Tuesday, 26 May 2015

A Solution to Nagaland’s Economic Growth - Lanu, Assistant Professor, Department of Commerce





Nagaland is endowed with huge untapped natural resources and has the potential to transform itself into a commercial hub of India and a tourist paradise. If we take advantage of our blessings then we can not only boost our economy, but also improve the problem of unemployment, which is a pressing problem in our society today. In view of this, the Micro Small and Medium enterprises (MSMEs) can play a vital role in the economic structure of Nagaland. This week, we take a look at its significant contributions in terms of output, export and employment.

A Solution to Nagaland’s Economic Growth

The Micro Small and Medium Enterprises (MSME) sector has slowly come into the limelight, with increased focus from government and other government institutions, corporate bodies and banks. It is viewed as one of the greatest agents of growth. Policy based changes, investments into the sector; globalization and India’s robust economic growth have opened up several latent business opportunities for this sector. Even the domestic market is no more an insulated zone in a controlled economy; the competitive pressures of a free market economy are catching up in India. The domestic market has been flooded with many low cost, reasonable quality, bulk produced products giving tough competition to MSMEs. With the opening up of the economy, the MSMEs have to catch up with global standards of excellence in order to remain competitive and profitable. MSMEs are increasingly having to adapt to new standards in technology, quality and pricing to be able to survive in the marketplace.

MSMEs contribute 8 per cent of the country’s GDP (MSMEs contribution to India GDP has been growing constantly at 11% per annum), 45 per cent of the manufactured output and 40 per cent of the country exports. The labour and capital ratio in MSMEs and the overall growth in the MSMEs are much higher than in the larger industries. The non-homogenous structure in terms of range of produce/service as well as size of industry adds to its dynamism. Thus, MSMEs are important for the national objectives of growth with equity and inclusion. To talk about the economic development of Nagaland, it is essentially the economy of 19,80,602 person occupying an area of 16,579 sq. Km with a population density of 120 /sq. Km where the rural population consists of about 82 percent and urban population of about 18 percent. The number of educated unemployed has been rising at the rate of 9.32%per annum, which has to be taken into account in any economic planning. For a developing nation like India, where the labour is abundant and capital is scarce, the Micro and small enterprise sector is a major source of employment for millions of people.

In Nagaland, the effort for economic development started in the real sense only after its statehood in 1963. During that time, the economy was agrarian in nature with more than 89% of its working population directly depending on agriculture. The technique of production was more or less pre-Newtonian type with very low productivity in income. The level of urbanization and infrastructural development was very low and industrialization virtually non-existent. During the last four and half decades of statehood, beginning from scratch Nagaland has made significant achievement in various fronts. However in many sectors, the state’s economic planning has failed to move in the right direction and the base of development has been rather slow. Besides, Nagaland state was created out of political necessity and hence it was anticipated that Nagaland would not be economically viable for a long period.

Micro Small and Medium Enterprises (MSMEs) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. MSMEs not only play crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth. MSMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socioeconomic development of the country/state.

MSEs in Nagaland have growth potential and can significantly contribute to state economy provided appropriate measures are taken to boost these sectors in the interest of economic ends. However, in Nagaland, information about this sector is very limited, so far as official records and research data are concerned. It is therefore, envisaged to investigate into the operational efficiency of Micro and Small Enterprises and their contribution to socio and economic development of the state. The State Govt. of Nagaland has also been assisted to set up a Mini Tool Room & Training Centre at Dimapur, Nagaland. Tool Rooms are equipped with Hi-Tech machinery for providing common facility services to the industry; conducting various long-term and short-term training programmes such as 4-year diploma in Tool & Die Making, Computer Aided Design, Basic Workshop Technology, Turning and Milling, Engineering Drawing etc.


In spite of immense potential of MSMEs in Nagaland, the region has largely remained underdeveloped. A key constraint to the growth has been poor infrastructure and limited connectivity (roads, telecommunications and power supply), both within the region as well as with the rest of the country. The region, connected to the rest of India by a narrow stretch of land called the ‘chicken’s neck’, needs infrastructure to support and ensure significant investments and developmental aids. Hence, it is necessary for the government to mobilize the SMEs in Nagaland to channelize their resources for economic development of the region.

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