Nagaland Faces Fiscal Challenge with Lowest Own Revenue among Indian States

State Finances Report Reveals Alarming Trends

A recently released report by PRS Legislative Research sheds light on Nagaland’s fiscal predicament, as the state grapples with the lowest own revenue among all States and Union Territories in India.

Own Revenue Dips to 12% of Total Budget Estimates for 2023-24

Nagaland’s own revenue, a combination of ‘Own Tax’ and ‘Own Non-tax’ revenue. Accounts for a mere 12% of the total budget estimates for the fiscal year 2023-24, according to the ‘State of State Finances’ report.

Mizoram Close Behind, Northeast States Struggle with Own Tax Revenue

While Mizoram trails with just 9% in ‘Own-Tax’ revenue, Nagaland is not alone in its struggle. States in the Northeast, including Arunachal Pradesh and Manipur, face similar challenges. With 13% of their total revenue receipts estimated as own revenue.

Assam Leads Own Tax, Northeast Reliant on Central Assistance

Assam takes the lead with 31% own tax in its total budget estimates for 2023-24. While Northeastern states heavily rely on devolution and grants-in-aid from the Union Government.

High Dependency on Central Largesse

All Northeastern states, including Nagaland, are largely dependent on devolution and grants-in-aid from the Union Government. Arunachal Pradesh tops the list with 69% of its total revenue receipts coming from devolution.

Nagaland’s Dwindling Finances Raise Concerns

Nagaland’s financial outlook may worsen without an increase in own tax revenue. The share from devolution is expected to decrease from Rs 4447 crore in 2023-24 to Rs 3647 crores in 2025-26, according to the report.

Urgent Need for Revenue Mobilization

The report emphasizes the urgency for Nagaland to enhance its own tax revenue. As the state faces a potential decline in financial assistance. The 15th Finance Commission recommends a total post-devolution revenue deficit grant of Rs 21,249 crore from 2021-22 to 2025-26.

Overall Fiscal Landscape

In 2023-24, states, on aggregate, are projected to raise 57% of their revenue receipts from own tax and non-tax sources. Indicating the states’ ability to mobilize revenue from economic activities, with an estimated own tax to GSDP ratio at 7%, according to the report.