Changing Development Scenario in the Economy of Assam with India

g_incicus_assam_webDr.Ajit K Neog, Our Senior Faculty examines how the economy of Assam is transitioning.

Introduction:

Economic development itself is a vast concept. It is an act of causing an economy to grow vertically and expand horizontally i.e. growth plus change. The main objective of economic development is to raise the living standards of the citizens. Development occurs when human and material resources are productively utilized, given the state of technology. However, economic development is a process whereby the per capita income (adjusted for inflation) increases over a long period of time accompanied with fall in poverty, unemployment, illiteracy, malnutrition, pollution, crime, etc along with improved distribution of income.

Per capita income is the most commonly used measure of economic development. Its level and velocity is an emblem for a State as a hallmark of development. For a State, it is the average level of State income for each member of the population of a State. For a country, it is the average level of national income for each member of the population. Per capita income is calculated both at current prices of goods and services prevailing in the market during current period, and at constant prices which prevailed in a normal year in the past taking that as base year. Per capita income at constant prices gives real income or income in real terms as it removes the effect of year to year price changes i.e. inflation. Since income at current prices are deflated for price changes, the values of real per capita income tend usually to be lower than that of per capita income at current prices. Lower price rise or lower inflation leads to better growth environment in an economy. Higher price rise leads to a high cost economy and makes it uncompetitive. With changes in types and quality of goods and services occurring over long periods of time, per capita income at constant prices becomes less reliable and less comparable. A higher level of per capita income indicates a higher standard of living and vice versa. Rise or growth in per capita income is a good thing as it indicates improved living standard, while a fall indicates economic deterioration. Fall in growth tends to increase inequality, unemployment and reduces well being of the people, making them unhappy.

Rate of inflation differs both over time and space. Hence comparing per capita income at current prices (where inflation is inherent and differs) between a State and the country is problematic. That price levels in Assam tend to be higher than all-India average is a stylized fact and well documented. Historically, the average Consumer Price Index Numbers (base year 1960-61=100) for Agricultural Labourers used to be higher in Assam than all-India by 1.02 to 1.06 times during the 1980s. This bears testimony to high cost Assam economy. We must bear this in mind in our analysis.

Economic growth reflects the hard work of the people and the government. In the long run, growth depends on productivity of workers. High growth brings more economic security and strength, and a more vibrant economy that brings more employment. High growth enables government and people spend more and also save. Slow or low growth brings fewer jobs, more economic pains and sufferance due to low purchasing power. On the other hand, negative growth brings economic loss similar to ‘hystersis loss’ and increases poverty and misery. Hence maintaining growth momentum is desirable for development. After this, we proceed to empirical analysis. The aim of this paper is to investigate how the momentum changed for Assam vis-a-vis India over the period from 1950-51 to 2014-15.

Methdology :The methodology adopted in this study is the analysis of decadal trend of per capita income of Assam vis-a-vis India, their annual rise (growth) and fluctuations as measured by coefficient of variation (COV), and per capita income ‘balance-sheet’ between the two in terms of ratio of Assam’s per capita income to that of India. The focus is on momentum of development as measured by per capita income at current prices. We have to admit that in our quantitative analysis “everything that counts (e.g. quality) cannot be accounted and everything that is counted may not count”. Data used are official data available in public domain and the period covered is from1950-51 to2014-15 (see table1).

 

Economic Scenario Before 1960-61: In 1950-51, the per capita income of reorganised Assam was Rs. 299.2 which was higher than India’s per capita income of Rs. 245.5, both at current prices. The ratio between the two was 1.22, which was in Assam’s favour. In 1955-56, Assam’s per capita income stood at Rs.277.6 and declined by 1.44% per annum. India’s per capita income also declined to Rs. 235.7 by 0.80%from the level of 1950-51 (see table 1). It has been documented that in the ladder of per capita income in 1950-51, Assam occupied the fifth place among the major States of India (box 2). Assam could be said to be in a zenith of economic glory in the 1950s.

 

Rise and fall of Assam Economy during 1960-61 to 1969-70 : The year 1960-61 marked the ‘inflexion point’ in Assam’s economy. Its population was growing annually at a higher rate of 3.5% during 1961-51 than the State Income (at 1948-49 constant prices) growth rate of 3.1% with negative consequences for the economy. India’s population growth during the said period was 2.16%, lower than Assam’s. The excess growth of 1.34% in Assam’s population can be attributed to illegal immigration, which squeezed State Income, and compressed the level of 1960-61 per capita income at Rs. 315.3 that rose (with a negative annual growth) to Rs. 490.7 in 1969-70 the penultimate year of the decade of 1960s (table 1). Assam’s per capita income of Rs. 315.3 in 1960-61 was higher than India’s Rs. 305.6, the ratio of the two being 1.03, but after that the ratio declined to 0.82 in 1969-70 as the levels and growth rates of India’s per capita income remained to be higher. The story of Assam’s economic development during 1951-61 can be compared to the race between hare and tortoise.

 

 

Box 1 : Period wise Average Per Capita Income (Rs.) and its Average Annual Growth (%) of Assam and India.

 

Period/Parameter Average of Per Capita Income Average of Annual Growth
Assam India Assam India
1970/71-79/80: Average

COV

767.17

0.2134

976.82

0.2439

7.73

1.0822

8.54

0.6763

1980/81-89/90: Average

COV

 

2301.48

0.3366

2925.98

0.3192

14.28

0.5506

13.51

0.4171

1990/91-99/00 : Average

COV

6928.90

0.3258

9909.95

0.3428

13.07

0.7581

12.80

0.1615

2000/01-14/15 : Average

COV

25770.12

0.4490

44656.40

0.5056

9.81

0.4215

12.33

0.4604

 

Note: COV is Coefficient of Variation

Source: Table 1

 

Development during 1970-71 and 1979-80 : During the ten years of 1970-71 to 1979-80, the per capita income of Assam rose  from Rs.534.7 to Rs. 1003.5 with annual fall in 1975-76 and 1978-79 (table 1); the ten year average in income was Rs. 767.17 with a coefficient of variation (COV) of 0.2134, while the annual average growth rate was 7.73% with high coefficient of variation of 1.0822 (see box 1). India’s per capita income during the same period, rose from Rs.632.8 to Rs. 1337.5; the ten years average was Rs. 976.82 with coefficient of variation (COV) 0.2439, and the growth rate was 8.54% with (COV) of 0.6763. Population growth in Assam continued at 3.5% per annum against India’s 2.48%, and State Income at 1948-49 prices grew by 4.5% per annum. The implicit inflation rate was about 7% per annum in Assam. It may be pointed out that as per Economic Survey Assam for 1972 (page 7) during 1961-71 there had been increase of 10 lakhs in population of Assam due to migration. In 1970-71, Assam’s rank among the States came down to tenth.

 

Development during 1980-81 and 1989-90: The year 1979-80 is a landmark in the annals of history of Assam due to launching of Assam movement against illegal immigration. In 1980-81, Assam’s per capita income was Rs.1220.8 (against India’s Rs. 1557.3) which rose to Rs. 3723.0 (against India’s Rs. 4693.7) in 1989-90. The ratio of the two incomes marginally improved from 0.78 to 0.79 with oscillations (table 1).

The average of per capita income during the ten years of 1980-81 to 1989-90 stood at Rs. 2301.48 (COV 0.3366) for Assam against Rs. 2925.98 (COV 0.3192) for India, and average annual growth of per capita of Assam was 14.28% (COV 0.5506) against India’s 13.51% (COV 0.4171).  There was a paradigm shift upwards in the growth of per capita income. The acceleration in Assam’s ex-post growth (rate being higher than India’s) and fall in fluctuations (see box 1) belied the negative predictions of the prophets of gloom and doom on Assam movement. It seems people used to struggle hard economically during movement, and prefer short term pain for long term gain. The economy was moving forward, people were gainers. It suggests that the movement did not hurt Assam economy. Census 1981 could not be conducted in Assam due to the movement.  The government interpolated Assam’s population in 1981 as180 lakh and its annual growth rate at 2.34% which was close to  India’s rate of 2.47. The figures were unbelievably low, immigration aspects remained unknown.

Development during 1990-91 and 1999-00: In the next ten years of 1990-91 to 1999-2000, the average of per capita income in Assam rose to Rs. 6928.9 (COV 0.3258) compared to Rs. 9909.95 (COV 0.3428) for India, the average of annual growth marginally fell to 13.07% (COV 0.7581) compared to previous rate of 14.28%. It was 12.80% (COV 0.1615) for India (see box1).

Development during 2000-01 and 2014-15: During the fifteen years period of 2000-01 to 2014-15, the curve of Assam’s economic growth moved downward compared to the previous two decades as the average of annual per capita income growth became single digit at 9.81% (COV 0.4215) from the earlier two-digit figures even though the average of per capita income at Rs. 25,770.12 (COV 0.4490) bloomed by 3.72 times from Rs.6928.9 (see box 1) of the previous decade. The wave of economic momentum in Assam subsided seemingly due to policy paralysis and inertia at the Central Government level towards the end of the said period with impact on the meek State, even as people tried to work hard. Inflation went up sky high adding to misery. Inflation in Consumer Price Index (Combined) in Assam stood at 9.42% in the year 2014 against 9.31% in 2013. At all-India level, it was 10.2% in 2012-13, 9.5% in 2013-14 and moderated to 5.9% in2014-15 (Govt. of India, Economic Survey 2015-16, vol. 2, P 90-91). India’s per capita income proceeded with a higher trajectory at 12.33% rate.

The balance sheet of per capita income between Assam and India worsened after 2000-01, the ratio between the two drifted from 0.81 to 0.56 in 2014-15. Mathematically speaking, the two income series turned divergent. Inequality aggravated as Assam’s per capita income of Rs. 49,480 in 2014-15 became only about 56% of India’s Rs. 87,748. This is violative not only of Article 38 (44th Amendment in 1978) of the Constitution of India on reducing and eliminating regional income inequalities, inter alia, but also of the NDA government’s new common vision “Sabka Saath, Sabka Vikash”- together with all, development for all. It may be mentioned that during period of low growth accompanied by rising inequality and high inflation, economic security and competitive strength gets threatened.

 

 

Box 2 : Rank (descending order) of Per Capita Income of Assam Among States & UTs of India at given Years.

Year 1950/51 1960/61 1970/71 1980/81 1990/91 2000/01 2010/11 2013/14
Rank  5th 6th 10th 25th 19th 25th 29th 30th
Reporting No. of States /UTs 14 14 17 28 28 32 33 33

Note: UTs are Union Territories 

Source:                 (i) Dr.  P.C. Goswami, Fifth Annual IFCI Lecture, G.U.

(ii) GOI: Economic Survey, 1999-2000 & onwards.

 

Decelerating Ranks : We have explored that the rank of Assam among various States of India, in terms of its position of per capita income (arranged in descending order) at given points of time slided from the fifth position in 1950-51 to tenth in 1970-71, twenty fifth in 1980-81, improved to nineteenth in 1990-91, but again fell to twenty-fifth in 2000-01, twenty ninth in 2010-11 and to thirtieth in 2013-14 (see box 2). People now jokingly say that in the ladder of development Assam is in the fourth place from the bottom. It is at the nadir now. Competitive strength of Assam economy went down despite its so-called Special Category State status till recent times. It is a reflection of performance of the past regimes who ruled Assam. It is seen that even the newly created States like Jharkhand, Chhattisgarh, not to speak of the Union Territories and sister States of Assam (other than Manipur) have left Assam far behind them in the race for development. The economic fate of Assam at some point of time in the past seemed to be like that of a mother crab, whose off-springs used to eat up her breast and let her die.

Correlation, Regression and Elasticity Values : We have found that there is very high degree of relationship (r) between per capita income of Assam (Y) and that of India (X). The estimates of correlation coefficients (r), regression line equations (Y=a+bX) and elasticity (E) for the ten year period 1970-71 to 1979-80 and for the fifteen year period 2000-01 to 2014-15 are presented in Box 3.

 

 

Box 3 : Correlation, Regression and Elasticity Values

Period       =          1970-71 to 1979-80

r          =          0.9866

Y          =          86.40 + 0.6969X

E          =          0.8874

Period       =          2000-01 to 2014-15

r          =          0.9969

Y          =          2959.99+0.5108X

E          =          0.8850

Data Source : Table 3

 Diagrams  of Regression Lines between  per capita Income of Assam and India are given in diagram below :

“Regression Lines”

 

 

Y=86.40+0.6969X

Y for Assam, X for India

Period 1970-71 to 1979-80

 

 

Y=2959.99+0.5108X

Y for Assam, X for India

Period 2000-01 to 2014-15

 

Samples of Other Developments :  The character of Assam economy basically remains rural as 85.90% of its population live in rural areas as per 2011 census. Assam’s Urban population today accounts for 14.10%, which is below the mark of 18% urban population attained by India in 1961, i.e. half a century back. Its literacy rate of 72.2% in 2011 is comparable with India’s 73.0%, but far behind the other states of the region than Arunachal Pradesh. Rural poverty ratio of Assam in 2011-12 at 33.9% is higher than India’s 25.7%, urban poverty of 20.5% is also higher than India’s 13.7%. The unemployment rate per 1000 persons in 2011-12 was higher at 46 in Assam (next to Kerala’s 66) compared to All-India rate of 22 persons. Infant Mortality rate (per 1000 live births) in 2013 in Assam was the highest at 54, All-India average being 40. The credit deposit ratio of scheduled commercial banks in Assam in March 2013 stood at 36.76% much lower than All-India ratio of 78.09%. Banks are still shy to invest in Assam. Industrial sector is still lagging behind in the State, contributing 17.94% to State real gross Domestic Product in 2013-14 compared to 25.60% by agriculture & allied and 55.46% by the tertiary sector. Land and labour productivity of Assam agriculture is very low. The State is highly dependent on Centre for food supply.

Concluding Remarks :  Our economic investigation finds that Assam is lagging in performances in agriculture, industry and business enterprises. But laggards cannot be left to be laggards for ever. They have to be brought at par with the best with definite road map and within pre-defined time table. National development cannot be complete without the development of the States. Peoples representatives must raise their voice against exploitation, deprivation, discrimination and economic injustice in appropriate fora. This would improve their credibility. They must bear in mind that the citizens and State are above them, and democracy and development are of the citizens, by the citizens and for the citizens. They should demand from the government of India that representatives from Assam should also be included in the Government of India team(s) negotiating economic and business ties with ASEAN and others under the Act East Policy so that attention to development of Assam is also taken care of. The barometer of performance of the State machinery, North Eastern Council (NEC), Ministry of Development of North Eastern Region (DONER), the Banks and the financial institutions has to be monitored by the representatives. Economic development has neither substitute nor surrogate. It cannot be borrowed, hired or imported. It has to be cultured and nurtured. Momentum of development can be raised through productive work, improvement in work culture, reforms in attitudes towards openness, competiveness and productivity frontier. These cannot be had from the empty-slogan shouting forces on the street that want to divert attention from the genuine issues and hijack development agenda. The civil society and  think-tanks must improve human ecosystem,  civic environment and culture. They must be vigilant on social strength, weakness/challenge, opportunity and threat (SWOT/SCOT), maximize strength and opportunity and minimise weakness/challenge and threat. Assam is a land of immense economic opportunity. Opportunities come to those who are eager and ready to avail. The unemployed  must grab them.  The Government must implement the vision document and thereby remove the development backlog and lag.

 

Table 1 : Per Capita Income (Rs.) at current prices of Assam and India for the given years, their Annual Rise (%) and Ratios of Per Capita Income of Assam to India.

 

Year Assam (Rs.) Annual Rise (%) India (Rs.) Annual Rise (%) Ratio
(1) (2) (3) (4) (5) (6)
1950-51 299.2 245.5 1.22
1955-56 277.6 (-)1.44 235.7 (-)0.80 1.18
1960-61 315.3 2.72 305.6 5.93 1.03
1965-66 398.7 5.29 425.5 7.85 0.94
1968-69 513.4 9.59 552.3 9.93 0.93
1969-70 490.7 (-)4.42 597.5 8.18 0.82
1970-71 534.7 8.97 632.8 5.91 0.84
1971-72 548.1 2.51 660.3 4.35 0.83
1972-73 576.6 5.20 711.1 7.69 0.81
1973-74 648.4 12.45 870.1 22.36 0.75
1974-75 821.7 26.73 1003.5 15.33 0.82
1975-76 783.3 (-)4.67 1026.4 2.28 0.76
1976-77 875.5 11.77 1079.4 5.16 0.81
1977-78 953.2 8.87 1194.1 10.63 0.80
1978-79 926.7 (-)2.78 1253.0 4.93 0.74
1979-80 1003.5 8.29 1337.5 6.74 0.75
1980-81 1220.8 21.65 1557.3 16.43 0.78
1981-82 1474.0 20.74 1985.7 27.51 0.74
1982-83 1641.0 11.33 2143.3 7.94 0.77
1983-84 1777.0 8.29 2464.1 14.97 0.72
1984-85 2182.0 22.79 2690.5 9.19 0.81
1985-86 2313.0 6.00 2933.0 9.01 0.79
1986-87 2420.0 4.63 3192.1 8.83 0.76
1987-88 3060.0 26.45 3546.4 11.10 0.86
1988-89 3204.0 4.71 4153.7 17.12 0.77
1989-90 3723.0 16.20 4693.7 13.00 0.79
1990-91 4432.0 19.04 5366.9 14.34 0.83
1991-92 4683.0 5.66 6011.8 12.02 0.78
Year Assam (Rs.) Annual Rise (%) India (Rs.) Annual Rise (%) Ratio
(1) (2) (3) (4) (5) (6)
1993-94 5715.0 14.92 7689.6 14.22 0.74
1994-95 6017.0 5.28 8856.9 15.18 0.68
1995-96 7001.0 16.35 10149.4 14.59 0.69
1996-97 7394.0 5.61 11564.1 13.94 0.64
1997-98 7966.0 7.74 12706.9 9.88 0.63
1998-99 8826.0 10.80 14395.7 13.29 0.61
1999-00 12282.0 39.16 15625.8 8.54 0.79
2000-01 12803.0 4.24 15886.0 1.67 0.81
2001-02 13059.0 2.00 20259.0 27.53 0.64
2002-03 14421.0 10.43 21529.0 6.27 0.67
2003-04 15487.0 7.39 23775.0 10.43 0.65
2004-05 16782.0 8.36 26629.0 12.00 0.63
2005-06 18396.0 9.62 29869.0 12.17 0.62
2006-07 19737.0 7.29 34249.0 14.66 0.58
2007-08 21290.0 7.87 39384.0 14.99 0.54
2008-09 24099.0 13.19 43604.0 10.72 0.55
2009-10 28383.0 17.78 49402.0 13.30 0.57
2010-11 33087.0 16.57 58534.0 18.49 0.57
2011-12 36320.0 9.77 66997.0 14.46 0.54
2012-13 38945.0 7.23 71593.0 6.86 0.54
2013-14 44263.0 13.66 80388.0 12.28 0.55
2014-15 49480.0 11.79 87748.0(P) 9.16 0.56

 

Note: P denotes Provisional.

Source :      (i) Government of Assam : Statistical Hand Book Assam 1973 & subsequent issues, Economic  Survey Assam 1972 & subsequent relevant issues till 2014-15,  Estimates of state Domestic Product Assam 1970-71 to 1980-81 & subsequent issues.

 

(ii) Government of India: Economic Survey1988-89 and various issues till 2015-16,  India2016.

 

Select References :

 

Goswami, P.C. (1990)       :           Financial resources And Economic Development

in the State Sector :           A study in Assam (Fifth

Annual IFCI Lecture) Deptt of Commerce,

Gauhati University.

Government of Assam      :           Economic Survey Assam 1972 & Other Issues,                                                          Statistical Pocket Book Assam 1973 & other issues                                                 upto 2014-2015.

Kashyap, S.C. (2014)         :           Our Constitution, National Book Trust, India; New                                                  Delhi.

Government of Assam      :           Estimates of State  Domestic Product Assam,           (1982)                                 1970-71, Assam Govt. Press, Gauhati.

N.E.C. Secretariat               :           Basic  Statistics of North Eastern Region, Issues                                                    from 1980 & others Relevant till 2006.

Government of India         :           Pocket Book of Labour Statistics 1989, Labour                                                      Bureau, Chandigarh/Shimla.

-do-                                        :           Agricultural Statistics at a glance 2013 & earlier                                                    Issues, https://eands . dacnet.in

-do-                                        :           Economic survey 2015-16 & earlier Issues.                                                             www.bookskhoj.com

Baishya P. (et.al) (1979)   :           Development Issues of North-East India, Lawyer’s                                               Book Stall, Guwahati.

Neog, A.K. (2013)              :           Economic Development of North East India: A                                                      Glimpse (Prof. N.C. Das Memorial Lecture) Deptt.                                                of Commerce, Gauhati University.

 

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