The 2024 Nobel Memorial Prize in Economic Sciences was awarded to Daron Acemoglu, Simon Johnson, and James A. Robinson “for studies of how institutions are formed and affect prosperity”. It is based on this study that the book “Why Nations Fail” has been published. Their research provides a lens through which we can take a jab at scanning our very own home-Nagaland.
Their study highlights the role of societal institutions in developing a nation’s economy. They have established two distinct frameworks of institutions- inclusive and extractive. In simple words, an inclusive institution promotes opportunities, freedom and an even distribution of wealth, where individuals are guaranteed stability, security and reward for their contribution.
An extractive institution, on the other hand, concentrates a majority of the wealth into an elite minority, and this group therefore enjoys greater comfort, power and privilege while the rest don’t. Unsurprisingly, this leads to economic stagnation, poorer living conditions and social unrest.
Distribution of wealth: Now don’t be mistaken, I am not here to point fingers. I am but a messenger. The Income Disparity Survey for Nagaland in 2026 found that thebottom 50% of households received about 18% of total household income while the top 5% received about 21%. These percentages are not abnormal on a very large scale, but for a small state like Nagaland, with a modest population, it can be a matter of concern. And the survey’s household-level figures are even more prominent- the reported mean monthly income was Rs. 1,639 for the bottom 50% versus Rs. 71,028 for the top 5%.
Now, all this is just considering the legal, official flow of money on paper. If you take the undeniable corruption into consideration, I can assure you, that survey would look very different.
The GSDP of Nagaland in indeed improving, but that is simply not enough. Firstly, it is only an average of the overall state revenue, and with increase in population, it does not show the actual picture. Secondly, the Income Disparity discussed above clearly shows that the distribution of wealth is still unsatisfactory.
Economic Structure: Another point of concern is the structure of the economy. This is a problem faced in India as a whole. And that is the lack of industrialization.
Let us go back in time to 1950. India and China, both large nations with large population, roughly had the same beginning- heavily dependent on agriculture, and also undoubtedly impoverished. In 2026, China’s GDP hovers roughly around 5 times that of India, and the per capita income around 4 times that of India. In recent years, China is undeniably showing signs of saturation and slowing of growth, but the fact remains that they have achieved faster growth than us.
The most crucial tool they have used for this is industrialization, along with liberalization of market. While India was in the ‘License Raj’, whence any attempt at entrepreneurship was faced with a bureaucratic hassle of paperwork and licenses, China was doing the opposite by promoting ventures, foreign investment and making their economy attractive for development, while also maintaining control over it. They irrefutably had disasters and catastrophes (for instance, the ironically named Great Leap Forward), but where they found success, they were able to find more than enough success to compensate for their losses. It also shows the difference in democracy and authoritarianism. Our country climbed up a staircase, stable and reliable, but slower and tiring, while China was on an elevator, which in the right direction propels rapidly, but maintains the same enthusiasm in destroying lives.
Nagaland’s economic structure boasts an approximate share of 66.6~ % credited to the tertiary(service) sector, 22.7~ % to the primary(agricultural) sector, thus leaving only a measly approximate of 10.7~ % for the secondary(industrial) sector.
This is a point of concern because the industrial sector has proven to be an irreplaceable element for an economy’s development since time immemorial. Service sector has potential for income generation, but industrialisation is needed for long term stability.
Importance of industries: Industries create mass employment opportunities, something very much lacking in Nagaland. More industries would also lead to export, thus bringing revenue. More revenue would also attract foreign investment and encourage local ventures, thus leading to more industries and continuing the cycle.
Another key importance of industries is that they produce value at every step. By exporting raw materials for processing in other states, Nagaland misses out on the potential revenue that could have been created by handling all stages of production like processing and packaging in Nagaland itself, thus allowing for final finished products to satisfy local customers and, at the same time, export for additional revenue.
Further down the line, it would lead to competition to satisfy customers, thus encouraging improvement in product quality and actually providing an incentive to listen to customers.
Bottom line of industrialization is that it provides employment, revenue, investment, products, export capabilities and less dependence on foreign imports. So why are we not doing it?
Industrial potential of Nagaland: Surely the geography with its rough terrain and hills makes for an inconvenience to develop industries. Also, the Article 371(A) imposes certain restrictions for such activities.These factors may complicate matters, but they do not completely wipe out any chance of industrialization. These are merely speed bumps on a wider scale.
One majorstep taken by the government is the setting up of Special Economic Zones, wherein certain rules and regulations are partially softened with tax regulatory incentives, to ease and encourage industrialization. However, there is only one (in Dimapur), and it has not been very successful. It remains unfilled and lacks investment.
Main cause is lack of incentive. An investor wants profit, and we cannot promise that. Since we are a small populace and lack an industrial base, the local market is insufficient, so exports remain a must. And exports require infrastructure, for which Dimapur is arguably the best in Nagaland, but dwarfs in comparison to urban hubs like Guwahati.
Cafés: I feel compelled to point out that we have a concerning number of cafés in our state, particularly in Dimapur and Chumou. Now don’t get me wrong, I love coffee as much as the next sleep-deprived person, but this trend has deeper significance.
In fact, the entirety of this article was projected into my mind when I, for what feels like the hundredth time, saw yet another café open up.
Recall the sector ratio mentioned earlier, where services take up around 66.6~ % of the economy. This is an example of that imbalance. Services genuinely work well for revenue, no doubt, but they do not lead to stable and long-term development. For an economy to rely effectively on services would require large population, tourism capability, which in turn requires transport infrastructure and interconnectedness with the world, all of which is not present in Nagaland as of now.
The coffee industries responsible for the processing of coffee, i.e.- roasteries and washing plants, are underdeveloped compared to their distributors, i.e.- cafés. Moreover, insufficient production at the agricultural level is also present.
This also highlights the previously stated problem of lack of industry. In the staircase of production to processing to distribution, we seem to have neglected the middle step.
Vanity: The service sector appeals to most because restaurants, cafés, boutiques, resorts etc display wealth and status, which appears to be the ultimate goal for most of us.But we must realize that the real development and progress, at least for now, lies not in comfort but in manufacture.
If you recall, the survey from one of the initial paragraphs showed the disparity between the top 5% and bottom 50% population of our state. It is worth noting that most luxury services cater only to the needs of the wealthy, who constitute a miniscule portion of the citizens. We also do not have enough tourists to meaningfully impact the revenue.
Think about what this says about our society: When a rich person wants coffee, he can choose from a multitude of options, drive to it, spend on a few cups of coffee that costs (at the minimum) roughly around what most people earn in Nagaland per day. On the other hand, a child from a middle-class family has to scour through the waterlogged roads to hopefully find one open ground to play some sport, that too surrounded by garbage and broken glass. Come to Dimapur, we have world class coffee but not something as basic as a single public library.
I believe all these reveal the human nature to seek shortcuts and easy gains, which is very palpable in our society. At an individual level, people seeking shortcuts recklessly invest and in the worst-case scenario, fall for scams and get robbed. At a societal level, we can see that we have skipped over an entire step in economy development, whether unknowingly or otherwise. And I believe it is high time we learn that long, difficult paths are often more fruitful.
People with power and wealth are the ones who have the capabilities to bring changes, but we must remember that they have zero incentives to do so. They are immune to the sufferings of the average man. They do not have to worry about their children’s future, because their children don’t have to live here. We are in a sinking ship, and the ones in power are using what’s left to build rafts for themselves. Things could be far worse, but that does not mean we cannot strive for more. Growth is mandatory for survival. Complacency is a dangerous thing, and we must instead channel a sense of urgency, if we do not want to be left behind.
Victor
Wednesday, August 19, 2026