Why a new development model?Except for employment in the low-skill segments, no major development benefits are retained in Sikkim.
Mahendra P Lama
The economies of the Eastern Himalaya have mostly followed a growth model that has intrinsic and complex mechanisms of promoting the outflow of development multipliers. While defying and disproving most of the orthodox theoretical underpinnings of development, the highlands in Nepal, Bhutan and various hill provinces in India have unconsciously recorded a trend of siphoning off the cream of development mostly to the lowlands or the mainstream theatres. One can attribute this deleteriously unending phenomenon to the dominant and mindless development planning far away from the remote action centres. The agents involved in the process are primarily outsiders with a huge capital base, entrepreneurial history and market capture. The underdeveloped nature of physical infrastructures, nascent institutional structures and the very presence of government in the form of tightly bureaucratised systems make the hills and mountains deeply vulnerable to backwardness syndrome and incremental practices.
Several examples can be cited. Darjeeling’s tea industry is a typical example of how the outflow of development gains has consistently occurred and been institutionalised. The very pattern of ownership, modes of the production system and linkages with the markets ensure that nothing remains in Darjeeling except low wages and fringe benefits to the workers. Most of the sales proceeds derived from both national and global markets get directed to metropolitans, consistently usurped by merchant capitalists and other intermediaries. Only a trickle flows down to the hapless workers who actually struggle for generations to recover their own savings of gratuity and provident funds. The much-celebrated new dictum of ‘fair trading’ has actually justifiably consolidated these outflows. Tea workers and people at large remain as ignorant and deprived in terms of how their development gains have been redeployed to build lowland industries like jute, sugar, leather, tobacco and other business ventures.
The states in Northeast India and the Western Himalaya have witnessed this vicious practice even in the process of operationalising special development packages generously extended by the government of India like the North East Industrial and Investment Promotion Policy (1997-2014) and the North East Industrial Development Scheme (2017-22). Under these packages, investors, mostly from the lowlands, enjoyed unparallel incentives in these ‘special category states’ of 100 percent income tax and excise duty exemptions, capital investment and transport subsidies and interest and insurance benefits. Many of these entrepreneurs who had never climbed the hills found the highlands suddenly fertile and productive, at least till these incentives remained. In this case, too, the cream of development flowed down to the lowlands as profit-driven entrepreneurs had no inkling of development commitments. The failure of the respective state government to devise ways and means to monitor some of these ‘fly by night operators’, legally retain them for at least a few decades and institutionalise the participative process has led to a huge industrial development vacuum and credibility gap as reflected in increasing local resistance to such outside participation.
The most glaring example has been that of Sikkim. With the third-highest per capita income of Rs357,000 and the state gross domestic production growing at 11 percent, Sikkim should have been a model of development in terms of structural composition, employment generation, institutionalised progress, availability of local entrepreneurship and skills, and more importantly, development budgets. In the last more than two decades, in all these critical development parameters and performance variables, this highland state remained a laggard. The core attribution to this laggard syndrome could be once again pinpointed to the steady and unhindered outflow of development benefits.
This phenomenon is widely prevalent across sectors. In agriculture, Sikkim’s most valuable cash crop, cardamom, has developed a value chain wherein farmers receive hardly 10 to 20 percent of total realisations as the supplier of raw cardamom. The rest of the value chain, including the last critical segment of processed spices, ingredients in pan parag and pharmaceuticals, remains outside the state boundary and purview of traditional farmers. The agents in value additions, merchants and partners in market disposal, usurp 80 to 90 percent of this value chain realisation. Sikkim was one of the highest global producers of cardamom.
A more telling story has been that of the manufacturing sector like pharmaceuticals where some of the top brands of India have set up their factories in Sikkim, mostly to harness both the North East Industrial and Investment Promotion Policy and the North East Industrial Development Scheme. With the manufacturing sector suddenly sharing 62 percent, the state gross output has galloped. However, its impact on the state’s revenue generation is very negligible as the raw materials, packaging amenities and carriers and warehousing are brought from and located outside Sikkim. Except employment in the low-skill segments, no major development benefits are retained in the state. This sordid story abounds in haphazardly drawn contractual conditions and trading models with hydropower producers. As a result, even with an installed capacity of over 2,200 megawatts, Sikkim carries staggering debt burdens. With a firm 39 megawatts capacity in 2000, Sikkim made unplanned, unscientific and unprofessional interventions without any institutional capability and regulatory agency. Over 20 projects have either been discontinued or terminated or are in the judicial realms at huge financial, administrative and environmental costs to the state. The leakages were inevitable and the technical and commercial loss remains at 29 percent incurring over Rs680 million in losses annually.
Despite strong local sensitivity, an overwhelming portion of the hotel and concomitant businesses are leased out to management partners from outside. It is estimated that the outflow of three-fourths of the benefits injected by the over 1.5 million annual tourist arrivals actually makes the lowlands happier and more prosperous. The pari passu benefits to the locals are not at all robust. The state government has been a silent policy supporter. Many of us in the State Planning Commission tried to permanently correct these severe ills and predatory practices in the early 2000s; but the political leadership was numb and indifferent, and surreptitiously brought policies that actually consolidated this virulent process. As a result, Sikkim’s dependence on finances from the centre and debts has immensely deepened.
Therefore, the vision, commitment and sagacity of the political leadership to usher in a new growth model are the first-order conditions of long-term peace, stability and happiness in Sikkim. The change in the government and political leadership in 2019 has been a significant and blessed departure. The present Chief Minister Prem Singh Tamang, an astutely sagacious and popular politician, has a non-traditional responsibility of reversing the development model itself that kept Sikkim superficially in a high-growth regime with questionable feats and achievements. Rebuilding a class of local entrepreneurs, injecting newer technology and skills, bringing a variety of national institutions, rejuvenating the rural economies, inducting global multilateral development and philanthropic organisations, and playing a key role in Prime Minister Narendra Modi’s India’s Act East Policy must adorn this government’s agenda for the next decade or so.
What do you think?
Dear reader, we’d like to hear from you. We regularly publish letters to the editor on contemporary issues or direct responses to something the Post has recently published. Please send your letters to firstname.lastname@example.org with "Letter to the Editor" in the subject line. Please include your name, location, and a contact address so one of our editors can reach out to you.