Macroeconomic Overview of Assam

This chapter explains the overall economic condition of Assam using indicators like GSDP, income, employment, and government finances.

In simple terms, it answers:

• • How much Assam produces
  • How much people earn
  • How many people have jobs
  • How the government manages money

GSDP Trends and Growth in Assam

What is GSDP?

• Gross State Domestic Product (GSDP) means the total value of all goods and services produced within Assam in one year.
• This includes:
  • Farming (rice, tea)
  • Industries (oil, cement)
  • Services (transport, banking, tourism)
• Higher GSDP = stronger and more developed economy

Key Trends in GSDP

At Current Prices (Nominal Growth):

• • 2016–17: ₹2.54 lakh crore
  • 2023–24: ₹5.71 lakh crore
  • 2024–25: ₹6.43 lakh crore (~12.74% growth)
  • 2025–26 (Projected): ₹7.42 lakh crore (~15.2% growth)
• This means, assam’s economy has more than doubled in size in less than 10 years.

At Constant Prices (Real Growth):

• • 2016–17: ₹2.02 lakh crore
  • 2024–25: ₹3.38 lakh crore
  • Around 45% real growth (2019–2025)
  • This is higher than the national average (~29%)

Understanding Nominal vs Real Growth

• • Nominal Growth → Includes price rise (inflation)
  • Real Growth → Shows actual increase in production
  • Real growth tells us the true progress of the economy

Growth Performance

• • Real growth rate: ~7.94% in 2024–25
    → Among the fastest-growing states in India

Post-COVID Situation:

• • 2020–21: -2.0% (decline)
    → Economy slowed down due to pandemic
  • 2021–22: 20.9% growth (sharp recovery)
    → Economy bounced back strongly
  • After that → steady and strong growth continues
  • Even after a big shock like COVID, Assam recovered quickly and kept growing.

Assam share in National Economy

• • Increased from 1.65% to ~1.99%

→ This means Assam’s contribution to India’s economy is slowly increasing

• • But earlier it was around 2.6%, so still not fully recovered
  • Assam is growing, but still a small part of India’s total economy

Sectoral Contribution to GSDP

Assam’s economy is divided into three main sectors:

1. Primary Sector (Agriculture): ~30–35%

• • • Includes farming, fishing, forestry
    • Employs the largest number of people
    • Highly dependent on rainfall and climate.
    • Many people depend on farming, but it is risky

2. Secondary Sector (Industry): ~20–25%

• • • Includes:
      
      • Oil refining
      • Tea processing
      • Cement industries
    • Growth is slow and limited

3. Tertiary Sector (Services): ~40–45% (Largest Share)

• • • Includes:
      
      • Trade
      • Transport
      • Tourism
      • Banking
    • This sector is the biggest contributor to Assam’s economy

Important Trend observed

• • There is a shift from agriculture → services sector
  • It means, people are slowly moving from farming to jobs in services like trade, transport, and tourism

Drivers of Growth in Assam

These are the main reasons why Assam’s economy is growing:

• • Growth in agriculture, oil & gas, and services sector
  • Better infrastructure (roads, bridges, connectivity)
  • Government policies like Act East Policy (improves trade with Southeast Asia)
  • Improved law and order, which attracts investment
  • Better roads, policies, and industries are helping the economy grow

Challenges to Growth in Assam

Even though growth is happening, there are still problems:

• • Floods and river erosion → Damage crops and property
  • Weak industrial base → Not enough factories and industries
  • Connectivity problems → Difficult transport in some areas
  • Regional imbalance → Plains develop more than hill areas

Per Capita Income in Assam

• Per Capita Income (PCI) = GSDP ÷ Population
• This means:
  • Take the total income of the state (GSDP)
  • Divide it by the total number of people
• It shows the average income of one person in the state.

Example:

• • If Assam earns ₹100 and has 10 people, then, each person’s average income = ₹10
  • But remember,this is only an average
    
    • Some people earn more
    • Some people earn less

Trends of Per Capita Income (PCI)

• • 2023–24: ~₹1.4–1.58 lakh
  • 2024–25: ~₹1.54 lakh (~10% growth)
  • Around 54% increase in recent years

What does this mean?

• • People in Assam are earning more money than before.
  • Income level is improving year by year

Key Observations

• • Assam’s PCI is only 70–77% of the national average
  • Rank is low (around 28th) among Indian states

What does this mean?

• • Even though income is rising, people in Assam still earn less than most Indians.
  • Growth is happening, but Assam is still behind other states

Reasons for Low PCI

1. High dependence on agriculture

• • A large number of people depend on farming
  • But farming gives low income (low productivity)

2. Slow industrialization

• • Not many factories or industries
  • Less job opportunities in high-paying sectors

3. Unemployment and underemployment

• • Some people don’t have jobs (unemployment)
  • Some people are not fully employed (underemployment)

Rural vs Urban Gap in PCI

Urban Areas (Cities):

• • Higher income
  • More jobs in services (banking, business, transport)

Rural Areas (Villages):

• • Lower income
  • Mostly dependent on agriculture

Implications of low PCI

• Because income is low, it affects people’s daily life:
  • Lower purchasing power
    → People cannot buy many goods and services
  • Affects:
    
    • Savings → Less money saved
    • Investment → Less business growth
    • Standard of living → Lower quality of life

Factors Behind Improvement of PCI

• Despite challenges, income is increasing due to:

1. High GSDP growth

• • Economy is growing
  • More production = more income

2. Government welfare schemes

• • Schemes like Orunodoi provide financial support
  • Help improve people’s income level

3. Growth in services sector

• • Jobs in trade, transport, tourism, banking are increasing
  • These jobs often pay more than agriculture

Poverty and Unemployment in Assam

• This topic explains two major economic problems in Assam:
• • Poverty → People not having enough income to meet basic needs
  • Unemployment → People not getting proper jobs
• In simple terms, Poverty is about low income, and unemployment is about lack of jobs

Poverty in Assam

Status of poverty in Assam

• Historically, poverty in Assam has been higher than the national average
• But the good news is that it is slowly decreasing over time
• Fewer people are poor today than before, but poverty still exists

Causes of Poverty

• There are several reasons why poverty is still present:
  • Floods and natural disasters
    → Crops and homes get damaged every year
  • Dependence on agriculture
    → Many people depend on farming, which gives low income
  • Lack of industrial jobs
    → Not enough factories or stable employment
  • Low literacy and skills
    → Many people lack training for better-paying jobs

Government Initiatives

• The government has introduced several schemes to reduce poverty:
  • MGNREGA → Provides guaranteed rural employment
  • PMAY (Pradhan Mantri Awas Yojana) → Provides housing for poor families
  • Food security schemes → Ensures affordable food grains
  • Orunodoi scheme → Gives direct financial support to women and families

Unemployment in Assam

Current Situation of unemployment in Assam

• • Overall unemployment rate: ~3.9%
  • Youth unemployment: ~6% (higher concern)

Types of Unemployment

• • Open unemployment → People who have no job at all
  • Underemployment → People working but not fully utilized
  • Seasonal unemployment → Common in farming; work only available in certain seasons

Key Issues

• • Educated unemployment is increasing
    → Even educated people are not getting jobs
  • Skill mismatch
    → Education does not match job requirements
  • Limited private sector jobs
    → Few companies and industries in the state.

Structural Problem with Unemployment in Assam

Disguised Unemployment in Agriculture

• • About 70% of people work in agriculture
  • But agriculture contributes only ~35% to GSDP

What does this mean?

• • Too many people are working on farms
  • But farms do not produce enough income for everyone

Migration

• • Many people move to other states for jobs (out-migration)
  • This leads to brain drain, meaning:
    
    • Skilled and educated people leave Assam
    • The state loses talented workers

Positive Trends

• • Despite problems, some positive changes are happening:
    
    • Growth of MSMEs (Micro, Small & Medium Enterprises)
      → Small industries creating jobs
    • Expansion of skill development programs
      → Training people for better employment.

Fiscal Health and Budget of Assam

What is Fiscal Health?

• Fiscal health means how well the government manages its money—that is:
  • How much money it earns (income)
  • How much money it spends (expenditure)
  • Whether it is managing both in a balanced way or not

Revenue Structure of Assam

Government income mainly comes from two sources:

1. Revenue Receipts (Regular Income)

• This is the main day-to-day income of the government.

Tax Revenue:

• • Money collected from taxes like:
    • GST share (tax on goods and services)
    • State taxes (VAT, excise duty, etc.)

Non-Tax Revenue:

• • Income from other sources such as:
    • Oil royalties (money from petroleum production)
  • Fees and charges (government services)

2. Capital Receipts (Borrowed Money)

• Includes loans and borrowings
• Used when the government needs extra money for big projects

Expenditure Pattern of Assam

Government spending is divided into two types:

1. Revenue Expenditure (Daily Expenses)

• This includes:
  • Salaries of government employees
  • Subsidies (financial help to people)
  • Interest payments on loans
• These are money spent on running the government and supporting people

2. Capital Expenditure (Development Spending)

• This includes:
  • Building roads, bridges, power projects
  • Long-term development projects
• These are money spent on building the future of the state

Important Trend

• Assam is now focusing more on capital expenditure, which means:
  • More spending on infrastructure and long-term growth
  • Less focus only on day-to-day expenses

Key Fiscal Indicators

• These indicators show the financial condition of the state:

1. Fiscal Deficit

• Around 3.7% of GSDP
• This means the government spends more than it earns, but still within safe limits
• It is within FRBM limits (safe financial rules)

2. Debt-to-GSDP Ratio

• Around 23–25%
• This means Assam’s debt level is manageable and not too high

3. Central Dependence

• Around 60–63% of revenue comes from the Central Government
• In short, Assam depends heavily on central funds for its budget

Budget Priorities of Assam

• The government focuses its spending on:
  • Infrastructure development → Roads, bridges, power
  • Agriculture modernization → Better farming tools and methods
  • Women empowerment → Schemes like Orunodoi and entrepreneurship support
  • Education and health → Schools and hospitals
  • Skill development → Training youth for jobs

Strengths of Assam’s financial system

• Assam’s financial system has some positive points:
  • Prudent fiscal management → Careful use of money
  • Increasing capital investment → More spending on development
  • Good fund utilization → Money is being used effectively

Challenges of Assam’s financial system

• However, there are still problems:
  • High dependence on central funds
    → State earns less on its own
  • Limited tax base
    → Fewer sources of state income
  • Rising committed expenditure
    → Fixed costs like salaries and pensions are increasing
  • Flood-related spending
    → Natural disasters increase emergency costs

Reform Measures Needed to improve financial health

• To improve financial health, the government needs to:
  • Improve tax collection efficiency
  • Promote industries and investment
  • Better use natural resources (oil, forests, etc.)
  • Rationalize subsidies (reduce unnecessary spending)