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Speech of Shri S.C. Jamir, Chief Minister, Nagaland
49th N.D.C. Meeting
, 1st September 2001, Vigyan Bhavan, New Delhi.


Respected Prime Minister, Members of the Planning Commission, fellow Chief Ministers and Distinguished Participants,

I am happy to participate in this 49th meeting of the National Development Council. At the outset, I congratulate the Chairman, Deputy Chairman and Members of the Planning Commission for bringing out a comprehensive draft Approach Paper to the Tenth Five-Year Plan 2002-2007. By and large, the objectives, strategies and priorities envisaged in the Approach Paper reflect the current social, political and economic scenario in India and the changes and reforms taking place in the world economy. However, despite being one of the ten fastest growing developing countries, we cannot ignore the stark truth that the majority of Indians still live below the poverty line and our per-capita income is very low even among the developing nations. The focus of the Tenth Plan has to be on developing this segment of the population and the growth of the economy cannot be in isolation of eliminating poverty.


The measures for reforming the planning processes suggested in the Approach Paper are understandable in the present context. However, we should keep in mind that while on the one hand the country is aiming to be a major player in the competitive global market, on the other hand some Regions and States still survive on subsistence economies. The advantages of liberalisation are yet to reach the people in many States. They will take many more years even to reach the stage of a transitional economy.

To enable such States to catch up with others, the Government of India declared some of them as Special Category States and certain concessions were granted for their accelerated economic development. Unfortunately, of late, some essential concessions like bridging of their BCR gap through Additional Central Assistance have been withdrawn, which has thrown their economy and development completely out of gear. In fact, I find no mention of Special Category States or their problems in the Approach Paper and I hope the very concept of Special Category States has not been erased from the political and economic vocabulary of the Centre as a fall-out of liberalisation. The process of liberalisation and economic reforms must have a human face, especially in a vast and diverse country like ours. Regional and State-to-State inequities cannot be ignored.

The target for the Tenth Plan to raise the level of GNP from the present level of 6.2% per annum to 8% per annum is laudable, but appears to be a little ambitious. I wonder whether this target has an inbuilt strategy to improve the economic base, growth levels and income levels of economically backward regions like the North East or is only based on the nation's capability to produce goods and services by enhancing the available infrastructures and facilities. A strategy that concentrates on enhancing existing infrastructure will only result in widening the gap between the advanced and backward States. I say this because the goal for achieving 8% growth in the Tenth Plan is almost unthinkable for a State like Nagaland, which has negligible economic activity and little internal resources.

In such a scenario, we naturally lost out on our genuine requirements. The extremely high quantum of negotiated loans as well as earmarked and tied funds gave the State practically no manoeuvrability for prioritisation of programmes. Moreover, such funds were earmarked primarily for development of infrastructure and social service sectors at the expense of the primary sector. As a result, the percentage of actual achievements under the primary sector, both physical and financial, was much below the targets during the Eighth and Ninth Plans.


The measures suggested for reforming the planning process in the context of the changing world economy are necessary to some extent, as we cannot swim against the global current. If excellence in science and technology can give India a competitive advantage in the world market, we have to realise our potential in these fields fully. There is no quarrel with that. However, what is important is that any drastic change in the planning process should not be at the expense of the poorest sections of our people who still struggle to get a square meal a day. We have to reconsider whether we have reached the stage to radically alter our entire planning process and reduce Government's role to such an extent that the poor are left high and dry.

The Tenth Plan coincides with a time when the nation is passing through a situation of poverty amidst plenty and resultant social tensions are evident all over the country. Other problems like high levels of insurgency and secessionist tendencies are plaguing several parts of the country. The answer to many of these problems is sustained economic development. Unless controlled rapidly, these political and social problems can have dangerous consequences. A uniform and across-the-board approach or over-dependence on any one set of economic parameters will be short sighted. A methodology that suits a particular State may not be suitable for another. Different Regions and States should be treated differently and given the flexibility to choose their own economic models, based on their social and economic conditions, priorities, strengths and weaknesses. For example, the insurgency problem in Nagaland may appear to be a small issue to others, but for us it has been an insurmountable problem for the last 50 years. Our political, economic and social priorities are aimed at tackling this issue and keeping the State as a part of the Indian Union. Consequently, our planning and development needs will be quite different from others, as the prime concern is to wean people away from insurgency. Hence, our priorities may be appreciated in the perspective of our problems.


I would like to briefly dwell on some of the issues relating to Nagaland, which I hope will be considered and addressed while formulating the Tenth Plan.

(a) For us, the Eighth and Ninth Plans were the worst periods for the economy and development of the State. The allocation of funds to the State during the last two Plans was not based on any realistic assessment of the development requirements of the State. The entire exercise was based on a mechanical assessment of the State's internal generation of resources and virtually ignored the socio-economic and political aspects. The Central Plan Assistance provided to the State was stagnant and if calculated at constant prices, the growth of Central Plan Assistance during the Ninth Plan has been negative. The aggregate outlay for the State was propped up by inclusion of a very high percentage of negotiated loan components, earmarked and tied outlays in the guise of Additional Central Assistance. There were no economic development activities worth the name during the Eighth and Ninth Plans. Even the assets and facilities created in the earlier Plans could not be maintained due to resource constraints- The result is that the State has been plunged into a vicious circle of fiscal crisis due to chronic debt burden and budget deficits. In order to sustain the deficits, the State has been forced to take more loans leading to a debt trap situation. Consequently we have been forced to cut back sharply on investments in development programmes.

(b) The decision of the Centre to change the funding pattern during 1988-89 was arbitrary and literally sounded the financial death-knell of the Special Category States. The task of making resource starved and backward States viable was practically given up. Despite my pleas at many earlier meetings of the NDC, the situation has been left to drift for more than one decade. As a result planned economic development activity in the State has almost come to a standstill since the Annual Plan 1989-90. If the State cannot develop how do we generate resources and become viable? It is not fair to leave us in the lurch to fend for ourselves. The Centre must find an alternative. In the present context our fate appears to be sealed and any hope of economic development seems impossible. Unless the Scheme of Plan Financing is restored to the pre-1989-90 pattern, there is no hope of a State like Nagaland becoming viable and contributing to the economy of the country. This reality should not be ignored and k is high time the problem is addressed seriously.

(c) The Eleventh Finance Commission (EFC) award was another blow to us and other Special Category States. The EFC grossly under-estimated the State's Non-Plan expenditure, while over-estimating our own revenues. The shortfall is nearly 39% of the actual requirement of funds assessed by us over a period of five years. Similarly there has been a drastic reduction in the percentage share of Central transfers to the State from 1.23% in the Tenth Finance Commission to 1.02% in the Eleventh Finance Commission. In terms of numbers, it works out to a loss of Rs.913 crore over a period of five years. This reduction is indeed substantial for a State like Nagaland where the total Central Plan Assistance provided to the State for the entire Ninth Five Year Plan is Rs.1253 crore. The details of the transfers to Special Category States as per the EFC award are given in the Annexure to my speech.

(d) Further, the Eleventh Finance Commission has not provided Capital Grants for the Special Category States whereas substantial funds were provided for the advanced and richer States. This decision by the Central Government will put the Special Category States further behind other States in the country. The gross imbalances thus created must be recognised and remedial measures taken. Balanced regional development has to be a major strategy of the 10th Plan for which resource deficit States must receive adequate support from the Central Government.

(e) Another unfavourable measure for the economically backward States is the scheme of 'States Fiscal Reforms Facility 2000-01 to 2004-05 drawn up by the Ministry of Finance on the basis of the EFC Award. Under this scheme, 15% of the recommended Revenue Gap Grant during the 5-year period is to be withheld and transferred to an Incentive Fund. The withholding of 15 % of Revenue gap grant directly affects the 16 States that are entitled to the grant. These States will be restored the Revenue Gap Grant only if they fulfil the stringent norms of fiscal reform, upon which they will be entitled to a nominal incentive. In contrast, 12 other relatively affluent States which otherwise are not entitled to the grant under the EFC Award will be entitled to receive hefty amounts from the incentive fund after fulfilling the fiscal reform norms, even though they do not stand to lose anything if they fail to achieve those norms. For instance, in the case of Nagaland, an amount of Rs.530 crore will be with held and the incentive available on achieving the fiscal reform norms will be only Rs.5 crore. On the other hand, for a State like Maharashtra no amount is withheld, but they will get an incentive of Rs.492 crore for achieving the fiscal reforms. It is urgently necessary to review the Fiscal Reforms/Incentive schemes to ensure that major schemes from the Incentive Fund is made available to the Revenue Deficit States, since the scheme, in its present form, will make the rich States richer and the poorer States still poorer.

(f) The methodology of allocation of Plan Outlays to the States is another area of concern for us. The Annual Plan discussions with the Planning Commission have, of late, become fairly ritualistic. The Plan allocation is not based on development strategies or identified priorities but is pre-determined purely by the State's own resources and the BCR gap. Being a State without adequate internal resources, we are left to fend for ourselves. Unrealistically high quantum of components of Negotiated Loans, EAP and earmarked outlays make the Plan size look attractive on paper, but in reality it is devoid of any meaning. The State's debt burden becomes heavier and heavier each year without real development on the ground as per our priorities. I strongly urge this august body to take a decision to reverse the process of Plan discussions and start from bottom to top approach. The allocation of Plan outlay should be based on the merit of Plan programmes and schemes and the development needs of the State and not entirely based on the State's own resources. If the present imbalance and misallocation of resources is not corrected, I am afraid the following serious complications will arise:

  1. Development activities will remain confined to a few infrastructure areas covered under the earmarked sectors and projects eligible for financing through loans. Vital areas such as promotion of agricultural productivity and generation of income and employment will suffer for want of investment.
  2. Without increase in productivity, the revenue base of the State will continue to remain stagnant, which will further affect the planning and development process. The current trend of Plan activities provides no prospect of the State ever becoming self-reliant in the near future.
  3. There will be no generation of employment opportunities leading to escalation in social unrest and insurgency activities that will further cripple the economy.

(g) Funds for maintenance of assets and posts created during the 7th and 8th Plans is also a major problem area that needs redressal. Every year nearly 15% of our Plan resource is spent towards maintenance of assets and posts created during the last two Plans, as the full requirement of funds on this account is not provided under Non-Plan grant. This has further compounded our financial problems leading to erosion of Plan resources. The Planning Commission may take a concrete decision whether the requirement of fund on this account will be met from Plan resources or provided under Non-Plan. Despite our repeated pleas, the Eleventh Finance Commission neglected this issue and no fund is provided in the EFC grant for the purpose. I may also point out that an additional burden of Rs-58 crore of Non Plan expenditure was transferred to Plan during the Annual Plan 2001-2002 for the sake of reducing the State's BCR gap. Such exercises push the State further into financial deficit and force a cut back of investment in development programmes. The Central Government should examine this matter in all seriousness and accommodate the expenditure for maintenance of posts and assets created during the last two Five Year Plans by providing a 'Special Package of Central Assistance'.

(h) In the previous meetings of the NDC, I had suggested that while we do not have any objection to the proposal for transferring of some of the C.S.S to the State Governments, the Central Government should ensure that requirement of funds for maintenance and implementation of the transferred schemes should be fully provided for by the Centre. However contrary to our request, the Centre had transferred 116 Centrally Sponsored Schemes to the State but the funds allocated for maintenance or implementations of these schemes is not at all commensurate to the requirement. This has added to the financial burden of the State Government. I urge the Centre to realistically assess the requirement of funds for the transferred schemes and proportionate funds provided to the State Governments for maintenance and implementation of the schemes. It may be a good idea to bunch a large number of CSS into compact sector-wise schemes. The mode of implementation should be made flexible and in the case of Special Category States, the State contribution should be dispensed with.

(i) The Hon'ble Prime Minister has already decided that 10% of fund in each sector must be utilised in the North Eastern Region. A Non-lapsable Pool of Central Resources has also been created out of the shortfall in such expenditure. However, it is common knowledge that we are far from spending 10% of Central sector fund in the region. A detailed paper on this issue may be brought out by the Central Government showing the quantum of 10% in each sector and its utilisation State-wise, since the decision was taken by the Hon'ble Prime Minister. This should include the externally assisted sectors as well and any shortfall must be compensated forthwith.


Very high emphasis has been given in the Approach Paper on privatisation. While this is a welcome trend, many States, including Nagaland have various limitations and constraints in attracting private investment. For successful privatisation, the State should have strong infrastructure facilities. With the present level of Central Funding, it will take many more years for the State to attain the level of development whereby private entrepreneurs are willing to make investments in the State. I may point out that the Shukia Commission appointed by the Planning Commission had estimated in 1997 that the level of infrastructure was so poor that over Rs.93,000 crore will be required for bridging the gap in infrastructure in the North Eastern region but till date the flow of funds has been minimal. This gap in infrastructure needs to be bridged on a war footing.

In conclusion, I may be allowed to reiterate that the planning process and the development of a State is not the sole responsibility of that State alone. The Centre must help find some answers to the problems faced by the States in the present circumstances. It will be necessary to evolve new norms of financing the Plans, especially for the less developed and insurgency-affected States, as we seem to have reached an impasse today with no solution in sight. I thank you for giving me a patient hearing.


States VIII FC Total (1985-90) Percentage IX FC Total (1990-95) Percent XFC Total (1995-00) Percent XI FC Total (2000-05) Percent
Transfers to Total Transfers to Total Transfers to Total Transfers to Total
1. Arunachal Pradesh 834.88 0.79 1768.36 0.78 2315.18 0.53
2. Assam 1607.48 4.07 3956.30 3.73 8328.05 3.68 13280.86 3.06
3. Manipur 469.05 1.19 1085.47 1.02 2136.62 0.94 3218.91 0.74
4. Meghalaya 821.89 0.78 1888.85 0.83 2961.41 0.68
5. Mizoram 381.86 0.97 1021.01 0.96 1802.01 0.80 2535.27 0.58
6. Nagaland 527.42 1.34 1244.30 1.17 2793.04 1.23 4449.76 1.02
7. Sikkim 104.45 0.27 252.18 0.24 698.S9 0.31 1633.92 0.38
8. Tripura 561.18 1.42 1433.92 1.35 2873.21 1.27 4361.04 1.00
Total N.E. States 3651.44 9.26 10649.95 10.04 22289.03 9.84 34753.35 7.99
9. Himachal Pradesh 774.37 1.96 1860.02 1.75 4761.66 2.10 7460.43 1.71
lO.Jammu and Kashmir 1119.69 2.84 3358.74 3.17 7322.08 3.23 16428.22 3.78
Total Special Category States 5545.50 14.06 15868.71 14.96 34372.77 15.17 58642.00 13.48
Total Non Spl. Cat. States 33906.51 85.94 90167.72 85.04 192270.53 84.83 376263.40 86.52
Total: All States 39452.01 100.00 106036.43 100.00 226643.30 100.00 434905.40 100.00