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Centre Provides 55% Of Rs 65,502 Crore North-East States’ Spend

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India’s North Eastern states are clubbed under the category of special status states. While it is known that the 7 states – Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura receive considerable financial assistance from the Centre – the balance sheet details may not be in one place.

 

IndiaSpend’s Dhritiman Gupta discovers in this snapshot study for instance that Government support for states like Tripura, Nagaland and Manipur can be upto 70% and 80% of their budgets and rising. While there may be nothing inherently wrong with that, it does suggest that economic self-sufficiency which is critical for a state’s own development and growth may be a distant goal, if it is.

 

To get an idea of how much assistance the states get from the Centre, let’s look at a composition of their revenues.

 

Table 1

2009-10 2010-11 2011-12(BE)
1.    Arunachal Pradesh
Total Revenue(TR) 4,294 6,716 5,940
Grants from Centre(GC) 3,134 5,334 4,638
GC/TR (%) 72.9 79.4 78.0
2.   Assam
Total Revenue(TR) 19,884 27,989 32,730
Grants from Centre(GC) 6,805 11,562 13,266
GC/TR (%) 34.2 41.3 40.5
3.   Manipur
Total Revenue(TR) 3,873 5,544 5,882
Grants from Centre(GC) 2,839 3,949 3,914
GC/TR (%) 73.3 71.2 66.5
4.   Meghalaya
Total Revenue(TR) 3,447 4,393 5,602
Grants from Centre(GC) 2,115 2,816 3,545
GC/TR (%) 61.3 64.1 63.2
5.   Mizoram
Total Revenue(TR) 2,963 3,716 3,748
Grants from Centre(GC) 2,334 2,823 2,627
GC/TR (%) 78.7 75.9 70.0
6.   Nagaland
Total Revenue(TR) 3,719 5,290 5,611
Grants from Centre(GC) 2,978 4,232 4,341
GC/TR (%) 80.0 80.0 77.3
7.   Tripura
Total Revenue(TR) 5,620 5,386 5,989
Grants from Centre(GC) 4,261 3,560 3,785
GC/TR (%) 75.8 66.0 63.1

(Figures in Rs Crore)

Source: RBI State Budget Study 2011-12

Note: The difference between Total Revenue and Central Grants includes states share in central taxes, and hence is not a proper measure of states own revenues.

 

Heavy Dependence On Centre

As is apparent from the table, all states except probably Assam depend heavily on central grants for their revenues. In 2010-11, total revenues of the 7 north eastern states stood at Rs 59,034 crore of which central grants were to the tune of Rs 34,276 crore or 58%.

 

If we take 2011-12(BE) into account, total revenues of these states is estimated to be Rs 65,502 crore of which central grants are estimated to be Rs 36,116 crore or 55%.

 

In 2009-10, Arunachal Pradesh received 72.9% of its revenues in form of grants from the centre. The figure went up to 79.4 % in 2010-11. It is expected to be 78% in 2011-12.

 

The story is similar for almost all the other states. A look at (Table 1) confirms that.

 

The worst performer however has been Nagaland. In 2009-10 and 2010-11 it received 80% of its revenues from the Centre. It is expected to marginally fall to 77.3% according to budget estimates of 2011-12.

 

Assam, on the other hand, has performed better. In 2009-10 it received only 34.2% of its revenues from the Centre. The ratio worsened to 41.3% in 2010-11.However, it still remains the most independent of the north eastern states.

 

Financials Of North East States

Let’s now look at the financial condition of these states, firstly the indebtedness of the states or debt-GSDP ratios.

 

Table 2

State 2004-08(Avg) 2008-09 2009-10 2010-11 2011-12 (BE)
Arunachal Pradesh 60.3 103.2 46.2 42.3 40.0
Assam 30.4 28.1 27.7 26.2 26.4
Manipur 67.3 66.0 67.2 66.9 69.3
Meghalaya 34.6 31.7 30.8 29.4 29.1
Mizoram 105.1 90.6 67.0 68.4 63.8
Nagaland 44.9 45.1 53.2 46.6 46.4
Tripura 47.5 34.7 35.5 34.0 31.9

(Figures are in %)

Source: RBI State Budget Study 2011-12

For absolute debt figures refer to (Table 4) below

 

The debt-GSDP ratios of the north eastern states are much higher than the non-special status states. In 2010-11 only Assam and Meghalaya have managed to keep the figure below 30% which incidentally is better than figures for a state like West Bengal, which had a figure of 39.54%.

 

The debt-GSDP ratios of the north eastern states are generally high. Over the period 2004-08, the average debt-GSDP ratio of Arunachal Pradesh was as high as 60.3%. It went up to 103.2% in 2008-09. Since then it has been controlled and brought down to 42.3 % in 2010-11.

 

Manipur has consistently had a high debt-GSDP ratio. It was 67.3% over the period 2004-08. It has consistently remained in the high 60 range. In 2010-11 it was 66.9%.

 

Mizoram had a debt-GSDP ratio of 105.1% over the period 2004-08. Even though Mizoram has done better than Manipur when it comes to controlling debt, the figures were still at a very high level of 68.4% in 2010-11.

 

The better performers are Meghalaya and Assam. Assam had a figure of 30.4% over the period 2004-08. It has managed to reduce it to 26.2% in 2010-11. Meghalaya which had a figure of 34.6% over 2004-08 managed to reduce it to 29.4% in 2010-11. These incidentally are better figures than ones registered by West Bengal.

 

No Trend In Deficit Figures

 

Let’s now look at the fiscal deficit-GSDP ratios.

Table 3

State 2004-08 (Avg) 2009-10 2010-11 2011-12 (BE)
Arunachal Pradesh 3.7 7.3 1.5 2.0
Assam 0.3 4.4 8.3 2.9
Manipur 4.9 8.8 9.3 8.2
Meghalaya 2.6 1.8 2.6 2.5
Mizoram 9.5 5.5 11.6 2.4
Nagaland 3.9 5.0 2.8 3.5
Tripura 0.7 -0.5 4.0 2.4

(Figures are in %)

Source: RBI State Budget Study 2011-12

 

Fiscal deficit includes the overspending of revenues and loans taken to make investments.

 

The first thing to note is that there is no particular trend in these figures. For example, Mizoram had a sizable fiscal deficit of 9.5% over 2004-08. It was brought down to 5.5% in 2009-10, only to rise to 11.6% in 2010-11. According to budget estimates for 2011-12, it will be brought down to 2.4%.

 

The story is similar for Assam and Tripura. Assam had a minute fiscal deficit of 0.3% over 2004-08.It shot to 8.3% in 2010-11. According to budget estimates it will be 2.9% in 2011-12. Tripura, on the other hand, shot from being a fiscal surplus state in 2009-10 to a deficit of 4.0% in 2010-11. The deficit is expected to be brought down to 2.4% in 2011-12.

 

A look at the other states confirms the absence of any trend. Arunachal Pradesh had a fiscal deficit of 3.7% over 2004-08. It shot to 7.3% in 2009-10 only to be brought down to 1.5% in 2010-11. Nagaland also follows a similar path.

 

Table 4

State End March 2010 End March 2011 End March 2012 Growth since 2010 (%)
Arunachal Pradesh 3,160 3,440 3,880 22.7
Assam 25,610 27,330 31,060 21.2
Manipur 5,580 6,150 7,060 26.5
Meghalaya 3,940 4,310 4,840 22.8
Mizoram 3,780 4,310 4,600 21.6
Nagaland 5,500 5,220 5,640 2.5
Tripura 5,450 5,910 6,290 15.4

(Figures in Rs Crore)

Source: RBI State Budget Study 2011-12

 

As we pointed out earlier, the Centre’s overall support for the North Eastern States is not being debated here. A sum of Rs 65,502 crore may seem small in the context of things. But an economy dependent on grants usually lacks incentive to create its own growth engines.

 

The political and social climate in many of the North East states may not be conducive for sudden or radical change. The citizens of these states might however feel more compelled to act if they were better aware of first, their dependence on Central grants and the resultant problems and second, the real condition of their states’ balance sheets.

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