By Moa Jamir
The Nagaland Economic Survey 2025–26 presents a notably optimistic picture of the state’s economic trajectory with macro indicators appearing to be gaining momentum, reinforcing the government’s narrative of building a “Viksit Nagaland” by 2047. Yet beneath this encouraging outlook lies a set of structural fiscal challenges that could determine whether this ambition remains aspirational or achievable.
As per the survey, Nagaland’s economy is projected to grow by 10.33% in real terms and 13.03% in nominal terms in 2025– 26, with the state’s economy expanding from Rs 45,133 crore to Rs 51,014 crore. Per capita income is also expected to rise from Rs 1,75,374 to Rs 1,92,280, signalling a gradual expansion in consumption capacity.
Over the past decade, Nagaland’s economy has grown from about Rs 19,524 crore in 2015–16 to over Rs 45,000 crore in 2024–25, with per capita income more than doubling. Yet the survey highlights the scale of the task ahead: aligning with Viksit Bharat @2047 would require per capita income of about $15,000, meaning the state economy must expand from $5 billion to nearly $68 billion, sustained by 10% annual growth for two decades. This would entail major structural transformation within the state economy.
At present, however, the structure of the economy remains heavily skewed towards services. The tertiary sector contributes about 66.6% of GSDP, while the secondary sector accounts for barely 10.6%.
This imbalance reflects the continuing weakness of Nagaland’s industrial base. Without stronger manufacturing, agro-processing, and value-added industries, the prospects for broad-based economic transformation will remain limited.
The more pressing concern, however, lies in the state’s fiscal structure. Nagaland continues to rely overwhelmingly on central transfers. The survey estimates that State Own Revenue Receipts will be about Rs 2,472 crore in 2025–26, accounting for only 13.19% of total revenue receipts. By contrast, central transfers dominate the fiscal architecture, with more than Rs 8,000 crore expected as the state’s share of central taxes and another Rs 8,178 crore as grants-in-aid.
This dependence becomes particularly significant in the context of the 16th Finance Commission. While the states’ share in the divisible pool remaining at 41% may not materially affect Nagaland, the real concern lies with revenue deficit grants, long relied upon by fiscally weaker states to bridge routine expenditure gaps. Any reduction under the new Finance Commission cycle could place immediate stress on the state’s finances.
The implications are significant. With Rs 7,529 crore earmarked for salaries and Rs 3,871 crore for pensions, Nagaland will spend over Rs 11,400 crore on wages and retirement benefits alone, pre-committing much of its revenue before development spending begins. Revenue expenditure will account for nearly 69% of total spending in 2025–26, even as capital expenditure declines by over 12%.
In many ways, the findings of the Economic Survey appear to affirm concerns raised in this column last week, particularly regarding the structural fiscal pressures confronting the state and the difficult choices that may lie ahead.
This raises a fundamental policy dilemma. If the state struggles even to meet non-developmental expenditure such as salaries and pensions, how will it finance its ambitious development goals? The challenge therefore extends beyond maintaining encouraging growth numbers. The real test lies in strengthening the state’s fiscal foundations by expanding its own revenue base, improving tax administration, and fostering productive sectors capable of generating sustainable economic activity.
Without such structural adjustments, the vision of a “Developed Nagaland by 2047” risks remaining aspirational, as mounting fiscal and economic challenges could overwhelm the state’s development ambitions.
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