Economic impact of ongoing conflict in Manipur

Oinam Nabakishore Singh *

While hard data of the present economic situation is not available, it is not difficult to conclude on the downward spiral of the economy in Manipur. I was told by someone some time back that a way side tea-stall used to sell about 100 cups of tea daily before the May 3, 2023 incident, and now that figure has come down to about 30 only.

The decline in sales in most of the retail stores including expensive items like passenger cars is by more than 50 to 70 percent. This is corroborated by the collection of GST and tax on vehicle registration by the state government.

Sale of vehicles is a major contributor to GST and vehicle registration tax. Luxury cars costing more than ten lakh rupees attract upto 48% GST including cess, which is shared between the Centre and states.

Private consumption is a major component of national or state domestic products. It is an important indicator of the health of an economy . In an economy, both goods and services are produced for consumption or as intermediary goods for the final product.

Most of the goods consumed in Manipur come from other states as manufacturing capacity in the state is negligible. Items like vehicles-both transport and passenger-, cement, steel, consumer durables, consumer non-durables, etc. are transported to the state through National Highway No.2 and 37. When these roads are blocked due to the ethnic clash, supply of these goods are impacted resulting in reduced consumption.

However, the major issue at hand is the purchasing capacity of the people. Economic activities of all sections of the society, particularly those who have been displaced by the conflict, have been turned upside down.

Primary activities of agriculture have been severely affected both by the conflict and vagaries of nature. Farmers are unable to go to fields close to foothills for fear of assault. Thousands of hectares of farm land are left barren. Attention of many people, both in the hills and valley, are focused on the conflict and survival leaving other activities as secondary.

While farming in Manipur is at the level of subsistence without much surplus produce to dispose of, some level of comfort is available to farmers. With reduced production of crops or no production in some instances, spending of the poor people is prioritized for food items.

Construction generates more than 20 percent of employment. Road construction by NHIDCL, BRO, PWD and PMGSY mainly in the hills have been disrupted due to the conflict. Many people from the plain were engaged in a range of jobs as driver of vehicles and machineries, cutting of hills, supervisors, skilled and unskilled labourers, etc. in such works.

Now, such places and works are out of bounds for the people of the valley resulting in their unemployment and no money in their pockets. Besides, many people from the valley were engaged in construction of houses in the hills as well as making furniture. Such works are not available now.

Consumption by the Government is another contributor to the gross domestic product. With reduced collection of tax and little room for leverage available, state government spending in economic activities have correspondingly come down.

Similarly, spending by the Central Government mainly in major projects like Railways, Roads and other infrastructure works would be impacted negatively due to the ongoing conflict. Consequently, the contribution of the government spending on the calculation of gross domestic product would be accordingly reduced.

One may not forget the fact the spending of one creates income for another as money moves in a circular fashion. Lesser expenditure by the government and individuals including on tea means less income for other people, who would spend their income on goods and services.

As reflected by the sales figures of retail stores across the state, consumption by individuals have come down drastically leaving only bare necessities like food and transport not much affected.

The question is how to put money in the hands of people so that they are able to buy goods and services at the level at least what was before the fateful day of May 3, 2023. The answer lies in engaging people in gainfill activities by the government.

After the second world war ended, the USA government spent a lot of money in the creation of infrastructure like schools and hospitals to generate gainful employment and increase spending capacity. Both the Central and State Government should pay attention to the plight of the people and state of economy to stop the downward spiral of the economy, where survival is at stake.

Of course, restoring normalcy and peace, which is the dream of everyone, will naturally help in rebooting the economy.