1 Form F – 1 (See rules 3 and 4) MACRO ECONOMIC FRAMEWORK STATEMENT 1. Overview of the State Economy : 1.1 The size, composition and growth of the economy determine the revenue potential of the State and the size of the budget; and the size of the budget determines the level of public expenditure. The economy is measured in terms of Gross State Domestic Product (GSDP) both at current and constant prices. The projected GSDP and per capita income for the years 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14 are as in Table 1.1 below: Table 1.1 (R in Crore) 2009-10 2010-11 2011-12 2012-13 2013-14 (final) (prov.) (prov.) (quick) (advance) GSDP at current prices (R. cr.) 10507 11315 12272 13322 14469 Per capita income (current prices)(R.) 54383 57967 61949 64077 66343 2. Overview of State Government Finances: 2.1 The fiscal base and fiscal health of a State are directly related to the development of the State. Public Investment in the infrastructure would expand the productive capacity of the economy and thus, expand the revenue generating potential of the State. The fiscal base is determined by the size of the economy, which can be expanded in the long run. Thus, in the medium term, the fiscal health of the State has to be improved so that the Government can increase the development expenditure to expand the economic base. 2.2 The total receipts of the Government comprise the Consolidated Fund of the State and the balance from Public Account. The proportion of the revenue receipts in the Consolidated Fund of Nagaland during the years 2006-07 to 2012-13 has been varying between 82.19 % and 91.48% (Table 1.2 below). Table 1.2 Total Receipts of the State Government (R in Crore) Recov Net Revenue Consolid- Total RR as RR as Public -ery of Public Year Receipts ated Fund (4+5) % of % of Debt Loans Account (RR) (CF) CF Total (1+2+3) 1 2 3 4 5 6 7 8 2006-07 2772.51 455.49 4.33 3232.33 -73.94 3158.39 85.78 87.79 2007-08 2996.02 501.02 3.06 3500.10 -7.37 3492.73 85.60 85.78 2008-09 3400.89 651.55 2.57 4055.01 -71.83 3983.18 83.87 85.38 2009-10 3719.76 805.25 4.20 4529.21 -195.17 4334.04 82.19 85.83 2010-11 4999.98 463.35 2.31 5465.64 107.04 5572.68 91.48 89.72 2011-12 5586.38 672.22 2.44 6261.04 422.53 6683.57 89.22 83.58 2012-13 6204.29 764.72 0.84 6969.85 167.64 7137.49 89.02 86.93 FRBMA 2014-15 2 2.3 Revenue Receipts comprises of State’s own revenue receipts and Central transfers. The Central tax devolution is determined by the Finance Commission Award. The Thirteenth Finance Commission (TFC) awarded 0.314% of sharable tax excluding service tax and 0.318% of the sharable service tax to Nagaland. During the years 2006- 07 to 20121-13, proportion of State’s Own Revenue Receipts (SORR) in Total Revenue Receipts varied between 7.58% to 9.90 % (Table 1.3). Thus the fiscal stability of the State is predominantly dependent on the Central transfer. Table 1.3 Composition of Revenue Receipts (R in Crore) State’s Own Revenue Total Proportion Central Devolution Receipts (SORR) Revenue of SORR in Year Tax Non- Total Tax Grants Total Receipts Total Tax Revenue 2006-07 119.00 91.14 210.14 316.95 2245.42 2562.37 2772.51 7.58 2007-08 131.37 119.48 250.85 399.77 2345.39 2745.16 2996.51 8.38 2008-09 156.02 180.55 336.57 421.84 2642.47 3064.31 3400.88 9.90 2009-10 180.50 126.35 306.85 434.03 2978.87 3412.90 3719.75 8.25 2010-11 227.32 183.14 410.46 689.46 3900.07 4589.53 4999.99 8.21 2011-12 303.88 232.95 536.83 803.20 4246.35 5049.55 5586.38 9.61 2012-13 339.95 207.17 547.12 917.14 4740.03 5657.17 6204.29 8.82 2.4 The growth in State’s own tax revenue is indicated in Table 1.4 and the trend of realization of non-tax revenue is indicated in Table 1.5. Table 1.4 Growth of State’s Own Tax Revenue (R in Crore) Average Own Tax annual Revenue 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 growth Professional Tax 16.33 17.72 19.86 22.54 24.57 27.02 27.22 8.97% Land Revenue 0.50 0.50 0.60 0.63 0.59 0.68 0.72 6.63% Stamps and Registration fees 1.05 1.02 1.01 1.19 1.35 1.85 1.58 8.31% State Excise 2.13 2.83 3.34 3.14 3.00 3.36 3.73 10.58% Taxes on Sales, Trades etc. 85.02 94.79 114.70 132.22 167.22 231.12 257.21 20.62% Taxes on 12.26 12.30 14.14 16.73 23.92 34.58 41.59 23.57% Vehicles Taxes on Goods and Passengers 1.69 2.19 2.34 3.96 6.62 4.85 6.71 30.74% Other taxes 0.02 0.02 0.03 0.09 0.05 0.42 1.19 18.81% Total Own Tax Revenue 119.00 131.37 156.02 180.50 227.32 303.88 339.95 19.39% FRBMA 2014-15 3 Table 1.5 Trend of realisation of State’s Own Non-Tax Revenue (R in Crore) Own Non-Tax Revenue 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Interest Receipts 5.22 5.66 11.57 10.02 14.35 9.62 5.90 Other Administrative Services 1.46 1.93 1.21 1.42 2.90 2.38 3.22 Misc. General Services 14.59 19.44 28.05 7.04 12.43 29.01 6.60 (including Lottery) Water Supply 2.26 1.07 0.98 0.94 1.29 1.62 1.74 Housing 2.21 2.11 2.97 3.43 3.63 4.38 5.12 Forestry & Wild Life 5.94 4.81 4.78 7.70 10.18 8.87 7.76 Power 41.63 69.47 111.49 75.17 74.01 94.28 102.83 Road Transport (NST) 8.03 8.37 9.38 10.81 11.55 12.90 11.37 Others 9.80 6.62 10.12 8.82 52.80 69.89 62.63 Total Own Non-Tax 91.14 119.48 180.55 126.35 183.14 232.95 207.17 Revenue Expenditure 2.5 Public expenditure is an instrument through which the Government provides social and physical infrastructure for the development of the State. Thus, the size, composition and productivity of public expenditure are important parameters to assess the effectiveness of public expenditure in accelerating growth impulses of the economy. The basic categorization of public expenditure is plan and non-plan. 2.6 Plan expenditure has grown at average annual rate of 12.36% whereas Non Plan expenditure has grown at average annual rate of 16.91% as shown in Table 1.6. Table 1.6 Plan and Non-Plan expenditure (R in Crore) Plan (including Growth Growth Total Growth Year Non Plan NLCPR/CSS/NEC) (%) (%) Expenditure (%) 2006-07 1149.00 1783.62 2932.62 2007-08 1294.36 12.65 2099.39 17.70 3393.75 15.72 2008-09 1396.73 7.91 2345.90 11.74 3742.63 10.28 2009-10 1565.18 12.06 2676.79 14.11 4241.97 13.34 2010-11 2010.41 28.45 3304.49 23.45 5314.90 25.29 2011-12 2070.92 3.01 4054.11 22.68 6125.03 15.24 2012-13 2279.23 10.06 4577.34 11.76 6856.57 11.94 FRBMA 2014-15 4 2.7 More appropriate classification of the public expenditure is capital and revenue expenditure. The level of capital expenditure indicates the level of public investment, which not only creates public assets but also accelerate private investment. It is important to reduce the revenue expenditure and increase capital expenditure. The revenue and capital expenditure during the last few years are indicated in Table 1.7. Table 1.7 Revenue and capital expenditure (R in Crore) Revenue Capital Year Growth(%) Growth(%) expenditure expenditure 2006-07 2222.15 710.48 2007-08 2572.27 15.76 824.09 15.99 2008-09 2889.54 12.33 853.09 3.52 2009-10 3252.44 12.56 989.53 15.93 2010-11 4187.84 28.76 1122.94 11.35 2011-12 4875.66 16.42 1249.39 11.26 2012-13 5601.39 14.88 1255.18 0.05 2.8 Major components of revenue expenditure are salaries, pension, and interest payment as is shown in Table 1.8. Table 1.8 Composition of Revenue Expenditure (R in Crore) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Total Revenue 2222.15 2572.27 2889.54 3252.44 4187.84 4875.66 5601.39 expenditure Of which Salaries 1077.24 1207.32 1249.39 1442.85 2083.