Introduction:
Meghalaya is one of the eight states of North East India. Meghalaya is located in the remotest part of the country and shares its international border with Bangladesh in the South. Meghalaya is predominantly inhabited by three major tribes – Khasis, Jaintias and Garos. The primary means of occupation of the people of the state is agriculture which is characterized by low productivity due to primitive methods like shifting cultivation which is commonly practiced in the hilly areas. Although Meghalaya has abundant natural resources, it is industrially backward because of poor infrastructure and financial crunches. It falls under the special Category states (SCS) along with all other North Eastern States of India which entitled it to get various financial incentives from the Central Government. Meghalaya just like any other North-East states is clubbed under the SCS because they are geographically isolated and industrially backward states. Meghalaya as a state largely depends on central transfers to run its day to day economic activities. Being labeled a special category status, Meghalaya enjoys numerous financial assistance from the central government. The state is entitled to nearly four times per capita plan assistance compared to other states. Other financial incentives include various excise exemptions and income tax holidays. However, one of the defects of special category status is that although Meghalaya has been receiving huge financial incentives, the flow of transfers is not properly accounted for and monitored which promotes corruption and hence mismanaged. This has resulted in a vicious circle of financial dependency on central government funds and transfers. The state is characterized by low industrialization and backwardness, low standard of living, low growth rate, high cost of production, low productivity, low investment, lack of private investment and initiative, excessive loss-making PSUs, deteriorating financial position and low employment economy. The unemployment rate is quite high among the educated youth. At the national level, India has achieved a lot through the adoption and implementation of liberalization, privatization, and globalization (LPG). However, the LPG model adopted by India has little or no impact on the economy of Meghalaya.
Socio-economic Profile:
The population of Meghalaya as of 2011 Census was 2.9 million out of which 2.3 million are rural population and 0.6 million are urban population. The decadal population growth rate during 1991-2001 was 30.65% while during 2001-11 it was 29.95%. The sex ratio which indicates the number of females per 1000 males is quite satisfactory as compared to other states of India which was 989 as of 2011. The literacy rate of Meghalaya is 74.43% which is slightly higher than all India levels at 72.9%. The birth and death rates are 23.7 per thousand and 6.6 per thousand respectively as of 2016. The Infant Mortality Rate (IMR) which indicates the number of deaths per 1,000 live births under one year of age for that state was 39 in 2016 which high that the all India level of 34. The unemployment rate of the state measured by usual status where the reference period is 365 days is 4 per 1000 in rural areas and 28 per 1000 in urban areas as of 2011-12. With regard to the poverty rate, the number of persons falling under the poverty line based on the mixed recall period (MRP) as of 2011-12 was 0.36 million which is about 11.87% of the population. Under the MRP method, the information on five broad items of household expenditure with a low frequency of purchase namely clothing, footwear, education institutional medical care, and durables are collected on year-long recall basis while information on consumption expenditure on all other items is collected on the basis of a month-long recall period.
The developmental experience of Meghalaya is not a very encouraging one. The Human Development Index (HDI) is a summary indicator of the level of achievement in human well-being. It measures achievements in the basic dimensions of human development – health, education, and income. The HDI of Meghalaya as of 2005 is 0.585 which ranks 26 among other states and union territories of India. It is way behind other Northeastern states of India such as Mizoram which rank 4, Nagaland which rank 7, Manipur which rank 11 and Sikkim which rank 13. The state also has a low per capita net state domestic product (NSDP) of Rs. 72,870 which is below the national average of Rs. 1, 14,958. For a state with low per capita income, it is almost impossible to achieve a high physical quality of life indicators like high literacy, high life expectancy, and low infant mortality.
Trends in Growth of State Income:
The contribution of different sectors to the Gross State Domestic Product (GSDP) is almost stable over the years based on the trend available from 1993-94 to 2002 where the contribution of the primary sector is about 33%, secondary sector is 15% while the service sector contributes about 52%. The annual growth rate of GSDP is about 3.69% in 1994-95 which increased to 10.51% in 1995-96. It fell down to 3.71% in 1996-97 and then slowly rising up to 6.20% and 9.87% in 1997-98 and 1998-99 respectively. However, in 2000-0, it gain fell down to 3.74% before rising to 6.80% in 2001-02. The data available from Economic Survey 2018-19 for the period 2012 to 2018 shows that the growth rate of the Meghalaya Economy is quite low and unstable compared to its neighboring Northeastern states of India. The growth rate of net state domestic product (NSDP) at current prices in 2012-13 was 9% and it fell down to 3.9% in 2013-14 and further to 1.4% in 2014-15 before rising to 8.8% in 2015-16. The growth rate of NSDP as of 2017-18 was 10.7% which is slightly low than the all India NDP growth rate of 11.2%. In terms of per capita Net State Domestic Product (NSDP), again the performance of Meghalaya is very poor compared to other Northeastern states. The per capita NSDP growth rate of Meghalaya was 6.7% in 2012-13 and it fell down to 1.7% in 2013-14. In 2014-15, it recorded a negative growth rate of -0.7%. No other NE states experienced a negative growth rate during the period 2012-2018. The per capita NSDP growth rate pick up to 5.9% in 2016-17 and further to 8.4% in 2017-18 which is again below all India per capita NNI growth rate of 9.8% in the same year.
Performance of Agriculture:
Some of the major agricultural produce of Meghalaya are rice, wheat, maize, pulses, oilseeds, fruit crops such as pineapple, banana, and papaya, vegetables such as potato, spice crops such as ginger and turmeric and plantation crops such as tea and areca nut. With respect to agriculture, Meghalaya has performed poorly over the years. The data available for the period 2006-07 to 2012-13 indicates that the Compound Annual Growth rate (CAGR) of the total area under rice cultivation has increased only by 0.81% during the period. Similarly, the CAGR of the total area under food grains cultivation which includes pulses has increased only by 1.34%. It is interesting to note that the CAGR of the total area under pulses and oilseeds cultivation increased by 14.59% and 5.64% during the period 2006-07 to 2012-13 which is higher than CAGR of the total area under food grains. The CAGR of rice production which includes rice produce under different seasons such as autumn, winter and spring increased by 4.12% over the same period. The CAGR of total food grain production is 4.90%. There a remarkable improvement with regard to the production of pulses and oilseeds both registering a CAGR of 25.94% and 13.49% respectively. Rice accounted for about 83% of the total food grains in the state. The total production of rice was 2, 31,613 metric tonnes in 2006-07 which increased to 3, 08,650 metric tonnes in 2012-13. Most agricultural commodity markets generally operate under the normal forces of demand and supply. However, with a view to protect farmers and encourage increased production, the government fixes minimum support price (MSP) for some crops like Paddy, Wheat, Jute, etc. The Government of Meghalaya has also set up two Regulated Markets – one at Mawiong in East Khasi Hills District and the second at Garobadha, West Garo Hills District. Besides, there are also 7293 Wholesale Markets and 27,294 Rural Periodic.
Industrial Sector:
Meghalaya is an industrially backward state. The geographical isolation, poor infrastructure and political instability of the state act as a deterrence to private investment both from within the state and outside. Other factors that cause industrial backwardness are a high cost of production on account of infrastructural deficiency and acute shortage of power, lack of risk-taking behavior on the part of local entrepreneurs, high cost of transportation of raw materials and finished products, lack of skilled laborers, etc. According to the State Development Report 2008-09, there are only 116 units of large and medium industries in the state. The majority of the large and medium industries in the state are cement, steel units, limestone mining and crushing plants, foods, etc. There are 17 state public sector undertakings (SPSUs), out of which one is a non-working SPSU. The working SPSUs registered an aggregate turnover of Rs. 935.69 crore as per their latest finalized accounts as of September 2016. This turnover was equal to 3.43 percent of Gross State Domestic Product (GSDP) of Rs. 27,305 crore for 2015-16. The working SPSUs incurred an overall loss of Rs. 389.50 crore as per their latest finalized accounts as of September 2016 as compared to the aggregate loss of Rs. 220.92 crore incurred by the working SPSUs as of September 2015. The increase in the aggregate loss of working SPSUs was mainly on account of net overall losses of Rs. 365.30 crore incurred by power sector companies in 2015-16. There are 22,520 units of small scale industries (SSI) in Meghalaya which is about 0.21% of the total number at all India level. The SSI provides employment to about 65,586 workers.
Banking Sector:
The number of banks and other non-financial banking institutions (NBFIs) in the state has increased over the years. However, most of the banks especially private banks are mostly concentrated in urban areas. A large number of rural areas and villages are yet to be connected by banks. The regional rural banks (RRBs) in its effort has tried to provide banking facilities in rural areas, however, most of them are again located in rural areas where there are large markets. As of 2018, there are only 343 scheduled commercial bank offices and 93 regional rural bank branches. The credit-deposit ratio which indicates how much banks lend out of its mobilized deposits is also very low for Meghalaya which around 25 to 28%. This indicates that few people take loans from banks for entrepreneurial purposes. The credit-deposit ratio for all India level is 76.7%.
Fiscal Scenario:
The fiscal scenario of Meghalaya is characterized by a growing fiscal deficit. The state depends on grants and borrowing from the central government to finance its expenditure. It has never experienced a cash surplus. The Gross Fiscal Deficit (GFD) which depicts the excess of total expenditure over revenue receipts and a measure of the amount that the state needs to borrow has been widening over the years and it was about Rs. 11.5 billion in 2018-19. The reason for growing GFD is also triggered by the obligations of the government to undertake social sector expenditures. The social sector expenditure of the state government as of 2018-19 was Rs. 63.9 billion. The fiscal strength of the state can be understood by looking at its financial dependency and the ability to raise revenue on its own. In 2018-19, the Meghalaya State Government had a total revenue receipt of Rs. 9273.48 crore out of which the share of the revenue raised by the state was only 1816.73 crore which is only about 19.59% of the total revenue receipts. This figure itself speaks louder about the financial dependency of the state on the central government in the form of transfers and grant-in-aid. The contribution of revenue receipts by the Government of India was Rs. 7456.75 crore which is about 80.41%.
Concluding Remarks:
The analysis above indicates that the Meghalaya economy is still a poor and backward state. The state lack behind in terms of basic infrastructure, industries, sound financial and fiscal management. The state cannot achieve growth and development because of factors such as low growth in different sectors, the poor performance of the SPSUs, low level of investment, instable financial and fiscal situation, and continuous dependence on the central government. In order to achieve the required growth and development, the state must develop and implement alternative plans and strategies. The state must make a tremendous improvement in terms of agriculture and industries. The state should encourage more private investment in the industrial sector. The state must also identify its comparative advantage with respect to other states and regions of the country. The state should invest more in identifying the sectors that can help in the development of the state and provide employment to a large number of people. Although the state is quite behind the rest of the state in all spheres, however, it has a lot of potentials to develop itself as a self-reliant and prosperous state. The state has abundant natural resources that are yet to be exploited. Meghalaya is also blessed with beautiful natural landscapes, magnificent caves, mesmerizing waterfalls, rich culture, and tradition, etc. The state can convert this opportunity to augment its revenue by using tourism as a unique selling point. The state can work on attracting tourists from its neighboring South East Asian countries. The state should also capitalize on its social assets like good education system, English speaking youth, and natural beauty. Given the fact that the state government has a little financial resource, it should focus on attracting private investment from other states of the country and also foreign direct investment (FDI) from abroad in those sectors which can help in the development of the state.
References:
1. Statistical Handbook of Meghalaya (Several Years). Directorate of Economics & Statistics, Government of Meghalaya.
2. Statistical Abstract of Meghalaya (Several Years). Directorate of Economics & Statistics, Government of Meghalaya.
3. Handbook of Statistics on Indian States 2018-19. Reserve Bank of India.
4. Reports on Area, Production, and Yield of Agriculture Crops (Several Years). Directorate of Agriculture, Meghalaya.
5. Report of the Comptroller and Auditor General of India, 2018. Revenue Sector. Government of Meghalaya.
6. Annual Report 2018-19. Ministry of Micro, Small & Medium Enterprises (MSMEs). Government of India.
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