The term ‘resource curse’ is used when a State with abundant natural resources performs poorly in economic development compared to other states with poor-resources due to implementation of flawed policies regarding the extraction of the natural resources. Several rich-resource states suffer from the malady of this ‘curse’ resulting in poor economic development, rampant corruption, human rights violations, armed conflict and failure of democratic institutions.
Examining this in the context of Nagaland state, I seek not to determine whether the state is suffering from the maladies of the curse, but instead to delineate the effects that will be faced by the state ‘when and if’ defective policies are implemented while extracting natural resources and if the state government relies too much on natural resources for economic development.
The State is blessed with abundant natural resources ranging from mineral resources to forest products. In the annual report of Economic Survey 2012-13, the Government of Nagaland indicated that 52% of the state is forest area. In the report of Energy Statistic 2014, the Government of India has specified an estimated reserve of 2.69 million tonnes of crude petroleum in the state and 0.12 billion cubic meters of natural gas. The report of the Ministry of Coal, Government of India, in September 2014 identified coal reserve of 315 million tonnes in the state.
However over the past few years, through several rules passed in the State Legislative Assembly, viz. Nagaland Coal Policy (NCP) and Nagaland Petroleum and Natural Gas Regulations (NPNGR), and although the High Court has issued a stay order on latter, exploitation of natural resources has been continuing rampantly in several places such as, Mokokchung, Mon, Peren, Longleng and Wokha without proper regulation. This work is endangering the environment and human lives. If such trends continue, damaging consequences will follow, impacting the state economy.
One foremost effect is ‘Dutch disease’. This term originated in the Netherlands in the 1950s, where, upon discovery of a large gas field, gas exports soared, but the economy was negatively impacted due to a sharp inflow of foreign currency. Consequently, unemployment rose from 1.1% to 5.5% between 1970 and 1977. As recognized by economists, Jeffery D. Sachs and Andrew M Warner, states suffer from such a symptom when they concentrate more on natural resources, including agriculture, neglecting the manufacturing sector.
In order to escape from such a symptom, economist Thorvaldur Gylfason suggests one important means. He advocated that rich-resource states should give utmost attention to education. When states give more attention to natural resource based industries, including agriculture, both of them requiring low skills, then benefits from primary production are less relative to high-skill labour manufacturing industries and consequently put constraints on economic growth. But if rich-resource states give adequate attention and investment to education, then output will shift away from primary production towards manufacturing and service sectors thereby accelerating the growth rate. Presently, several rich-resource countries are facing economic constraints due to negligence of high-skill labour manufacturing industries. India is no exception in this case and therefore in late 2014, the government of India took the initiative of ‘Make in India’ focusing on the manufacturing sector.
For the state of Nagaland, however, in order to generate revenue and create employment opportunities, the policies for the past few years are mainly focused on tapping natural resources. Against preventive measures shown by economists on how the state needs to stay attentive in the wake of exploiting natural resources, several pertinent questions arise, such as where should the revenue from natural resources be invested? Should the government invest the revenue generated from natural resources in the education sector such as establishing technical institutes, so that it will eventually help in manufacturing goods locally? Should government officials invest in the health sector for HIV, tropical neglected diseases, etc. which are endemic in the state? Should the state government have the proclivity to improve roads and public transportation, supply of drinking water, and sanitation from the generated revenue?
No doubt, tapping natural resources will generate revenue. But in the long term it brings a negative impact to the state economy if the revenue generated from those resources is not properly invested. One must keep in mind that once non-renewable resources are extracted from the ground and sold, they cannot be replaced. If the revenue generated from the resources is not invested in a sustainable manner locally, it will only lead the state to an economic catastrophe.
In the current scenario, with the state creating few new jobs, having a decent job has become everyday talk, particularly among the youth. As had been reported by NSSO survey, among all the North Eastern states, Nagaland has the highest in the unemployment rate. The condition of the state economy can be well understood from the budget, 2016-17 presented by the Chief Minister in March, 2016, which is marked by a current deficit of Rs.1419.35 crores, and the report of the Comptroller and Auditor General in April 2016, where the state’s returns were ‘nil’ in 2014-15 from investment of 278.44 crores. In the recently concluded budget session the Chief Minister of Nagaland highlighted several measures to be undertaken in order to revive the state economy. However, in order for the state to escape from economic constraint it is currently experiencing, one important fundamental key is that the state should not ignore the state’s manufacturing industries sector. Indeed, there is no denying that over the years the state government is implementing several schemes in industries and commerce. But in ground reality, the picture is not rosy.
Blessed with rich varieties of natural resources, the state government and the citizens of Nagaland should not feel over-confident and consider natural resources as the most important asset and thereby fails to implement good economic policies. Rather, both the state government officials and the citizens need to retrospect deeply and develop the right policies in order to benefit all people and help the state prosper.
Opangmeren Jamir holds PhD from the Centre for International Politics, Organisation and Disarmament, Jawaharlal Nehru University, New Delhi.
