Taming Debt Burden

As a central policy document that reflects the government's priorities, vision, and programmes, along with the projected receipts and expenditures for a financial year, the Union Budget serves as a focal point for intense debate, often triggering criticism from opposition parties, economic experts, and analysts. In contrast, the annual budgets of smaller states often fail to draw similar enthusiasm, as was evident in the public response to the budget passed by the Nagaland Legislative Assembly last week for the financial year 2026-27. However, this financial blueprint, despite its reputation for being tedious due to the big data involved, is important as it outlines the government's receipts and expenditures for both the previous and the upcoming financial years. For a state like Nagaland, which is sandwiched between limited revenue and an infrastructure deficit, the budget is more than just a financial statement. A carefully planned budget can alleviate issues like unemployment and stimulate economic growth, while a visionless one can push a state into deeper financial despair in the form of fiscal deficits and debt burdens, which is why it is essential to scrutinise the allocation of funds to various sectors as well as question inefficiencies. In the same measure, constructive policies and programmes should be acknowledged and supported. Such an outlook is crucial for fostering positive change.

For the uninitiated, the government of Nagaland has reduced the total outlay for this fiscal year by about INR 2,721 crore against the 2025-26 budget estimates, citing a sharp decline in the state’s share of central taxes and the discontinuation of key grants, not forgetting years of fiscal deficit burden. However, the development outlay (state programme) has been increased from INR 1,200 crore in the previous year to INR 1,350 crore (a 12.5% increase) this fiscal year. The Rio-led government has introduced various schemes like the Nagaland start-up policy, Chief Minister’s Health Insurance Scheme (CMHIS), and Nagaland Solar Power Mission, etc., drawing both praise and criticism. This year’s budget focuses on promoting women entrepreneurs, addressing water scarcity, and boosting infrastructure, though it touches almost all sectors. However, those who closely follow the state budgets will notice one prominent change: the fiscal deficit, an area for which the state has gained notoriety. The budget deficit has decreased significantly, from a high of INR 2,212.74 crore in 2022-23 to INR 1,374.17 crore in 2023-24, INR 905.78 crore in 2024-25, to INR 411.81 crore in the previous financial year. Continuing this trend, the state government has projected a budget deficit of INR 337.04 crore for 2026-27, further narrowing the gap between expenditure and income. It clearly indicates that the Rio government is making a conscious effort to improve the state's economic health, which had been deteriorating due to years of reckless spending by successive administrations. By opting for a pragmatic budget over a populist one, the government may forfeit short-term electoral gains, but it is crucial to bail the state out of perpetual debt and steer towards long-term economic stability and sustainable growth. Having said that, we will benefit from the consolidation of the fiscal deficit only if the funds are judiciously allocated and utilised, and priority should be given to sectors that require urgent attention, such as health, education, and road infrastructure.