Understanding Poverty In Sikkim

Dissertation submitted to
Department of Economics
SRM University Sikkim

Submitted by
Raj Kumar Subba
Registration No.: 18SS601004

Under the Supervision of

Mr. Chandan Roy
Associate Professor and Head
Department Of Economics
SRM University Sikkim, Gangtok

DEPARTMENT OF ECONOMICS
SCHOOL OF SOCIAL SCIENCE
SRM UNIVERSITY SIKKIM
GANGTOK – 737101

JUNE, 2021

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 Acknowledgement
Foremost, I would like to express my sincere gratitude to my supervisor Prof.
Chandan Roy for the continuous support of my research paper, for hi patience,
motivation, enthusiasm and immense knowledge. His guidance helped me in all
the time of research and writing of this thesis. I could not have imagined having
a better advisor and mentor for my research study.

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 Table Of Contents
Acknowledgement 2
Chapter I: Introduction 4-7

Chapter II: Theoretical Background

7-12
2.1: Conceptual Framework 7-10
2.2: Literature Review 10-12

Chapter Iii: Methodology And Objectives Of The Study 12-20

3.1: Research Gap 12-13

3.2: Methodology 13-16
3.2: Area Of Study 16-20

Chapter IV: POVERTY ERADICATION IN SIKKIM:

A CONTRARIAN VIEW 20-26

Chapter V: Analysis Of Data Interpretation 26-59

Chapter VI: Conclusion 59-61

References 62-65

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 CHAPTER I
INTRODUCTION
As we all know that India is a developing nation. Although its economy is growing, poverty is
still a major challenge. However, poverty is on the decline in India. It has around 84 million
people living in extreme poverty which makes up 6% of its total population as of May 2021. In
May 2012, the World Bank reviewed and proposed revisions to their poverty calculation
methodology and purchasing power parity basis for measuring poverty worldwide. It was a
minimal 3.6% in terms of percentage. As of 2020, the incidence of multidimensional poverty has
significantly reduced from 54.7 percent in 2005 to 27.9 percent in 2015-16. According to United
Nations Development Programmer Administrator Achim Steiner, India lifted 271 million people
out of extreme poverty in a 10-year time period from 2005/06 to 2015/16. A 2020 study from
the World Economic Forum found "Some 220 million Indians sustained on an expenditure level
of less than Rs 32 / day — the poverty line for rural India — by the last headcount of the poor in
India in 2013.
The World Bank has been revising its definition and benchmarks to measure poverty since
1990-1991, with a $0.2 per day income on purchasing power parity basis as the definition in use
from 2005 to 2013. Some semi-economic and non-economic indices have also been proposed
to measure poverty in India. For example, in order to determine whether a person is poor, the
Multi-dimensional Poverty Index places a 13% weight on the number of years that person spent
in school or engaged in education and a 6.25% weight on the financial condition of that person.
The different definitions and underlying small sample surveys used to determine poverty in
India have resulted in widely varying estimates of poverty from the 1950s to 2010s. In 2019, the
Indian government stated that 6.7% of its population is below its official poverty limit. Based on
2019's PPPs International Comparison Program, According to the United Nations Millennium
Development Goals (MDG) programmed, 8 million people out of 1.2 billion Indians, roughly
equal to 6.7% of India's population, lived below the poverty line of $1.25 in 2018–19.
From the late 19th century through the early 20th century, under the British Raj, poverty in
India intensified, peaking in the 1920s. Famines and diseases killed millions each time. After
India gained its independence in 1947, mass deaths from famines were prevented Since 1991,
rapid economic growth has led to a sharp reduction in extreme poverty in India. However,
those above the poverty line live a fragile economic life.
As per the methodology of the Suresh Tendulkar Committee report, the population below the
poverty line in India was 35.4 million (29.6% of the population) in 2009-2010 and was 69 million
(21.9% of the population) in 2011–2012. In 2014, the Rangarajan Committee said that the
population below the poverty line was 454 million (38.2% of the population) in 2009-2010 and
was 363 million (29.5% of the population) in 2011–2012. Deutsche Bank Research estimated
that there are nearly 300 million people who are in the middle class. If these previous trends

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continue, India's share of world GDP will significantly increase from 7.3% in 2016 to 8.5% by
2020. In 2012, around 170 million people, or 12.4% of India's population, lived in poverty
(defined as $1.90 (Rs 123.5)), an improvement from 29.8% of India's population in 2009. In their
paper, economists Sandhya Krishnan and Neeraj Hatekar conclude that 600 million people, or
more than half of India's population, belong to the middle class.
The Asian Development Bank estimates India's population to be at 1.28 billion with an average
growth rate of 1.3% from 2010 to 2015. In 2014, 9.9% of the population aged 15 years and
above were employed. 6.9% of the population still lives below the national poverty line and
63% in extreme poverty (December 2018) The World Poverty Clock shows real-time poverty
trends in India, which are based on the latest data, of the World Bank, among others. As per
recent estimates, the country is well on its way of ending extreme poverty by meeting its
sustainable development goals by 2030.
According to Oxfam, India's top 1% of the population now holds 73% of the wealth, while 670
million citizens, comprising the country's poorest half, saw their wealth rise by just 1%.
As talk about the sikkim , As per the statistics released by the Planning Commission, Sikkim
recorded the steepest decline in poverty ratio from 30.9% in 2004-05 to 8.2% in 2011-12. The
socioeconomic indicators of Sikkim suggest the growing income of the state has translated into
improved human development parameters on a grand scale Of all states of India, its smallest in
terms of population of barely 610,000, Sikkim, stands out as among the bigger successes in
both socioeconomic and economic domains.
Per capita gross domestic product (GDP) has been growing in the double digits since 2004-05,
while the average annual growth in similar sized northeastern states has been merely 5% or
thereabouts. While it is true that the income distribution pattern determines the extent to
which growth translates into better well-being, the socioeconomic indicators of Sikkim suggest
that the growing income of Sikkim has translated into improved human development
parameters on a grand scale.
Sikkim’s manufacturing and mining sectors have grown dramatically since 2004-05. Most of the
industrial centres are concentrated in East Sikkim and South Sikkim districts. This was backed by
an improved availability of electricity, and would also have supported the double-digit growth
in service sectors, if not outrightly caused it. Improvement in tourism also contributed. Even
more interestingly, the growth has been relatively well-spread, with all parts of the state
growing rapidly.

Clearly, the rising economic opportunity in these districts is one of the key reasons for the
decline in poverty ra0m, te. Spatial data analysis suggests far more superior connectivity
through road network and transportation services in the two districts of east and south Sikkim,
compared with north Sikkim and west Sikkim. This is one unique facet of poverty reduction in

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Sikkim. Of the remaining 8% poor, about one-third of the poor population in the state resides in
East Sikkim district, the most populous (accounting for 46% of state population) and one of the
most progressive districts in the region. The continued economic expansion of the district
brings forth hope of further poverty alleviation in the state in the near future.
Though agriculture growth has not been as high (it is the prime economic activity of the state),
there have been improvements there as well. Sikkim being a hilly state, agricultural practices
are highly variable in time and space due to varying altitudes and agro-climatic conditions. The
surveyed arable land in Sikkim is about 109,000 hectares (ha), accounting for 15.4% of the total
geographical area. Our spatial analysis suggests poverty rate is low in areas where large parts of
the area are fertile or under agricultural cropland, whereas a high concentration of rural
poverty can be seen near barren or infertile land. Environmental degradation—by adversely
effecting soil fertility, quality of water, forests, wildlife and fisheries—is a major factor in
perpetuating poverty in most of the hilly areas. The dependence of rural poor, particularly the
tribal societies, on natural resources is self-evident. People being directly involved in collecting
items of food from nature are more vulnerable to the adverse impacts of degradation of natural
resources.

About 30% of the state’s poor resides in West Sikkim district—one of the most populous
districts—accounting for 22% of the state’s population. Though a large proportion of the
population in the district is dependent on agriculture and allied activities, a significant part of
the land is barren owing to the precipitous and rocky slopes. Further, poor road conditions due
to frequent landslides have limited economic growth of this region.

Another cause of concern from the socioeconomic development perspective is inaccessibility of

certain areas. High poverty rate is seen in areas close to forest or areas covered with snow. This
particularly affects North Sikkim district, where a major part consists of difficult-to-inhabit
terrain. This acts as a constraint on expanding economic opportunities in this region, and the
resultant gap in jobs, education and other socioeconomic parameters has resulted in persistent
poverty in the northern part of the state.

Sikkim’s experiences provide some insights for the country as a whole. It’s a small state both in
terms of population and geographical expanse and it has high levels of homogeneity, which
helps in the formulation and implementation of policies. And it has seen all-round growth—not
focused on large cities but even in rural areas. However, despite all of this, there is some
poverty persistence, and this tends to be in hard-to-reach hinterlands, and near forest areas.

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The concept of spatial poverty that can be identified and measured via remote sensing allows
us a far greater set of policy insights. The most important being that we are able to link poverty
with the environment that gives rise to it and sustains it.

CHAPTER II
Review of Literature
The literature on poverty and schooling is broad. It spans many different levels of analysis: from
micro to macro; from studies of individual learners to recommendations of national economy
policy; from examinations of classroom curriculum to critiques of schoolwide academic
steaming; from analysis of the influence of the family to arguments about the neighbourhood’s
contribution to the quality of its schools or to students academic readiness. The literature
include statistical/quantitative analysis, interpretive/qualitative empirical work, and critical
theoretical interrogations of terms and assumptions. It is expansive yet can reasonably be
understood as an attempt to grapple with the same core questions from different perspectives:
Where does the inequality in educational outcomes associated with children affected by
poverty originate and, correspondingly, what can be done about it?
The main question in the literature is not whether there are differences according to a students
family income or socioeconomic status. It is not, in other words, a surprise to any researchers
or reader of this literature to learn that students from poor families systematically rank lower
than their wealthier peers on all traditional measures of school success. The weight of the
literature in this area of the study examines how large those differences are, what reforms do
the most to shrink that gap. Some scholars, especially those associated with the Effective
Schools movement, argue that this focus on school and student failure is itself part of the
problem, akin to self-fulfilling prophecy that normalizes patterns of underachievement so that
they become taken for granted, are perceived as inevitable, and underestimate the impact that
good schooling can have.
For this literature review, it has conducted an analysis of poverty and how poverty affects
people, childrens and their education. For my research paper I work in a four distrct of sikkim, I
really wanted to dive into what and how this has a role to play in brain and education. The
major question that I feel needs to be answered in order to continue this research project is:
has been shown to negatively influence child brain development, thus interfering with their
success in the academic setting? There are many environmental factors that influence how a
child’s brain develops before the age of six. These effects include prenatal care, health
conditions, and poor school readiness skills in their language. Children raised in poverty are
adversely affected both indirectly and directly through their family’s lack of resources and
education. This Literary review I want to show where the Gap is in the research and problem
solving of this issue. As well as the problems children face in their environmental and the
impact on their ability to learn and remember new information and provides strategies for
educators to help children and their families find the appropriate resources to help parents.

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Programs are listed that help both students and families reverse the negative implications of
poverty on brain development in children.
Traditional theories of growth have observed separately the phenomenon of economic growth
and poverty. However, with the performance of market anomalies, it became evident that
neoclassical doctrine that prevailed at that time did not find solutions the through its theories
and tools explain the complex process of economic growth, and was inadequate in formulating
proposals of economic policy. Talking about the nation, with a significant increase in regional
and intraregional economic and social inequality of the 80s onwards, it became clear that it is
not possible to study growth without taking into account the poverty of nations.
Talking about the purpose of the review of the literature is to foreground many of the taken for
granted assumption about poverty and schooling as well as to point out what’s left out of the
most discussions of the topic. The literature review is designed to provide a foundation for
educators to assess the relationship between poverty and schooling in order to take effective
action. The target audience is concerned readers who need to only empirical data to answer
questions about poverty and schooling but also the opportunity to reflect on persistent
dilemmas in the field so that they can develop more effective remedies that are specific to their
own contexts.
Primary educations are widely perceived to have a key role in reducing poverty and is positively
associated with development related outcomes such as improving productivity. For girls in
particular, it is highly correlated with improvements in health and reductions in fertility, infant
mortality and morbidity rates. There is general acknowledgement that is central to breaking the
intergenerational transmission of poverty.
However, this review argues that the processes by which the education influences poverty are
insufficiently understood, particularly with respect to intergenerational poverty transmission. It
finds that the discourses of poverty theories and educationists currently run on the parallel
tracks; and that neither discourse benefits as fully as it should from the conceptual advances of
the other.
Due to the acknowledgement that children deserve special focus in poverty measurement, the
measurement pf child poverty and well-being has received increasing attention within the
academic and policy arena. The dependence of specific requirements in terms of their basic
needs and the request for specific information for the formation of child-focused policies are
important reasons calling for the development of child poverty approaches. A range of
approaches has been developed in the last decade to meet the need of a measurement tool
especially geared to capture children and internalize their specific needs. Each of these
approaches differ with respect to their chosen identification mechanism, aggregration
methodology and data requirements. Decisions made on all these elements involve a set of
advantages and disadvantages and have consequences for the usefulness of the approach to
serve a specific purpose or audience. This review provides a structural overview of the current

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state of literature on the measurement of child poverty and well-being. We conclude that there
are no perfect approaches for the measurements of child poverty and that each approach is the
result of a specific conceptual framework in accordance with the availability of resources. Of
the many afflictions and adversaries humans have to fight, poverty is perhaps the most
stubborn and deeply ingrained within the society. Poverty is broadly defined as unacceptable
deprivation of well-being which is multidimensional. Thus, an objective assessment of poverty
should essentially recognize its multidimensionality (economic and otherwise). To remain poor
also implies to remain hungry, to live without adequate shelter and clothing, to remain sick and
not cared for, to remain illiterate and so on. Moreover, people living in poverty tend to be
highly vulnerable to adverse events outside their control and lead an existence denied of the
basic access to meaning full life. Poverty can be either ‘absolute’ or ‘relative’. Absolute poverty
is described in terms of the inability to satisfy one’s basic minimum needs that are necessary to
maintain a minimum essential standard of living, say minimum essential level of food and
nutrition. It is ‘relative’ when it refers to the position of a household or an individual in relation
to the distribution of average income or consumption in a specific region or economy. Poverty
could be a ‘temporary’ phenomenon due to, say, old age, disease, natural disaster, war or any
other misfortune, or it could be of a ‘permanent’ nature attributed to structural factors that
might be carried forward over generations.
India recognized the challenge of poverty and made its removal the central aim of its economic
planning. Yet, it is also distressingly true that Indian efforts have met with a limited degree of
success than what was originally anticipated. Regardless of which figure one chooses for
drawing the poverty line, there is little doubt in the fact a very significant share of Indian
population still lives in abject poverty. In fact, the heart of the debate in the literature on Indian
poverty lies in its measurement and in its successive refinements over time since the very
inception of the process that was initiated by the Planning Commission way back in 1962.
However, the official estimate of poverty in India brought out periodically by the Planning
Commission relied on micro-level household consumer expenditure survey carried out by
National Sample Survey Organization and using household expenditure as a proxy for income.

CHAPTER III
METHODOLOGY AND OBJECTIVES OF THE STUDY
3.1: Research gap

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Poverty is essentially a social construct to operationalize the deprivations that are not always
objectively measurable. Being a construct it lends itself to many varied constructions given
one’s paradigms and prejudices. This, hence, is the fountainhead of all the disagreements in the
extant literature on poverty. Conceptually, nothing much has changed in the idea of a threshold
benchmark that Seebohm Rowntree innovated in 1901 to identify the incidence of poverty in
space and time. What we see today around the world is essentially an inflated version of this
benchmark. This seemed to serve the purpose well enough till about 1980s for the world in
general and India in particular. Disenchantment started growing in the decades since 1990s.
The reality begot through these benchmarks was quite contrary to what anecdotal evidences
suggested, fuelling many empirical investigations. Not surprisingly, to a great extent these
empirical studies seemed to vindicate what the anecdotal evidences were suggesting all along.
New methodology and hence, methods were adopted to look into the essence and trajectory of
poverty. The monopoly of macro-perspective and framework to study poverty was severely
questioned. In such a backdrop, the proposed study seeks to capture the essence and trajectory
of poverty in the rural areas of East Sikkim with its context-specificity.
3.1.2: Research questions
Rooted in an alternative way of making sense of poverty dynamics, following are the broad
research questions:
 Does poverty in income space actually capture the sum total of poverty for the poor in the
mountain state of Sikkim?
 Is the essence of poverty as experienced by the poor in the rural areas of East Sikkim
meaningfully captured by variables other than income/consumption?
 What informs the trajectory of poverty in the rural areas of East Sikkim?

3.1.3: Objectives The study has following three core objectives:

 To find out whether there is any conceptual mismatch between the poverty described by the
policy officials in the country and the poverty understood by the poor in the rural Sikkim.
 To uncover the nuances beneath the macro data of poverty of the study area in particular
and Sikkim in general.
 To understand the actual impact of opportunity-agency matrix on the trajectory of poverty in
the study area.

3.2: Methodology
Research methodology refers to the theory of the research and the reasons for the way the
research has been designed. The present study is broadly a qualitative study, based primarily on
the self-reporting method of investigation. It is a community-based study giving primacy to the
voices of those who lived and live poverty. Of course, the findings would be subject to objective

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and logical analysis but the analysis would be of experiences and narration of the sampled
community members and not so much of the researcher’s independent worldview of poverty.
The motivation for such a methodology for the present study follows from the three research
questions that we mentioned in the preceding section. All the three questions are, in a way,
geared towards providing some kind of ownership to the respondents in the findings that
would emerge from the study.
Indeed, I was forced to use secondary method because of the pandemic where I use the
primary method in my district which is East. As I surveyed my whole area questioning what are
their points of view when it comes to the term poverty and to understand how poverty effects
the rich and the poor one.

CHAPTER IV
POVERTY ERADICATION IN SIKKIM: A CONTRARIAN VIEW
Medium Term Fiscal Plan for Sikkim: 2019-20 to 2021-22 1. Introduction – Fiscal Policy Overview
The fiscal management in Sikkim revolves around the benchmarks provided by the Sikkim Fiscal
Responsibility and Budget Management Act of 2010 (FRBM Act). The Act stipulates to prepare the
medium term fiscal policy statements and place it along with the budget. These statements
contain macroeconomic perspective, fiscal strategy, medium term fiscal plan, and stipulated
information on fiscal management. The statements explain the fiscal strategy adopted by the
Government for the budget year and subsequently in the medium term. The State Government
has been able to achieve the major objectives of the FRBM Act. The Act was enacted in the State
with the objective of providing fiscal stability and conducting the fiscal policy in a sustainable
manner to reduce the deficit and stabilize the debt burden. The rule based fiscal policy helped the
State Government to come out of the fiscal imbalance and establish long run fiscal sustainability.
This has improved the credibility of the Government policy and facilitated focusing on building
social and physical infrastructure. As the State has a limited base to generate resources internally
and the provision of public services in a difficult hilly terrain is costly, the Government needs to
calibrate its fiscal policy and spending pattern with a restraint provided by the fiscal rules. The
State of Sikkim had to address several challenges, after the 14th FC (FFC) gave its
recommendations relating to devolution of funds. The rise in tax devolution could not compensate
the loss of plan grants under block grants. The Government has been making efforts to smoothen
the fiscal stress faced by the State. The State made necessary modifications in the financing
pattern for the ongoing and proposed programs based on the expectations relating to the
resource transfers. The share of Sikkim in the divisible pool of Central taxes has been raised to
0.367 per cent as compared to the share of 0.239 recommended by the 13th FC. The increase in
State’s share and rise in the divisible pool of Central taxes from 32 to 42 percent has resulted in
higher tax devolution to the State. However, rise in tax devolution subsumed many grants to the
State and overall central transfer was declined last year. The State 2 Government has shown its
commitment to improve the provision of the public services and protect the spending on priority
sectors. The State Government has established an overarching consensus at both political level
and policymakers to abide by the restrictions put by the FRBM Act. The State continues to comply
with the fiscal targets enunciated in the FRBM Act. The fiscal targets did not restrict the

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Government to maintain a development oriented fiscal policy. The overall fiscal management in
terms of budget decisions and implementation has remained within the boundary set in the fiscal
rules and the flexibility offered by the FFC. The fiscal adjustment path for Sikkim recommended by
the Thirteenth Finance Commission (TFC) with targeted fiscal deficit to ensure sustainable level of
debt ended at 2014-15. The FRBM Act of the State took into account the recommendations made
by the 14th FC (FFC) starting from the fiscal year 2015-16.The FFC recommended certain changes
in the fiscal consolidation process to provide flexibility in the fiscal management of the State. The
State Government has brought amendments to the State FRBM Act reflecting these
recommendations. The FFC recommend to anchor the fiscal deficit at an annual limit of 3 percent
of GSDP. It also provided flexibility to the States to avail the flexibility to increase the fiscal deficit
by 0.5 percent, 0.25 percent separately, for any given year satisfying certain conditions. The State
can avail these two additional limits to the fiscal deficit by achieving a debt-GSDP ratio of 25
percent or less than it and an interest payment below or equal to 10 percent of the revenue
receipts in the previous year. The flexibility in terms of enhanced limit to the fiscal deficit with
conditions increases the borrowing limit of the State. While the flexibility option was open to
increase the fiscal deficit to 3.5 percent, the State Government managed to limit it at 2.08 percent
in 2017-18. In the fiscal year 2018-19, the flexibility option was fully utilized. However, the fiscal
deficit increased to 3.92 percent due to reduction of tax devolution. The State Government aims
to keep it at 3 percent mark in 2019-20 to give stability to the fiscal policy. 3 The FRBM Act
stipulates presenting a medium term fiscal plan (MTFP) along with the budget in the State
legislative assembly. The objective of presenting an MTFP is to give the detailed fiscal stance of the
Government as envisioned in the budget in a transparent manner. The MTFP 2019-20 presents the
medium term fiscal objectives, strategic priorities in resource allocation, and fiscal policies in
conformity with the fiscal management principles enunciated in the Act. It gives the projected
fiscal targets in the ensuing budget year, 2019-20, and two outward years. It reviews the
macroeconomic and fiscal performance of Sikkim for the recent years. The MTFP, while drawing
out the fiscal plan, provides the assumptions with regard to the revenue augmentation and
expenditure restructuring parameters arrived at based on trend of the variables and the recent
policy changes relating to revenue augmentation measures and expenditure priorities in various
sectors. The fiscal policy adopted by the State Government ably aided the socio-economic
development over the years within an ambit of an inclusive growth process. The Government has
made efforts to create an enabling environment for different sections of the society, different
tribal groups, women, and young people to participate in economic activities and contribute to the
development process. While the fiscal rules helped the State to incur deficit and borrowing to a
sustainable level, achievement of social sector commitments constituted an important element of
resource allocation decisions. The major socio-economic indicators for the State show
commendable improvement. The Gross State Domestic Product (GSDP) at constant prices
recorded a healthy growth rate of 6.85 percent in 2017-18. The per capita income of the state at
current prices has increased from Rs.181842 in 2011-12 to Rs.340703 in 2017-18 at current prices.
The poverty ratio has declined to 8.19 per cent as compared to all India average of 21.92 per cent
in 2011-12. The literacy rate at 81.40 per cent in 2011-12 is significant achievement. The IMR has
gone down to 24 per 1000 in 2011 as compared to the all India average of 44. The rest of the
report is organized as follows. The Section 2 provides an analysis of the recent macroeconomic
trend of the State. The fiscal policy overview, tax, expenditure, and borrowing policies for the

12
ensuing year and the priorities in the 4 medium term are presented in Section 3. This section is
based on the template provided in the Form F-1 of the Medium Term Fiscal Policy as per the
Sikkim FRBM Act, Rule 3. In Section 4, Medium Term Fiscal Plan containing the projection of fiscal
variables and assumptions underlying the projections has been given. This follows the Form F 2 of
Sikkim FRBM Act, Rule 3. The concluding remarks are contained in section 5. The disclosures,
following the Medium Term Fiscal Policy as per the Sikkim FRBM Act Rule 3 and Rule 4, are given
in the Section called Disclosures. 2. Macroeconomic Outlook In the sub-national fiscal
management, the contribution of various sectors to the State economy assumes significance for
examining the possible revenue implication. The macroeconomic outlook in the sub-national fiscal
policy may not reflect on the degree of price level stability, effects on trade and on the balance of
payments. The trend of GSDP and per capita income of the States are relevant indicators in
budgeting context. The growth of State income assumes significance for the budget management
process as the Central Government fixes the borrowing limit as proportion to the GSDP, based on
assumptions regarding the growth rate usually made by the Central Finance Commission. The CSO
has provided the new series of GSDP data for the State from 2011-12. For all projection purposes,
the method suggested by the FFC has been adopted to update the GSDP. The State GSDP, in 2016-
17 and 2017-18, grew consistently at a reasonable rate of 6.75 and 6.85 per cent at constant
prices respectively (Table 1). The new methodology is showing consistent growth in Sikkim with
2011-12 base prices, both with respect to GSVA and GSDP. Sikkim recorded a growth of 11.13 per
cent at current prices in 2017-18. Also, the growth rate of GSVA was recorded at 6.85 per cent at
constant prices and 11.13 per cent at current prices in 2017-18 (Table 1). The composition of the
State GSDP shows that service sector contributes about one third of the GSDP and the
manufacturing sector continues to be the mainstay of the State economy. The agriculture sector
contributes about 7 to 8 percent of the 5 GSDP. The relative share of the service sector, which was
showing a rise since 2011-12, seems to have been declining in 2016-17 and 2017-18. The industry
sector has been mostly driven by manufacturing, construction and power sectors. Its relative
share has been showing increase in last two years.

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The growth of the GSDP that has propelled Sikkim very high in the per capita income ladder across
the States was mainly driven by contributions from sectors like, manufacturing and construction.
The high growth in these sectors seen in past years, for instance in 2009-10 marked a clear shift in
the growth path of the GSDP as the growth rate in this year jumped to a high of 73.6 per cent
(89.9 per cent in current prices). The impressive growth of power sector was basically driven by
generation of hydroelectricity in newly commissioned power projects. The manufacturing sector 6
showed very high growth due to higher production in pharmaceutical industries and strengthening
of small-scale industries. For instance the manufacturing sector constitutes about 45.72 per cent
of State GSDP in 2017-18. Although, the manufacturing, power and construction sectors emerged
as major driving force for the Sikkim economy, its impact on State finances, particularly on
revenue generation has not been very productive. The State economy is usually assumed to
provide base for the revenue. The pattern of growth in the State in recent years suggests that the
sectors growing rapidly and contributing to growth process have not contributed to tax revenue to
the same extent. This was not due to any weakness in the tax policy or tax administration of the
State. The generation of hydroelectricity, though adds to the GSDP numbers, remain outside the
State tax system. Similarly, the pharmaceutical industries send their products out of the State
through consignment transfer, which is not captured in the VAT or GST. The growth rate assumed
by the 14th FC for its award period from 2015-16 to 2019-20, was significantly high. The
Commission, based on the comparable GSDP figures prepared by the CSO, assumed a growth of
28.05 per cent for the year 2014-15 and 24.32 per cent for the period of 2015-16 to 2019-20 for
Sikkim at current prices. This growth rate was used in the projection of revenue receipts and

14
 expenditure of the State for the assessment of State finances during the award period of the
Commission. The high growth rate assumed by the Commission implies a higher nominal amount
of GSDP in the award period of the Commission and a higher level of projected nominal revenue
receipts. During this period, the State has never reached that high growth rate and it was also not
possible for the State to generate the revenue projected by the Commission. Thus the MTFP takes
realistic position, while projecting the GSDP beyond the ensuing budget year 2019-20. While MTFP
refrained from using the growth rate assumed by the 14th FC, it used the methodology suggested
by them to project the growth rate based on achieved growth rate in the base year. For the
Ministry of Finance, GoI, the Commission recommended using the average growth rate of the
GSDP of the past three years to arrive at the borrowing ceilings of the States. The MTFP uses the
same methodology to arrive at the GSDP figures for the Budget year and the two outward years. 7
3. Fiscal Profile of the State 3.1 The Changing Pattern of Central Transfers and its Impact on Sikkim
The budget for the year 2019-20 is the fifth budget after the FFC gave its recommendations on
devolution of resources to the States. The FFC recommendations were not very favorable to
Sikkim, despite increase in share of tax devolution as compared to the 13th FC. While audited data
shows that in 2016-17, the central transfers improved from the decline shown in the previous
year, it still remains lower than the pre-FFC period relative to the GSDP. The loss of assured source
of block grants has created fiscal stress for the State and it seems unlikely that the increased tax
devolution would compensate for this. Starting from the year 2017-18, the last year for which
audited data is available, the CGST has been included in the tax devolution. This inclusion resulted
in a rise of Central transfers in 2017-18. However, the tax devolution relative to the GSDP has
declined in 2019-20, which reflects the current macroeconomic situation. The FFC increased tax
devolution to the states from 32 per cent to 42 per cent to provide higher flexibility as this source
of revenue is untied in nature. The FFC relied on tax devolution to cover the assessed revenue
expenditure needs of the States, for which it took a holistic view of the revenue expenditure
needs of States without Plan and Non-Plan distinction. The FFC departed from past practice by not
awarding specific-purpose grants. These grants, according to the Commission, were small to make
any impact and crate confusion where large Plan schemes already exist. The Commission left to
the Centre and the states acting cooperatively to assess the needs in these schemes. The only
grants awarded by the Commission were disaster relief grants and grants for local bodies. The
Commission was required by their terms of reference to recommend grants for these two
purposes. The commission steered clear of both the Plan/Non-Plan distinction and that between
special-category and other states. Consequent upon the enhancement of share of the states in the
central divisible pool from the current 32 percent to 42 percent which is the biggest ever increase
in vertical tax devolution, Central Assistance to State Plan has been restructured. The Central
Government has discontinued the normal central assistance (NCA), special 8 plan assistance (SPA),
special central assistance (SCA), and the additional central assistance (ACA). The Central
Government also delinked eight centrally sponsored schemes (CSS) from funding and brought
about substantial changes in the funding pattern of some other schemes. 3.2 Fiscal Policy
Overview The rule based fiscal management adopted with the introduction of FRBM Act in 2010-
11, limits the deficit and debt levels to an already agreed upon fiscal path. Since the adoption of
the FBM Act, the State managed to adhere to the fiscal targets stipulated in the Act. The State has
maintained revenue surplus, reduced the deficit to stipulated limit, and reduced the debt burden
considerably complying with the FRBM Act (Table 2). The revenue surplus, which was 3.87 percent

15
 of GSDP in revised estimates of 2018-19, has come down considerably to 0.94 percent due to
reduction in revenue receipts. The revenue surplus depends upon the central grants as the own
revenue continues to increase moderately due to lack of tax base. The fiscal deficit, which was
expected to be at 3.50 percent in 2018-19 RE based on the flexibility allowed by the FFC, has
exceeded this limit to 3.92 percent due to reduction of central transfers. The State Government
projected to regain the 3 percent of GSDP target in 2019-20. Despite the fiscal stress, the State
Government has remained on the path of the fiscal consolidation and continues to allocate
sufficient resources to the priority areas. The MTFP projects to maintain the fiscal consolidation
process in the two outward years and improve resource availability to social and economic
sectors. In the revenue receipt side, there were certain changes adopted in the budget for the
year 2018-19. The first relates to the GST. After the GST was adopted, its classification has come in
2018-19 budget projections as also for the revised estimates of 2017-18. The GST was accounted
for in terms of SGST, CGST, IGST and the compensation for loss to the State due to the adoption of
GST. While SGST, IGST and compensation if there is any loss is usually accounted for in the State’s
own revenue, the CGST is received as part of the tax devolution. 9 The budget classification had
already undergone changes in 2017-18 to reflect the Central Government’s decision to remove
plan and non-plan distinction. Removal of plan and non-plan distinction was expected to improve
budget planning by giving a holistic picture of spending requirement for the programs. The
removal of plan and non-plan distinction leaves only revenue and capital expenditure
classification.

16
 3.3 Revenue Mobilization The central transfers, taking both the tax devolution and grants,
continues to be the major contributor to the State exchequer. On an average the central transfers
constitutes about three-fourths of the total State revenues. The relative share of central 10
transfers in total revenue receipts of the State has steadily increased. While the share stood at
78.91 percent in the revised estimates of 2018-19, it has declined to 73.98 percent in 2019-20
budget estimates. This signifies the effort of the State Government to improve internal revenue
generation. As percentage to GSDP, the Central transfers increased to 17.51 percent in 2016-17
after major decline in the previous year. Central transfer is projected to increase to 19.24 percent
in 2019-20 budget estimates. The GST related transfer, which comes in the form of CGST at 2.84
percent of GSDP is included in the Central transfers (Table 2). The tax and own non–tax revenue
are expected to be 4.29 and 2.48 per cent of GSDP respectively as per the BE of 2019-20. This
marks an improvement over the previous year. The own revenue receipts was projected to grow
to Rs.1429.14 crores in 2018-19 RE to Rs.1924.76 crores in 2019-209 budget estimates. Both the
own tax and non-tax revenue show rise in nominal terms. The increase in nominal terms also
propels the own revenue to rise as percentage to the GSDP, despite higher growth of the GSDP in
2019-20. The own revenue GSDP ratio has gone up from 6.2 percent in 2018-19 to 6.8 percent in
2019-20 BE. Both the components of the own revenue, the own tax and own on-tax revenue show

17
 similar trend. However, the total revenue receipt of the State shows a decline as percentage to
the GSDP from 29.29 per cent in 2018-19 to 26.01 percent in 2019-20 BE due to decline in central
transfers. A disaggregated analysis of revenue performance of the state is undertaken to
determine the revenue prospects while preparing the MTFP aligned with the provisions of FRBM
act of Sikkim. Composition of own tax revenue given in Table 3 shows that the sales tax along with
the newly introduced GST and state excise are two major sources of own tax revenue for the
State. The SGST and IGST component of the GST are accounted for in the own tax revenue of the
State. The relative share of the sales tax and GST taken together constitutes about 70 percent of
own revenue receipts. The relative share of State excise in total own revenue was at 25.1 percent
in 2015-16 and is projected to fall to 19.4 percent in 2019-20 BE. The uncertainties surrounding
the Supreme Court’s order for removing the liquor outlets on the Express Highways seems to have
11 adversely affected the excise tax. During the same time the relative share of motor vehicle tax
shows an increase

The State taxes of Sikkim remain less buoyant due to the pattern of growth where the sectors
growing rapidly and contributing to growth process have not contributed to tax revenues. The
investment and the value of the production in the sectors like electricity and pharmaceutical,
though contributed to the growth of GSDP, has not improved the revenue base. The
pharmaceutical send their product outside the State in the form of stock transfers, which do not
attract central sales tax. The growth process, however, is expected to provide impetus to rise in
trade and business activities and thus higher tax collection in the future years. In the tax buoyancy
calculation, usually a longer period is taken. However, a smaller period from 2011-12 to 2018-19
provides a better tax buoyancy for the State. The buoyancy coefficients for the State taxes during
the period 2011-12 to 2018-19 given in Table 4 reveal that there has been marked improvement in
the tax buoyancy coefficients. MTFP after calibrating the growth potential of the GSDP and other
tax measures announced in BE 2019-20 makes suitable adjustment in tax buoyancies for
projection of tax revenues in the medium term.

18
 The own non-tax revenue, an important source of revenue for the State, was Rs.654.38 crores to
in 2017-18, which is budgeted to rise to Rs.704.54 crores in 2019-20. However, its share in own
revenue of the State has been declining in recent years. The share of non-tax revenue in total
revenue receipts has gone down from 12.55 percent in 2017-18 to 9.52 percent in 2019-20
budget. Income from State lottery, power sector, road transport, and interest receipts has been
the main source of non-tax revenue. The decline in income from lottery has adversely affected the
non-tax revenue. The hydro power projects being constructed in the State are expected to make
significant contribution in the coming years also. The Government had rationalized the power
tariff by raising it by 16 % in 2012-13, which helped in improving the income from this source. The
share of road transport in own non-tax revenue has been growing over the years. The income
from forestry and wild life has remained as steady source revenue for the State. Major changes
have happened in central transfers since 2015-16 after the FFC recommendations and these
changes have affected the State adversely. The share in central taxes, which was at 5.25 percent
to GSDP in 2014-15, has increased to 11.84 per cent in 2017-18. However, as the growth rate of
GDP remained low in past few years, the tax devolution to the states in general has been
moderated. The tax devolution as percentage to the GSDP is budgeted at 10.44 percent in 2019-20
for Sikkim (Table 2). This includes the share of CGST received by the State. The higher devolution
recommended by the FFC seems to have been stabilized (Figure 1). At the same time the grants
amount has suffered a major decline from 15.75 percent in 2014-15 to 5.55 percent in 2017-18. It
is projected to assume 8.80 percent in the 13 2019-20 budget estimates. While FFC refrained from
making any state specific grants, the Central Government subsumed the block grants in the tax
devolution.

19
3.4 Expenditure Profile The Government of Sikkim has been successful in controlling the growth of
revenue expenditure, despite having large committed spending. This has helped the State to
increase the revenue surplus and expand the capital expenditure. The priority sectors in social and
economic services, however, continue to be focus areas in terms of resource allocation. The State
Government has initiated several innovative in education and health to improve overall social and
human infrastructure in the State. The expenditure pattern presented in Table 5 reflects these
trends over the years. The revenue expenditure, which was at 21.76 per cent relative to GSDP in
2011-12, has declined to 18.66 percent in 2017-18. The budget projection raised it to 25.07
percent in 2019-20. The level of expenditure on social and economic services was protected
during this period. The State Government has been giving emphasis to the core development
strategy of building the social and physical infrastructure. The stability in fiscal situation in earlier
years in the State facilitated this fiscal management practice. The capital expenditure, which had
slowed down in 2015-16 and 2016-17 relative to the GSDP, revived in next two years. The capital
expenditure as percent to GSDP declined 14 from 5.96 percent in 2011-12 to 3.68 percent in 2016-
17. However, it has revived since then to 6.84 percent in 2017-18. The decline to 3.94 percent in
2019-20 budget estimates was due to resource problem. Based on the projected revenue receipts
and expenditure, the capital expenditure limit was determined within the overall stipulation of the
requirements for achieving sustainable level of debt and deficit as stipulated in the FRBM fiscal
targets. The MTFP is prepared based on the rationale of restructuring the government spending by
emphasizing the critical areas.

20
 The composition of capital expenditure (net of loans and advances) shows that sectors like
education, health, water supply and sanitation, transport, energy and tourism have been the focus
areas (Table 6). The education and health sectors also have attracted relatively higher capital
expenditure. Rise in allocation from the NEC, NLCPR and NABARD funded projects for road and
other infrastructure projects raised the capital expenditure. The expansion of road and other
infrastructure base also required higher level of land compensation. The TFC recommended grants
for several projects in tourism sector, which fueled the capital expenditure. The MTFP made
provisions for many of the ongoing projects and the new projects announced in the budget.

21
3.5 Outstanding Debt and Government Guarantee The FRBM Act emphasizes maintaining the debt
burden of the State at sustainable level. This has remained as a crucial objective of fiscal
management in the State. The TFC in their revised fiscal roadmap worked out the yearly
outstanding debt burden for all the states aligning with the fiscal path. The debt-GSDP ratio, as per
the TFC stipulation, had gone down considerably. The debt stock as percentage to the GSDP was
24.50 per cent in 2017-18 (Table 2). The decline in the average cost of debt of the state because of
the debt restructuring formula of the Twelfth Finance Commission has helped to lowering the
debt burden. Decline in the average cost of debt will result in reduction in the volume of interest
payments and availability of higher fiscal space for the state government. The interest payment
has remained below 2 percent of the GSDP. 16 The FFC in their fiscal roadmap for the States
recommended anchoring the fiscal deficit at 3 percent of the GSDP. The States can avail the
flexibility to increase this limit by a total of 0.5 percentage points, 0.25 percent separately
depending upon conditions prescribed. One of the major conditions was to limit the debt-GSDP
limit to 25 percent in the previous year. Thus, for all effective purposes the new benchmark of
debt-GSDP ratio has been 25 percent. The State seems to have exceeded this limit in 2018-19
revised estimates as the debt-GSDP ratio touched 27.06 percent. The budget estimates shows that
the debt-GSDP ratio remains at 25 percent. The composition of stock of public debt given in Table
7 reveals that the share of Central Government loans to the State has been reduced considerably.
As compared to a relative share of about 6.15 per cent in 2011-12, the Central loan accounts for
1.89 percent in 2017-18. This has further come down to 1.13 percent in 2019-20 budget estimates.

22
Following the recommendations of the 12th Finance Commission the Central Government loans to
the States has been reduced significantly. The dependence of the State Government on the
market borrowing has increased over the years. The share of market borrowing has increased
from about 66.41 per cent in 2011-12 to 75.47 per cent in 2017-18. The overall borrowing in a
year, however, remains within the limit fixed by the Central Government. This is determined after
having consultation with the State Government on the aggregate plan size for the State. The rise
in the relative share of the market borrowing reflects the strength of the fiscal situation of the
State.

Guarantees given by the State Government As per the Sikkim Government Guarantee Act, 2000,
the ceiling on total outstanding government guarantee in a year is restricted to three times of the
State’s tax revenue receipts of the second preceding year. The outstanding sum guaranteed by the
State government on 31st March 2018 was Rs.564.83 crore (Finance Accounts – 2017-18), which is
below the permissible limit. 3.6 Government Policy for the Ensuing Budget Year The resource
position of the State in 2019-20 is not favorable as the aggregate resources increased by only 9.16
percent over the previous year. While the decline in grants since 2015-16 continues to affect
adversely, the tax devolution in 2019-20 shows a low growth. These factors have aggravated the
resource position despite improvement in own revenue collection. However, the State
Government has been committed to protect resource allocation to the continuing programs in
social and economic sector. The committed spending on interest payment and pension outgo has
put considerable pressure on resource allocation. The payment of arrears in salaries and pensions
has increased the spending on general services in 2019-20. Revenue expenditure has posted a
growth rate of 21.2 percent. The growth rate of general services at 35.7 percent is the highest
followed by 13.2 percent for social services and 12.4 percent for economic services. The
continuing programs and programs introduced in the last year’s budget will receive sufficient
resources to realize their full potential. The Government has made sufficient provisions for sectors
like housing and sanitation, transport, rural roads, urban infrastructure, health facilities and
infrastructure, education, organic farming, eco-tourism, sustainable forest management and so
on. The capital expenditure faced a setback in the fiscal year 2019-20 due to the pressure on
revenue receipts and committed spending. The capital outlay has gone down to 3.94 percent
relative to the GSDP as compared to 7.79 percent shown in the revised estimates of the previous

23
 year. However, the important sectors like education, health, water supply and sanitation,
transport, energy and tourism have been provided with sufficient funds

The fiscal outcomes in the form of indicators like fiscal deficit, revenue deficit, and outstanding
liabilities for previous year, current year, ensuing budget year and two outward years are
presented in Table 8. The Table follows the template given by the Sikkim FRBM Act rules as Form
F-2. The fiscal outcomes of the 2017-18, the last year for which audited figures are available, show
that the State Government has adhered to the fiscal targets under the Act. The revised estimate
for the year 2018-19 shows that the fiscal deficit increased to 3.92 percent of GSDP as against the
planned deficit of 3.5. This was because of the reduction tax devolution from the Central
Government in 2018-19. The Government managed to generate revenue surplus all along. The
projections for the budget year, 2019-20, and for two outward years, which give a medium term
perspective to the fiscal stance, is aligned with the FRBM Act. The MTFP projection from 2019-20
to 2021-22 conforms to the recommendations of the FFC to anchor the fiscal deficit to 3 per cent
of GSDP. The MTFP 2019-20 presents the fiscal outlook of the State Government in a medium
term that includes the ensuing budget year and two outward years. The detailed projection of
fiscal variables presented in Table 9 shows that the revenue account surplus has been maintained
during the MTFP period and the fiscal deficit has been stabilized at 3 per cent relative to the GSDP.
Although the revenue expenditure grows slowly during the MTFP period, the resource allocation
focusses on funding the priority areas of the Government. The spending pattern for the priority
areas of the 19 State has remained favorable in the medium term. While the allocation to social
services was increased the growth of the resource allocation to the economic services was
moderated due to resource problem. The increment in revenue expenditure is restrained due to
the pressure on revenue receipts. If the growth scenario improves in the country in next two
years, the central transfers will definitely increase. The rolling nature of the MTFP allows to make
revisions in the future. The growth in revenue has not been very fast in Sikkim due to lack of
buoyant sources. The adoption of GST, though, infused some growth, is not sufficient to make the
internal revenue as a potent force in the fiscal management of Sikkim. The capital expenditure has
been increased in a graded manner as compared to the budget allocation for 2019-20, keeping the

24
 reality regarding the resources in consideration. However, the capital spending at 4.50 percent of
the GSDP in the last year of the MTFP is reasonably high. The MTFP reflects on the fiscal stance of
the Government, which strives at fulfilling the sector objective and achieve better results from the
utilization of public resources. While GSDP is assumed to grow at 12.50 percent, following the
methodology proposed by the FFC, the total revenue receipt grows at 13.54 percent. The MTFP
projects improvement of own revenue and moderate rise in central transfers. It needs to be kept
in mind that given the growth scenario in the country, the resource position of the State may not
increase dramatically. Thus, the project is based on the fiscal reality witnessed in baseline period
with possible improvements. The outstanding liabilities increases marginally from 25.01 percent of
GSDP in 2019-20 to 25.43 percent in the last year of the MTFP. However, it is expected that with
higher flow of resources from Central Government, the borrowing requirement will ease up and
the debt-GSDP ratio will remain within 25 percent. There has been substantial growth in revenue
receipts and allocations to various sectors in nominal terms. While revenue receipts increases
from Rs.7397.44 crores in 2019-20 to Rs.9544.29 crores in the medium term, the revenue
expenditure rises from Rs.7129.09 crores to Rs.9004.36 crores. The provision for capital outlay has
increased from Rs.1121.35 crores to Rs.1619.80 crores during MTFP period. The 20 capital outlay
has been allowed to increase during the MTFP period, which emphasizes the focus of the
Government on infrastructure building. Despite pressure on revenue receipts and competing
demands, the focus on investments in infrastructure will remain a key factor in fiscal policy of the
Government.

25
 4.2 Assumption Underlying the Fiscal Indicators The assumptions made to project the fiscal
variables reflect the fiscal policy choices of the Government operating with limited resource
availability. The MTFP 2019-20 is based on realistic assumptions relating to the likely behavior of
fiscal 21 variables. The projections take into account the new schemes launched and forthcoming
spending requirements. The MTFP conforms to the provisions made in the FRBM Act of the State
and the recommendations made by the FFC regarding fiscal consolidation across the States.
Despite subdued Central transfers during 2015-16 and 2016-17, the State adhered to the FRBM
Act fiscal targets. The actual estimates for the year 2017-18 shows higher revenue deficit and a
reasonable fiscal deficit within the allowed limits imposed by the Act. The 2018-19 revised
estimates show a higher fiscal deficit of 3.92 percent. The budget projection for the year 2019-20
is more grounded with a fiscal deficit of 3 percent of GSDP. The MTFP projects to be on the fiscal
consolidation path in the medium term by anchoring the deficit at 3 percent of the GSDP. The
trends in resource transfers under tax devolution, grants, and GST related transfers have become
more stable, which were used in the projections for the MTFP. The fund flows to the programs are
protected and provisions have been made to focus on the priority sectors to help the
development process. The MTFP followed the methodology prescribed by the FFC to project GSDP
in the medium term (see Box 1). This methodology was used by the Ministry of Finance, GoI, to

26
determine the borrowing ceiling for Sikkim. For the years 2020-21 and 2021-22, the MTFP uses the
growth rate of 12.50. The own tax revenue of the State in medium term is the sum of components
projected separately to arrive at aggregate figure. The total own revenue of the State was derived
after projecting the State taxes and non-tax revenue in a disaggregated manner. The State taxes
were projected using a buoyancy based growth rate assuming that the growth in the economy
would help improving the tax base. Some adjustments were made to the buoyancy coefficients
derived for the period 2011-12 to 2018-19 for making projection in the medium term, which
implies higher revenue generation effort. The prescriptive buoyancies for individual taxes like sales
tax, excise duty, motor vehicle tax, and other taxes have been increased keeping in mind the
scope for improvement in these taxes. While average growth rate of own taxes was about 8.5 22
percent during 2014-15 to 2018-19, the growth rate assumed during the MTFP period was about
14 percent. The ongoing initiatives of the Government to modernize the tax department to reap
the benefits from the introduction of GST will improve the tax base. The e-governance programs in
the tax departments by introducing online registration, e-filling of returns and electronic control
and evaluation is expected to improve the tax collection. The own non-tax revenue is projected in
the MTFP period by assigning the observed trend growth rate for the period from 2011-12 to
2018-19. In the case of central transfers, the recommendations of the FFC are factored in during
the projection period. For the share in central taxes budgetary figure for the year 2019-20 is
allowed to grow at the rate observed during the award period of 14th FC, as the devolution
regime has changed based on the recommendations of the Commission. The grants were
projected using the observed growth rate after the restructuring of the central grants were
undertaken. 4.3 Expenditure Restructuring under MTFP As there is a resource problem in the State
despite the rise in own revenue, the growth of revenue expenditure was controlled, while
providing required funding to the priority sectors. Higher availability of resources in future years
will be helpful in further enhancing the expenditure. As the revenue expenditure has been
growing in nominal terms, the growth was required to be controlled given the availability of
resources. It is expected that effective program management and implementation of the projects
in a timely manner will help achieving the value for money. During the MTFP period, the revenue
expenditure declines marginally from 25.07 percent to 25.02 percent relative to GSDP. This still
remains higher than the actual audited figure of the year 2017-18. The amount of money available
to priority sectors will continue to rise. The MTFP proposes to continue with this resource
allocation approach and provide higher level of funding to priority sectors. The social sector
expenditure increases from Rs.2526.76 crores in 2019-20 BE to Rs.3307.29 in 2020-21. 23 The
capital expenditure has been increased during the MTFP period as compared to the 2019-20 BE.
Given that the capital expenditure became a residuary in 2019-20 to account for higher committed
spending, it was projected to rise in the medium term. The capital outlay increases from 3.94
percent in 2019-20 to 4.50 percent in 2021-22. As the fiscal deficit is stabilized at 3 per cent to
GSDP, a rise in revenue surplus will add to the capital outlay. The MTFP keeps the requirements of
infrastructural development in the State while projecting the capital expenditure. 4.4 Debt and
Deficit under MTFP The MTFP keeps the fiscal deficit at 3 percent of GSDP and revenue surplus at
1.50 percent at end of the MTFP period, while controlling the growth in the revenue expenditure
(Table 9). The restrained revenue expenditure helps in improving the capital outlay. The emerged
fiscal profile shows that the outstanding debt increases from 25.01 percent to 25.43 percent
during the MTFP period. This level of debt remains higher than debt level suggested by the 14th

27
 FC to avail the enhanced fiscal deficit limit. Additional revenue mobilization and economy in
expenditure will reduce the borrowing requirement during the year and bring it back below the 25
percent mark. However, 2019-20 is the last year under the award period of the 14th FC. The 15th
FC may have a different approach to the debt burden issue of the State Governments.
CHAPTER V

ANALYSIS OF DATA AND INTERPRETATION

Of all states of India, its smallest in terms of population of barely 610,000, Sikkim,
stands out as among the bigger successes in both socioeconomic and economic
domains.
Per capita gross domestic product (GDP) has been growing in the double digits since
2004-05, while the average annual growth in similar sized northeastern states has been
merely 5% or thereabouts. While it is true that the income distribution pattern
determines the extent to which growth translates into better well-being, the
socioeconomic indicators of Sikkim suggest that the growing income of Sikkim has
translated into improved human development parameters on a grand scale.
As per the statistics released by the Planning Commission, Sikkim recorded the
steepest decline in poverty ratio from 30.9% in 2004-05 to 8.2% in 2011-12.

Sikkim’s manufacturing and mining sectors have grown dramatically since 2004-05.
Most of the industrial centres are concentrated in East Sikkim and South Sikkim
districts. This was backed by an improved availability of electricity, and would also
have supported the double-digit growth in service sectors, if not outrightly caused it.
Improvement in tourism also contributed. Even more interestingly, the growth has
been relatively well-spread, with all parts of the state growing rapidly.

Clearly, the rising economic opportunity in these districts is one of the key reasons for
the decline in poverty rate. Spatial data analysis suggests far more superior
connectivity through road network and transportation services in the two districts of
east and south Sikkim, compared with north Sikkim and west Sikkim. This is one
unique facet of poverty reduction in Sikkim. Of the remaining 8% poor, about one-

28
third of the poor population in the state resides in East Sikkim district, the most
populous (accounting for 46% of state population) and one of the most progressive
districts in the region. The continued economic expansion of the district brings forth
hope of further poverty alleviation in the state in the near future.
Though agriculture growth has not been as high (it is the prime economic activity of
the state), there have been improvements there as well. Sikkim being a hilly state,
agricultural practices are highly variable in time and space due to varying altitudes
and agro-climatic conditions. The surveyed arable land in Sikkim is about 109,000
hectares (ha), accounting for 15.4% of the total geographical area. Our spatial analysis
suggests poverty rate is low in areas where large parts of the area are fertile or under
agricultural cropland, whereas a high concentration of rural poverty can be seen near
barren or infertile land. Environmental degradation—by adversely effecting soil
fertility, quality of water, forests, wildlife and fisheries—is a major factor in
perpetuating poverty in most of the hilly areas. The dependence of rural poor,
particularly the tribal societies, on natural resources is self-evident. People being
directly involved in collecting items of food from nature are more vulnerable to the
adverse impacts of degradation of natural resources.
About 30% of the state’s poor resides in West Sikkim district—one of the most
populous districts—accounting for 22% of the state’s population. Though a large
proportion of the population in the district is dependent on agriculture and allied
activities, a significant part of the land is barren owing to the precipitous and rocky
slopes. Further, poor road conditions due to frequent landslides have limited
economic growth of this region.

29
Another cause of concern from the socioeconomic development perspective is
inaccessibility of certain areas. High poverty rate is seen in areas close to forest or
areas covered with snow. This particularly affects North Sikkim district, where a
major part consists of difficult-to-inhabit terrain. This acts as a constraint on
expanding economic opportunities in this region, and the resultant gap in jobs,
education and other socioeconomic parameters has resulted in persistent poverty in
the northern part of the state.

Sikkim’s experiences provide some insights for the country as a whole. It’s a small
state both in terms of population and geographical expanse and it has high levels of
homogeneity, which helps in the formulation and implementation of policies. And it
has seen all-round growth—not focused on large cities but even in rural areas.
However, despite all of this, there is some poverty persistence, and this tends to be in
hard-to-reach hinterlands, and near forest areas.

30
The concept of spatial poverty that can be identified and measured via remote
sensing allows us a far greater set of policy insights. The most important being that
we are able to link poverty with the environment that gives rise to it and sustains it.

Sikkim has recorded steepest fall in poverty level in the country on account of increase in
per capita consumption and the proportion of the poor living below poverty line in the urban
area is lowest among all states.Latest data released by the Planning Commission says that
in Sikkim, the proportion of people below the poverty line (BPL) came down from 30.9% in
2004-05 to 8.19% in 2011-12, a decline of 22% due to inclusive and equitable development
of the entire state, an official release said.The number of people living below poverty line in
Sikkim has come down from 1.70 lakh in 2004-05 to 51,000 in 2011-12 and the proportion
of the poor in the Himalayan state remains well below the national average.

According to Planning Commission, Sikkim has been ranked among the five best
performing states in poverty reduction in the country. States with the least proportion of poor
living below poverty line are Goa (5.09%), Kerala (7.05%), Himachal Pradesh (8.06%),
Sikkim (8.19%), Punjab (8.26%) and Andhra Pradesh (9.20%).The average monthly per
capital expenditure in rural and urban areas of Sikkim has been estimated at Rs 1445.06
and Rs 2528.11 in comparison to national average monthly per capital expenditure of Rs
1287.17 and Rs 2477.02 in rural and urban areas respectively, the release said.around
9.85% of rural population and 3.66% of urban population of the Sikkim lives below poverty
line in comparison to national average of 25.70% rural population and 13.70% urban
population living below poverty line, according to latest planning commission data.

31
Sikkim has the lowest 3.66% urban population living below poverty line which is minimum
among all states and is followed by Goa (4.09%), Haryana (4.33%) and Kerala (4.97%).In
rural poverty, the 9.85% population of Sikkim is living below poverty line and the state is
ranked with the five top states Goa, Himachal Pradesh, Kerala and Punjab in terms of
reduction in rural poverty.Among the North-eastern states, Sikkim has been ranked as top
in poverty reduction.

32
33
As you can see in the given figure about the poverty rate all over India. In which you can
observe the fact that Sikkim comes under the lowest poverty rate among all the states of
India. So, Sikkim overcomes one of the goals of SDG’s (Sustainable Development Goals).
So, you can see the poverty was never the major problem for the people of Sikkim.
According to Planning Commission, Sikkim has been ranked among the five best
performing states in poverty reduction in the country. States with the least
proportion of poor living below poverty line are Goa (5.09 per cent), Kerala (7.05
per cent), Himachal Pradesh (8.06 per cent), Sikkim (8.19 per cent), Punjab (8.26
per cent) and Andhra Pradesh (9.20 per cent). The average monthly per capital
expenditure in rural and urban areas of Sikkim has been estimated at Rs
1445.06 and Rs 2528.11 in comparison to national average monthly per
capital expenditure of Rs 1287.17 and Rs 2477.02 in rural and urban areas
respectively.
Around 9.85 per cent of rural population and 3.66 per cent of urban
population of the Sikkim lives below poverty line in comparison to national
average of 25.70 per cent rural population and 13.70 per cent urban
population living below poverty line, according to latest planning
commission data.

Sikkim has the lowest 3.66 per cent urban population living below poverty
line which is minimum among all states and is followed by Goa (4.09 per
cent), Haryana (4.33 per cent) and Kerala (4.97 per cent).

In rural poverty, the 9.85 per cent population of Sikkim is living below
poverty line and the state is ranked with the five top states Goa, Himachal
Pradesh, Kerala and Punjab in terms of reduction in rural poverty. Among
the North-eastern states, Sikkim has been ranked as top in poverty
reduction.

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 CHAPTER VI

CONCLUSIONS
Poverty has become a great issue in our world. Though many organizations have been
created to find solutions for this matter nobody could not save our world completely
from poverty. The most common fact which we can realize when we consider on
information about poverty is that poverty is mostly occurring in developing countries.
What are the reasons caused for poverty mostly? According to the Borgen Project,
reasons for poverty are History, War and Political instability, National Debts,
Discrimination and social inequality and vulnerability to natural disasters. Poverty is the
significant lack of money or poorness. Precise definitions of poverty are controversial;
according to one definition, poverty is having so little money that one cannot pay for
basic necessities, such as food and shelter. Sociologists study the effects of poverty as
well as who lives in poverty and why. Many surveys have been done in order to
calculate the accurate number of people who are suffering from the poverty. According
to the Global Finance Magazine poorest countries in the world are Central African
Republic, Congo, Dem.Rep, Malawi, Liberia, Burundi, Niger, Mozambique and Eritrea.
There are many organizations such as CARE, Oxfam, ONE, The hunger Project working
to stop poverty. Some of these are non-profit, strategic organizations committed to the
sustainable end of poverty and world hunger. The World Bank data has published data
on absolute poverty for 1981 onward, but researchers have tried to reconstruct
information of the living standards of the more distant past.

What are the effects of poverty for our world? Do you know that over 21,000 children
die every day around the world due to illnesses, conflicts in the world and other
different reasons? Most of these are caused by poverty.

As a young student, I would like to suggest some factors which would be helpful in our
journey to reduce poverty. Basically we have to take necessary steps to reduce the
population in our world. Natural resources don’t increase according to the population
which is increasing at a high speed. When we consider the families in poor countries,
they have at least six or seven kids. But those kids do not have a proper health or the
parents cannot provide proper education for them. And also those parents cannot
provide good foods filled with suitable nutrients to their kids due to lack of wealth.
Because of that their healthiness decreases by a considerable amount. The
development of their brains becomes insufficient and due to that their ability to get a
proper education decreases.

35
So taking necessary steps to develop health and education sectors in these countries is
a good way to reduce poverty. So firstly we have to develop services for pregnant
women of those countries and provide them good foods filled with proper nutrients to
keep the babies in good health. And then the kids will be in good health and their brains
will be in a better condition to get a proper education. Developing the education sectors
of those countries with the help of charity services and the governments of developed
countries is also a good step to develop education systems in those countries. When we
take a look at the situation of education in a number of African countries affected by
poverty we see: language barriers; a lack of proper facilities; and military conflicts.

Increasing the number of organizations which are working to reduce poverty by

educating people of developed countries to be organized and to take actions related to
this matter is also another suggestion of mine. Encouraging people who have
volunteered to provide facilities such as pure water, foods filled with nutrients, living
places to poor people and who’re conducting charity services to develop the lives of
them, by offering special rewards and admiring them in various ways would be a good
way to increase the number of voluntary workers. So I believe my opinions and
suggestions would be a good help to conclude poverty.

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