M Chuba Ao
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 industrialization, 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 Rs. 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 Rs 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 still 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 mechanization 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 sanitized and digitized. 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, 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 Organizations (FPOs/FPCs) need to be promoted and supported with subsidized 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 is BJP’s National Vice-President and all the views expressed in this article are personal)
