The Economic Survey 2024-25 has revealed a critical fiscal challenge for Nagaland – its heavy dependence on Goods and Services Tax (GST), which accounts for 72% of the state’s revenue. While GST provides a stable income source, over-reliance on it poses threats to financial stability. To build a stronger economy, Nagaland must diversify its revenue streams, strengthen local industries, and prioritize non-tax revenue sources to reduce its reliance on GST.
GST collections are directly linked to economic activity and consumption patterns. Any downturn in business, a national economic slowdown, or policy shifts at the central level could cause a sharp decline in revenue. Moreover, the lack of strong alternative income sources limits Nagaland’s financial autonomy and increases dependence on central transfers. In contrast, Maharashtra, Tamil Nadu, and West Bengal have developed diversified revenue bases through stamps and registration fees, sales tax, and excise duties, respectively.
For long-term fiscal stability, Nagaland must strengthen alternative sources of revenue. One key area is non-tax revenue, as demonstrated by Odisha, where nearly 49% of total receipts come from non-tax sources.
Nagaland must adopt a similar approach by leveraging its natural resources, tourism potential, and public sector assets. Additionally, forestry, handicrafts, and horticulture offer untapped economic potential. Encouraging small-scale industries and local manufacturing can also increase sales tax revenue. Excise duties on regulated products, such as liquor, could provide another stream of income, as seen in West Bengal, although the NLTP Act remains a deterrent.
Tourism presents a significant revenue opportunity if managed strategically. The state can generate income through entry fees, tourism permits, and hospitality taxes. Similarly, public sector enterprises, public-private partnerships, and government properties can be optimized to generate sustainable income.
While GST will remain an important revenue source, Nagaland cannot afford to rely on it exclusively. The state’s future economic security depends on strengthening non-tax revenue. By diversifying its economy, improving tax administration, and developing alternative revenue streams, Nagaland can achieve fiscal elasticity, reduce its financial dependence on the center, and ensure sustainable growth. A balanced approach to revenue generation will stabilize Nagaland’s financial future, making it self-sufficient and less vulnerable to external economic fluctuations. Shifting toward self-sufficiency through non-tax revenue is key to Nagaland’s long-term economic stability and growth.