Nagaland’s 2025-26 budget unveils ambitious plans, but can the state escape its persistent financial challenges? With an opening deficit of ₹843.21 crore, mounting central grant dependency, and stagnant internal revenue, does this budget offer a roadmap for self-reliance, or is it merely an attempt to stay afloat?
Bijoy A Sangma
The hills of Nagaland have long stood as silent witnesses to history, resilience, struggle, and aspirations for progress. As another fiscal year unfolds, the Nagaland Budget 2025-26 attempts to script a story of transformation, seeking to elevate the state’s economic landscape through a focus on employment, sustainability, infrastructure, and governance efficiency.
Yet, beneath the ambitious numbers and policy commitments, the recurring fiscal constraints remain a stubborn obstacle - Nagaland continues to be heavily dependent on central grants, grapples with an enduring fiscal deficit, and struggles to generate internal revenue at sustainable levels.
At first glance, the budget paints an optimistic picture, projecting gross receipts of Rs.24,849.01 crore and gross expenditure of Rs.24,699.01 crore, suggesting a near-balanced financial plan. However, this stability appears fragile when viewed against the negative opening balance of Rs.843.21 crore, revealing deep-seated financial vulnerabilities that challenge long-term economic self-sufficiency.
Chief Minister Dr Neiphiu Rio, who also holds the finance portfolio, in his budget speech on March 6, 2025, reaffirmed the state government’s role as a facilitator in resolving the Naga political issue, acknowledging its longstanding complexity while emphasizing Nagaland’s economic and development priorities. This sets the tone for a budget that, while addressing immediate socio-economic concerns, also reflects the larger backdrop of political uncertainty and financial dependency.
Fiscal Tightrope: Can Nagaland Escape Its Financial Shackles?
Nagaland’s economic trajectory remains both promising and precarious. While agriculture, forestry, and services continue to expand steadily, the industrial sector remains stunted, held back by poor infrastructure, limited market linkages, and an over-reliance on government employment. The private sector struggles to gain momentum, posing a major challenge to the state’s economic diversification efforts.
The state’s revenue sources continue to reflect a heavy reliance on central assistance, making self-sustainability a distant goal. The budget estimates Nagaland’s own tax and non-tax revenue at Rs.2,472.13 crore, contributing just 10% of total receipts. In contrast, the state’s share in central taxes (Rs.8,093.70 crore) and central grants & loans (Rs.8,216.25 crore) together account for over 65% of total revenue.
Despite revenue-enhancement efforts, the deficit remains a persistent challenge. While deficit reduction from Rs.905.78 crore in 2024-25 to Rs.843.21 crore in 2025-26 indicates marginal improvement, the gap between developmental ambitions and fiscal constraints remains substantial. The government has proposed enhanced tax compliance measures, including RFID-based tracking systems for GST enforcement and smart prepaid meters in the power sector to reduce revenue losses.
However, without a clear roadmap for diversifying the revenue base, these measures may not be sufficient to achieve long-term fiscal sustainability. The lack of a strong manufacturing and industrial sector further exacerbates the problem, as Nagaland continues to import most goods while generating limited internal revenue.
A closer look at the budget’s key sectoral allocations reveals a mix of continuity, expansion, and cautious reform, alongside areas where stronger interventions are needed.
Infrastructure Dreams or Reality? Will Rs.55 Crore Be Enough?
The budget significantly increases investment in roads and transport, with a total allocation of Rs.55 crore for Special Road Development Programs and rehabilitation of bridges, marking an increase from Rs.50 crore in 2024-25. Additionally, ₹30 crore is set aside for the maintenance of existing roads, addressing long-standing concerns about deteriorating connectivity.
The Road Transport Department has been allocated Rs.7.88 crore for the construction of sub-stations, upgrading workshops, and expanding transport facilities across districts. In line with the state's commitment to modernizing public transport infrastructure, Nagaland State Transport (NST) plans to introduce 40 new buses.
While these allocations reflect progress, Nagaland’s difficult terrain and remote locations demand greater investment. The much-awaited Foothill Road project, first proposed over a decade ago, remains unfinished, raising concerns about effective implementation.
Will Green Energy Initiatives Fix Nagaland’s Power Woes?
A standout feature of the budget is the Nagaland Solar Power Mission, which receives Rs.10 crore in funding. Under the PM Surya Ghar Muft Bijli Yojana, the government has proposed a Rs.20,000 subsidy per kW (up to Rs.50,000 per consumer) for rooftop solar installations, aiming to reduce dependency on external power sources.
However, one of Nagaland’s biggest revenue leakages continues to be the power sector, with high transmission losses and poor billing efficiency. In 2024-25, the state lost Rs.280 crore due to inefficiencies in power distribution, and the situation is unlikely to improve drastically in 2025-26 unless reforms are effectively implemented. The budget acknowledges this by pushing for smart prepaid meters, yet previous attempts at revenue reform in this sector have met resistance. The fiscal burden of subsidizing power purchases remains unsustainable unless drastic efficiency improvements are made.
The state’s commitment to clean energy is commendable, yet without a parallel investment in distribution efficiency, the gains from solar power adoption may fall short of expectations.
5,000 Skilled Youth – A Pathway to New Opportunities?
One of the most striking aspects of the 2025-26 budget is its strong emphasis on employment generation through private sector participation and skill development. The introduction of the Nagaland Skill Mission, which aims to train 5,000 youth in hospitality, banking, insurance, logistics, drone technology, and healthcare, marks a structural shift in employment strategy - moving away from government jobs and promoting private-sector participation. To support this initiative, skill loans backed by government guarantees will be provided, ensuring that financial barriers do not hinder access to training.
This approach reflects a crucial realization: government jobs are no longer sufficient to sustain the aspirations of Nagaland’s growing youth population. However, the success of such an initiative hinges on creating employment opportunities within the state. Without robust private sector participation and industry-linked training programs, there is a risk that skilled youth may migrate outside the state, leading to a brain drain rather than localized economic growth.
Hornbill Festival Boom – Can Nagaland Sustain Year-Round Tourism?
Tourism remains a priority sector, with an allocation of Rs.14 crore for the Hornbill Festival, mini-festivals, and infrastructure expansion. The Nagaland Tourism, Hospitality, and Transport Scheme will support 500 new homestays and 200 tourist transport vehicles, creating self-employment opportunities and boosting the hospitality sector.
Given Nagaland’s potential as a niche cultural and eco-tourism destination, this could be a transformative move - if executed effectively. The Hornbill Festival, which saw record tourist footfalls in its 25th edition, has demonstrated how well-planned tourism policies can boost the local economy.
However, tourism cannot flourish in isolation. Nagaland’s infrastructure continues to lag behind, hindering accessibility and economic linkages. While the budget increases road and bridge allocations to Rs.55 crore, this remains insufficient given the pressing need for connectivity improvements in the state’s remote districts. The plan to introduce 40 new buses under Nagaland State Transport (NST) is a commendable step, yet without a comprehensive public transport overhaul, the benefits may remain localized rather than transformative.
Agriculture: Backbone of Nagaland or an Underfunded Sector?
The Agriculture and Allied sector receives Rs.49.03 crore, reflecting the government’s commitment to rural development and food security. Key allocations include Rs.11.55 crore for agricultural link roads and an agri park at Kisama Heritage Village. Rs.6 crore for horticulture initiatives, including a Strawberry Model Farming Project at Zubza, And, Rs.5.81 crore for sustainable coffee, rubber, and arecanut cultivation under the Land Resources Department.
Despite these investments, the agricultural sector faces challenges such as poor irrigation facilities, lack of cold storage units, and low processing capacities, which limit value addition and market expansion.
Health Insurance for Thousands – A New Era of Social Security?
The Chief Minister’s Health Insurance Scheme (CMHIS), launched in previous budgets, continues to be a flagship initiative, covering 12,047 beneficiaries across 66 empanelled hospitals. The Chief Minister’s Life Insurance Scheme (CMLIS) has also seen 399,915 enrolments, with a renewal provision of Rs.15 crore for 2025-26.
While these programs offer crucial financial security, delays in claim settlements and lack of awareness in rural areas remain key challenges in expanding coverage.
Incremental Growth or Transformative Shift?
While the 2025-26 budget introduces important expansions, it largely follows the trajectory set by the 2024-25 fiscal plan.
• Both budgets highlight the need to enhance tax collection and reduce power sector losses, yet neither presents a concrete revenue diversification strategy beyond better enforcement of existing tax structures.
• The Nagaland Skill Mission (2025-26) represents a notable evolution from 2024-25, signalling a more structured push toward self-employment and entrepreneurship.
• Infrastructure funding has increased, but not drastically enough to overcome connectivity gaps.
• Skill development programs have expanded, signalling a shift toward private-sector employment.
• Social security schemes remain unchanged, with minor enhancements in coverage.
• The fiscal deficit has slightly improved, but remains a long-term concern.
The most notable difference in 2025-26 is the focus on renewable energy and private-sector engagement, but Nagaland’s overreliance on central assistance remains unchanged. The total developmental outlay for 2025-26 stands at Rs.5,819.24 crore, with a state contribution of Rs.1,200 crore, marking an 18.81% increase from the previous fiscal year. This signals an intent to ramp up developmental investments despite fiscal constraints. Notably, this budget places renewed emphasis on skilling, employment generation, and private sector engagement, a strategic shift toward economic self-reliance rather than traditional government-driven employment models.
A New Fiscal Dawn or the Same Old Struggles?
The Nagaland Budget 2025-26 presents a vision of growth driven by skills, tourism, and renewable energy while acknowledging persistent fiscal vulnerabilities. The government’s renewed focus on private sector-driven employment, entrepreneurship, and tax enforcement is commendable, yet questions remain regarding execution capacity and institutional readiness.
While deficit reduction and revenue enhancement strategies are discussed, their practical impact remains uncertain. For Nagaland to truly transform its economic landscape, a long-term strategy beyond annual budgetary adjustments is required. To achieve true financial independence, the state must focus on broadening its tax base and improving industrial linkages.
As the hills of Nagaland look on, only time will reveal whether this budget steers Nagaland toward transformative growth or merely continues incremental progress will depend on how well the policies are executed in the months ahead.
(Bijoy A. Sangma is a development professional, policy analyst, commentator on governance, economic policies, social justice and religious freedom. He has previously worked with national and international organizations in leadership roles, contributing to thought leadership in public policy and social transformation. e-mail: bijoy.sangma@gmail.com)
