STATE OF THE ECONOMY. Nothing ‘special’ about Assam

The Tarun-Gogoi-led Congress government has been ruling Assam for the past 15 years. To gauge its performance over the past five-years, we looked at some economic, financial, social and law and order indicators.

Economic slowdown With the scrapping of the status of ‘Special Category (SC)’ altogether by the Fourteenth Finance Commission (FFC), Assam no longer gets preferential status when it comes to financing from the Centre.

Even when it enjoyed ‘SC’ status, Assam’s economic growth lagged its peers — the six other North-Eastern States and Himachal Pradesh, Sikkim, Uttarakhand and Jammu and Kashmir. Assam’s economy — the biggest among the SC States — grew at an annualised rate of 5.8 percent over the past five years (FY’11-15). That was lower than that of eight of the 11 SC States.

Its agricultural economy –– which grew at a slower pace of 3.1 percent –– suffered from poor agricultural yields, with frequent cases of flooding and cyclones. Assam’s industrial growth too averaged 5.1 per cent in the past five years, lower than that of most of the SC States. But the State benefited, to some extent, from the North East Industrial and Investment Promotion Policy (NEIIPP), which gave multiple sops to establish industries within the region. Service economy, which accounts for the largest share, grew at 7.1 percent over the past five years.

Financially sound Assam’s finances are, however, in a much better position than those of its peers. Assam was one of first SC States to pass the Fiscal Responsibility and Budget Management (FRBM) Act in 2005, and had a revenue deficit of 0.1 per cent of GSDP in 2013-14, against the average of 1.7 per cent for the SC States. The State is expected to become revenue-surplus by 2017-18, according to the FFC. The State’s debt-to-GSDP ratio was fairly comfortable (19.2 per cent of GSDP in 2013-14); it was the lowest among all the SC States.

The tax-revenue-to-GSDP ratio was 32.8 per cent in 2013-14, the highest in the country and nearly double that of the next best State. Assam earns the bulk of its tax revenues in the form of Own Tax Revenues (OTR), by levy of State sales tax/VAT.

Among non-tax revenues, current transfer to GSDP is among the lowest for Assam (18.4 percent in 2013-14), against 45 per cent plus for Arunachal Pradesh, Manipur and Mizoram. Contrary to the incumbent government’s reasoning, the lower transfer cannot be attributed to a rival political alliance (the NDA) coming to power at the Centre in 2014. Tellingly, even prior to 2014, Assam had received similar levels of transfers from the Centre.

The relatively lower transfers may have to do with the lower absorptive capacity of the State –– which in turn can be traced to the challenges of difficult topography, social unrest and frequent natural calamities. It is highly likely that the other SC States benefited from high transfers, which boosted investments and growth, and helped them outpaceAssam in economic growth.

Social laggard Assam’s social expenditure has been in line with the expenditure of the SC States in the past few years. On an average, it spent about 20 per cent of its total expenditure on education, against the all-India average of 15-16 percent over the past five years. However, post the innovation of 2005, where the ‘boat clinics’ of the State government reached out to the remote islands of Assam, the government has done little to improve the health of the poor.

Lower literacy levels, higher mortality rates among infants and among new mothers as well as higher poverty levels continue to affect the social development of the State.