Finance Commission Chairman Stresses Fiscal Self-Reliance for States in Nagaland Meeting
Kohima: Chairman of the 16th Finance Commission, Arvind Panagariya, emphasized the need for states to enhance their internal revenue generation to boost fiscal self-reliance during a press conference held in Kohima, Nagaland. While encouraging states to develop their own revenue streams, he assured that regular grants and fund devolution to states would continue without disruption.
Panagariya highlighted the link between state revenue and economic growth, noting, “The Commission generally does encourage states to raise as much of their own revenue as possible. Ultimately, this revenue is a function of the GSDP, and a larger GSDP translates to higher capital incomes.”
In response to questions on supporting Nagaland, a resource-constrained state that heavily depends on central funding, Panagariya clarified that the special category status, formerly granted by the Planning Commission, is no longer in effect. However, he pointed out that Nagaland still receives preferential support, such as a 90 percent central government contribution in schemes where other states receive only 60 percent.
Acknowledging the state’s efforts to generate revenue, Panagariya said, “Not as much as one would like it to, but it (Nagaland) is raising some of its own revenue, while a significant part is through devolution and grants-in-aid.”
The Commission, still in its information-gathering phase, has not yet finalized recommendations specific to Nagaland. Panagariya noted that final recommendations would be completed after consultations with all 28 states, with a submission deadline set for October 2025.
Nagaland’s proposals to the Commission include incorporating certain cesses and surcharges into the divisible pool, currently retained fully by the central government. The state also suggested a “disability index” to reflect its unique geographical and economic challenges and proposed “capital deficit grants” in addition to traditional revenue deficit grants.
Among the project-specific funding requests were investments for a new airport, the Foothill Road project, renewable energy infrastructure, hydropower generation, mineral exploration, and drone technology development.
Panagariya and the Commission’s delegation held discussions with Chief Minister Neiphiu Rio, cabinet members, senior officials, and representatives from trade, industry, and political groups. The extensive consultations reflect the Commission’s effort to gather comprehensive insights into the needs and challenges faced by Nagaland.
