a journey,
expecting them to use the talents productively. The first two servants use
their talents to trade and gain more, while the third servant, fearful of
losing the talent, buries it. Upon the master's return, he asks his servants to
account for the talents he entrusted to them. The master praises and rewards
the servants who used their talents, entrusting them with more responsibility.
The master condemns the servant who buried his talent, calling him wicked and
lazy, and throws him into the outer darkness. The parable highlights the
importance of using God-given abilities and resources productively, rather than
fearing failure or inaction.
Our land is our “talents”. I leave it to the wisdom of our
people whether they want to be like the first two servants in the use of the
rich God-gifted resources of our state for prosperity or get cursed like the
third servant by keeping the resources buried underneath!
M Chuba Ao
(The writer is BJP’s National Vice-President and all the
views expressed in this article are personal)
