Can one trust the economic growth rate of Meghalaya?

The MUA-II led congress Government has failed to highlight any credible achievement regarding its economic performance. There is nothing much to show ever since the Government assume office in 2013. Internal bickering of the Congress party and open rebellion against the leadership of Mukul Sangma has been the occupied prime time news much to the discomfiture of the government. The NGT ban on coal mining, in place since 2013, has tested the Government’s resolve to find an honorable solution acceptable to all. It is clear that the present regime has much to gain with the present moratorium on coal. Similar is the case with the Headmen issue, MUDA and Dual post controversy. For the Government the ban on coal is threatening to undone the growth story unfolding in the state. Coal mining and the extractive sector forms a major chunk of its revenues. The impact of the ban was evident when a year later the ban resulted in a loss of 600 crores, forcing the government to impose a 20% cut in non-plan expenditure.

Meghalaya’s inability to generate its own revenue (without depending on external support) is a baggage it has to carry since the inception of the state. Its taxable capacity is dismal as personal income falls outside the jurisdiction of the Government because of the sixth schedule. Even after 40 years of statehood, the resource rich has not progress without external assistance. In 2013 the Rangaraja Committee have categorized Meghalaya as a backward state. To overcome the tag, the state needs to invest on social and economic infrastructure but with no resources to fund development projects it has to depend entirely on the magnanimity of the central Government.

The Planning commission (now defunct), Finance Commission and Finance Ministry are the three principal source of finance for the state. The NEC is another financial source which receives substantial amount from the DONER ministry and Planning Commission. The decision of Prime Minister Narendra Modi to dismantle the Planning commission has disturbed the free flow of unaccounted finance to the state. To add further woes, the allocation of the 14th Finance Commission is the lowest for Meghalaya among the north eastern states.

Meghalaya’s financial position is precarious. It is clear that the honeymoon period is over and the state has to shoulder the burden. It has to devise an effective mechanism for alternative source of finance. Political rhetoric and protest against the Central government would cause more damage. Already the Central government has reduce all central funding to the north eastern states which they received under the Special Category Status (SCC) on a 90:10 funding ratio. Henceforth the state is expected to fund all developmental and social projects on its own.

The Chief minister has pleaded to Prime Minister time and again for maintaining status quo of the funding pattern. He is not alone. The Chief Minister of the north eastern states had urged the Prime Minister to retain the special category status. Centrally sponsored schemes (CSS) have assisted the state to implement various programme. Last year the Chief Minister have expressed concern that the momentum of growth which meghalaya has experienced is slowing down if not stop completely if things continued the way they are.

In this bleak scenario a study conducted by the Institute of Competitiveness at Harvard claiming Meghalaya as the most competitive state in the north east by highlighting the state’s compound average annual growth and its GSDP valued in 2014-15 is nothing to rejoice about. Any optimism that the state government derived from the report was cut short when another report commissioned by the World bank indicted the state government for its failure on economic reforms. These reports are not only contradictory but it raised question over an external agency painting a rosy picture of the state when the ground reality is something else. It is therefore interesting to see how much damage the cut in financial support and the lack of economic reforms has on Meghalaya’s celebrated growth rate which is the highest in the country.

For a backward state expenditure on social sector must increased (consistently) especially on health and education. In last year’s budget, allocation on these two sectors were substantial despite the shortfall in government revenues (arising out of NGT ban) and the cut on CSS and grants by the central government. Budget allocation for 2016-17 on Education has decreased from Rs 681.88 crores in 2015-16 to Rs. 677 crores. Is this a harbinger of deteriorating fiscal health for the state? A cut on social spending would revert all progress made by the state.

A word on Meghalaya’s growth rate which was cited as the highest in the country for 2013-14. How much of this growth rate has resulted in increase in real income of the people and how much has it succeeded to decrease poverty levels in the state needs to be investigated. If this growth rate is a result of external support it is safe to assume that this rate would dip sooner than expected because of the crunch of financial support and the lack of revenue generation internally. Dwindling external support would cut off the line-line to the state causing repercussions which maybe difficult to overcome. The Chief Minister himself has said that the NGT ban was a bolt from the blue leaving the state hanging precariously. An important question therefore needs answer. Can such an economy whose growth rate is supported from outside and whose internal ability to generate resources is restricted to a few sectors such as mining be able to sustain itself in the long run?

 

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Phrangsngi Pyrtuh Written by:

Phrangsngi Pyrtuh teaches in a college and is a fellow traveller

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