Nagaland proposes ‘Capital Deficit Grants’ to overcome accumulated deficit

November 6, 2024 1 View No Comment

Morung Express News
Kohima | November 6

The Government of Nagaland has put forth a proposal for ‘Capital Deficit Grants’ to the XVI Finance Commission, emphasising the need to bridge the infrastructure and governance deficits accumulated over the years.

The proposal is based on the constitutional mandate of the Finance Commission, which aims to capitalise on the revenue generation potential of the state, boost green growth initiatives and sustainable development, and particularly, to overcome the accumulated deficit in infrastructure and governance.

Informing this at a press briefing following the meeting with the state legislators and departmental officers, Dr Arvind Panagariya, Chairman, remarked, “This was a very new thing for the Commission.”

In addition to the Revenue Deficit Grants it receives, the government has asked that they also capitalise grants because of Nagaland’s special circumstances.

“This is not something that any of the Commissions had done in the past,” he stated, noting that this proposal has come from the fact that the Planning Commission existed and allocated some grants called capital projects earlier.

When asked, the Chairman said that the GDP and GSDP to debt ratio of Nagaland is quite high, and the fiscal deficits are also growing, which is a matter of concern from the overall macroeconomic stability viewpoint, he added.

However, he maintained that Nagaland is not the only state, as there are some other states with these issues as well.

Although it is premature for the Commission to say anything, Dr Panagariya commented that it is likely to say something about those states where macroeconomic balance at large needs to be addressed.

Giving an overview of the meeting, he said the state has emphasised its financial challenges and outlined specific requests in its presentation.

The Finance Commission’s role, he maintained, is to advise on the division of the nation’s divisible resources on vertical devolution between the centre and the states, and horizontal devolution based on criteria such as per capita income, population, forest area cover, among others.

Also, the Commission provides recommendations on grants for local bodies, disaster management, sector-specific grants, and state-specific grants from the consolidated fund of the Government of India.

Further highlighting the state’s proposals to the Commission, Dr Panagariya said the Nagaland government has proposed to be included in the cesses and surcharges, from which it is currently deprived of its share.

“The state government somehow would like to be included in the divisible pool or somehow adjust the share of the states in a way that the losses are compensated,” he stated.

The state government, he informed, suggested that weightage be given to forest cover in the horizontal distribution formula by proposing a 15% increase from 10% in the 15th Finance Commission to reflect the state’s extensive forested land, and also modify the criteria of forests.

It was also informed that the Nagaland government has proposed a ‘disability index’ to account for the unique cost challenges owing to its terrain, which impacts economic activities.

Dr Panagariya further noted that the specific project grants proposed by the state government included infrastructure, airport, foothill roads, hydroelectric projects, etc.