• Corruption, excess government employees
• Road shows, Hornbill festival
• Superfluous government buildings
• Backward economy, manipulated development funds

The reasons why Nagaland Government continues to throw up Deficit in its finances are myriad–and obvious–reasons: The deficit budget in case of Nagaland government is because of the expenditure on “non-productive assets.” In other words, using money where it shouldn’t have been used, according a local seminar that studied the state’s malady.

According to the study, the reasons for the deficit corroborate the long-standing sentiments of the state’s public: corruption, extravagance, extraneous and superfluous government employment sector and ‘investment’ in unproductive events, and ‘blatant’ misuse of developmental funds.

The commerce department of KROS College in Kohima town organized a seminar on October 30. Dr Ratanbo Kaurinta, associate professor of the department of commerce of Nagaland University was the resource person.

During the event, a resource person David Khutso presented a paper “fiscal deficit of Nagaland from 2004-16 and measures to fix the debt.” Another speaker, Keliihol Tase, presented a paper titled “The Implication and the Recommendations of the 13^th Finance commission of State Budget (Nagaland) 2007-12.”

The seminar attempted to recommend a “common sense solution to renew Nagaland’s economic strength,” the institution said in a note issued to the media on Monday, November 2.

In his address, Dr Kaurinta said, ‘Every time economists sense Nagaland is or will be in trouble, the phrase fiscal deficit often pops up. While some experts believe that fiscal deficit is a positive that helps the country grow, others think otherwise, favoring a balanced budget policy.’

Fiscal deficit is the difference between the government’s expenditures and its revenues (excluding the money it’s borrowed). A country’s fiscal deficit is usually communicated as a percentage of its gross domestic product (GDP).

“Government spending, inflation and lower revenue are among some of the main factors that point to fiscal deficit. The cynical nature of fiscal deficit does not only jeopardize the growth of the country but also the government’s economic management abilities,” the college says.

The seminar had this analysis: In an ideal financial system, which has a balanced fiscal deficit, the cost of expenditure is low while production and growth is advancing. But when there is an increase in fiscal deficit it means that the government is spending too much while it is earning less. Hence, it is important that the government keeps its expenses under control. One way the government earns money, is through taxes.

For example, if the government lowered taxes or provided tax concessions to a particular group of people, then it would earn less, leading to an increase in fiscal deficit. And that’s one of the reasons why you will find the government giving a face-lift to the tax structures.

In the same context, cutting of custom duty and excise duty will lead to declining revenues. Like Nagaland, many neighboring states are making an effort to resolve big fiscal deficits. Fiscal deficit does not come about only in case of creating less revenue and spending more money. Another major reason for a growing fiscal deficit can be slow economic growth or sluggish economic activities.

David Khutso presented the trending and causes of fiscal deficit. The deficit budget in case of Nagaland government is because of the expenditure on non-productive assets. Some of the causes, according to the organizers, are:

• Road shows: Introduced by the DAN Govt. in 2009. The main attraction was the entertainment of the VIP’s.
• Hornbill: annual event which of pure merrymaking activities burdening the already depleted State exchequer.
• Palatial office buildings: Constructing govt. offices and complexes at a high cost.
• Excess government employees: 10,000 excess employees which consume Rs. 200 crores from the State Exchequer. 66% of the State budget is for payment of salaries.
• Backward economy: low level of income, high poverty, high unemployment etc
• Corruption: Public money siphoned by the Political leaders for their own self benefit.
• Election expenditure: Excess election expenditure
• State exchequer as ‘private account’: Centrally Sponsored Schemes are blatantly misused.

Also, resource person, Tase gave the following conclusion of the XIII Finance Commission and Recommendation:

• The fiscal position of the State viewed in terms of the key fiscal parameters during 2011- 12 revealed that the State’s revenue surplus had declined by ` 101.43 crore while the fiscal deficit had increased by ` 226.38 crore and the primary surplus had turned into primary deficit by a margin of ` 203.32 crore in 2011-12 relative to the previous year.
• During 2011-12, 90 per cent of the total revenue came from the Government of India as Central transfers (14 per cent) and grants-in-aid (76 per cent ).
• The overall fiscal liabilities of the State increased at a compound annual growth rate of 11.34 per cent during 2007-12. The fiscal liabilities increased by Rs 866 crore (15 per cent ) from `Rs 5773 crore in 2010-11 to ` 6639 crore in 2011-12. The committed liabilities for the State projected by the XIII-FC was 55.80 per cent of GSDP for the Government had invested Rs 228.01 crore in Statutory Corporations, Rural Banks, Joint Stock Companies and Co-operatives at the end of March 2012. The average return on this investment was NIL during the last five years.
• There were 138 incomplete projects (estimated cost ` 1499.47 crore and actual expenditure incurred ` 686.29 crore as of March 2012) pertaining to 18 departments. Out of the 138 incomplete projects 57 projects (estimate cost ` 654.02 crore and actual expenditure ` 326.31 crore) were due to be completed by March 2012 but remained incomplete as of October 2012. The date of completion in respect of the remaining 81 projects could not be furnished by the departments.
  Besides, due to delay in completion of the projects, the intended benefits from those projects did not reach the beneficiaries in the State.

Recommendations

• Fiscal Responsibility and Budget Management Act (FRBM) Act, 2005, a fiscal responsibility legislation prescribing specific annual targets with a view to eliminate the revenue deficit should be enacted.
• It is recommended that the government takes suitable steps to install an effective procedure for prompt and appropriate response to audit observations as well as take action against officials/officers who fail to send replies to IRs /paragraphs as per prescribed time schedules and also fail to take action to recover loss/outstanding demand in a time bound manner as Inspection reports issued up to June 2014 disclosed that Rs 58 crore relating to 94 IRs remained outstanding increased from 81 IRs June 2012 involving Rs 51.78 crore.
• The state-public sector undertakings (SPSUs), with the investment has grown by 46.39 per cent from ` 70.01 crore in 2009-10 to ` 102.49 crore in 2013-14, should not remain stagnant at 0.04 per cent to State GDP but should show increase in the turnover.
• Variation of revenue raised by the state government should show increase trends rather than decreasing, growth of revenue during 2013-14 over previous year was at 0.52 per cent against 1.92 per cent in the year 2012-13.
• For sector growth rates of agriculture and allied sectors, industry and services to increase at a higher rate. The Power department should make efforts to increase its own generation capacities by effectively utilising the budget allocations made by the Government to reduce dependency on outside purchase of power.
  The department should also devise effective systems to ensure efficient billing and collection of revenue. The irrigation & flood Control department should ensure that proper survey is conducted before the projects are taken up and ensuring Participation of the farmers in the process of planning, execution and maintenance of projects by forming WUAs and clearly defining their functions and responsibilities.

  The Tourism department should promote sustainable and nature-tourism as Nagaland is one of the hot spots tourist in India.

  Nagaland, many neighboring states are making an effort to resolve big fiscal deficits. Fiscal deficit does not come about only in case of creating less revenue and spending more money. Another major reason for a growing fiscal deficit can be slow economic growth or sluggish economic activities.

Al Ngullie