Snapshot of the floundering economy of Meghalaya


By Sumarbin Umdor

Recently I, along with some other panelists, were invited to speak in a programme marking the 18th foundation day of the United Democratic Party (UDP). Frankly, I was surprised by the decision of this political party to use the occasion to invite social thinkers and academia to deliberate on pressing socio-economic issues facing the state. I was impressed by the large turnout of ordinary party members who had come to listen and take part in the day long deliberation along with the entire party leadership. I was even more surprised to see a number of nontribal party workers among the audience. For a regional party that is out of power and with just 8 MLAs in a house of 60, the enthusiasm of the party workers which was evident that day bode well for the future of thUDP.

Since the topic given to me on the State of Economy of Meghalaya may be of interest to many, I’ve summarized the same here in this column.

A third world economy: With a GSDP of about 3.5 billion (current US) dollars, the size of the economy of Meghalaya is comparable to Swaziland (not Switzerland) which is one of the smallest economies in the world. Within the country, our per capita income of about Rs. 60000 is roughly one forth of Goa, half of Maharashtra and one third of Sikkim. In an interesting exercise undertaken by The Economist to compare country equivalent to Indian states in terms of GDP, GDP per person (in PPP terms) and population, the country equivalent to Meghalaya is the Central African Republic (CAR) which happens to be one of the least developed countries of the world. The similarity of this country with the state however goes far beyond GDP parameter. The CAR possesses considerable agricultural, water and mineral resources, but corruption is rife and it undermines the growth of economy, a situation which is also true for our state.

The economy of Meghalaya has seen a rapid transformation with share of agriculture and allied sectors dropping from a high of 40 percent of GSDP in early eighties to 16 percent at present, accompanied by steady increased in the share of industrial and services sectors. However, while the relative importance of agriculture to the GSDP has decreased significantly two third of the population continues to depend on this sector for their livelihood, a pointer to a very low productivity of the sector. Further, aggravating the situation is the low GDP growth rate of agriculture which is little under 3 percent during 2005-14 compared to growth of 10 and 8 percent achieved by Mizoram and Sikkim respectively during the same period.

Jobless growth: Within secondary sector, manufacturing sub-sector has seen a phenomenal GDP growth since the early 2000s’ at 22 percent between 2005-14 largely driven by the subsidies and fiscal incentives offered under the Northeast Industrial Policy and also the availability of cheap and reliable power supply in the state. However, the growth in manufacturing has not been accompanied by commensurate growth of employment opportunity for the local population. Given the lack of job creation in other formal sectors, most of the employment outside agriculture is therefore in the low productivity informal sector particularly in informal construction, retail trade, transportation, etc

Power guzzler industries: Most of the manufacturing units that have come up in the state are power intensive industries falling under the extra high and high tension (EHT) category which has totally distorted the demand for power in Meghalaya. The sale of energy to industrial units which was for only 9 percent in 1997-98 today accounts for a whopping 44 percent driven mainly by demand from EHT industries. Still striking is the fact that the number of EHT industrial consumer at 155 constitute less than one percent of the 3.12 lakhs electricity consumer in the state. Thus the moot question is whether the present industrialization is beneficial to the state? The need of the hour is for a comprehensive evaluation of the NEIIPP 2007 in terms of its impact on the economy and job creation in the northern states.

Crumbling infrastructure and public service delivery: As per Meghalaya Human Development Report of 2008 there has been deterioration in the   position of Meghalaya to that of all India average in respect of key infrastructures. But do we really need data to tell us this. The crater size pot hole punctuating our highways and subways bear testimony to the pathetic state of infrastructure which has only worsened with every passing year. If infrastructure in Shillong the seat of government is so bad then one can only imagine the pitiable condition and hardship that the people in rural areas have to bear with.

According to the ‘Millennial Survey of India’s Public Services’ carried out in 2001, Meghalaya was among the worst performer in terms of management and delivery of public services such as drinking water, health & sanitation, education & child care, public distribution system and road transport as judged by the end users of these services. It is unlikely that the state would fare better if a similar study is undertaken now as nothing much has changed in the last 15 years.

Government Finances, a leaky bucket: There has been very little effort by the state government to improve own generation as evident by the low tax GSDP ratio. Also, very little attention is being given to the huge loss of revenue to the state on account of evasion of taxes. The state government can augment its revenues manifold by plugging the loopholes and leakages taking place through a systematic evasion and fraud committed year upon year without adequate remedial action. But no sincere efforts have been made by the state government in this regard.

The government has not been very proactive in effective and productive expenditure management as can be seen from high revenue expenditure at around 80 to 85 percent leaving very little for capital expenditure which increases the productive capacity of the state. There is a dearth of measures to improve the technical and allocative efficiency in public expenditure. In Meghalaya the execution of public projects is marred by huge delay and cost overruns with the Greater Shillong Water supply Scheme being a not so shining example. What makes the situation worse is that there is no accountability for lapses and misappropriation of public funds.

This culture of impunity in Meghalaya has only emboldened the looting of public money which is evident in the series of scams to hit the state in recent times. The latest is the purchase of male infertility drugs worth crores of rupees in a state with the highest fertility rate in the country. A recent report by anti-poverty organization, ‘One’ concludes that corruption inhibits private investment, reduces economic growth, increases the cost of doing business and can lead to political instability. It further asserts that corruption is a killer. When governments are deprived of their own resources to invest in health care, food security or essential infrastructure, it costs lives and the biggest toll is on children. It is no wonder then that Meghalaya continues to top the chart when it comes to child mortality in the country.

(The author teaches Economics in NEHU)

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