50 Years of Sikkim’s Statehood: The Development Nuances of the State

Sikkim commemorates 16 May every year as ‘Sikkim State Day’ to mark its integration with the Union of India in 1975. 2025 thus marks the 50^th year of Sikkim’s merger. Sikkim’s integration into the Union of India started picking up pace in the early 1970s. The law-and-order situation and the chaotic environment climaxed in the signing of the 8^th May Tripartite Agreement in 1973. On 14 April 1975, a special opinion poll was conducted – 59,637 voted in favour, and 1,496 voted against the resolution. This resulted in the Thirty-Eighth Amendment Bill promulgated on 19 April 1975, and Article 371F was added to the Constitution of India, making Sikkim the 22^nd state of the Union of India. It marked the transition from a monarchy to a democratic structure of governance and government enshrined within the principles of the Indian Constitution.

As Sikkim celebrates its 50^th anniversary of statehood, the key challenge it has faced is a development situation where it remains dependent on central government funds for pushing the holistic development of the state. Only achieving fiscal autonomy will make the anniversary of integration more momentous.   

Development and Statehood

Sikkim’s integration into the Union of India was a long negotiation spanning decades since the 1950s and ended one of India’s many impediments and insecurities in the Himalayas. The question of Sikkim’s independence and autonomy, which China had entertained, was eventually buried. Sikkim’s merger enhanced the security and the strategic posture of India.

Today, Sikkim is fully integrated into the ethos and distinct identity of India. Sikkim is characterised as one of the most peaceful states in the country with a successful and distinct growth story. Since its merger with India, the state has shown a positive development trend in many sectors. Modern planning-based development was initiated in the 1950s when Sikkim was still an independent kingdom. However, limited resources and a lack of funds led to a slow pace of development. Development picked up pace after 1975  and the flow of central funding into the state coupled with various other schemes and policies of the central government contributed to the improvement of the economy and the social indicators of the state.

The hilly and mountainous terrain of the state and the lack of infrastructure development and connectivity have been the major problems hindering the state’s development. Lack of connectivity and required infrastructure restrict market access and free movement of people, goods and services. Recognising this – the Ministry of Development of North East Region (DoNER) argues that the infrastructure deficit is one of the major problems hampering development in the region. As such, Sikkim received impetus in the form of connectivity projects. The development of Sikkim was placed under the larger development of the North East region with its membership of the North East Council (NEC), which has been one of the central government’s initiatives to develop the region.

In terms of social development, post-merger Sikkim has seen a relatively high rate of improvement in tackling fundamental concerns like poverty and inequality. As far as poverty is concerned, it has shown a declining trend. The 1973-74 data shows that more than 50 per cent of the population was below the poverty level. This decreased to 36.55 per cent in 1999-2000 and as of 2025, the figure has come down to 2.6 per cent.

In the economic sector, Sikkim has performed quite well since its merger with India showing fast growth rates. The Gross State Domestic Product (GSDP) at its current price stood at Rs.5,207 lakhs in 1980 when the first data was available. GSDP is projected to rise to Rs.57,000 crore by 2025-26.

The secondary sector dominated by the manufacturing, power and construction sectors has been the major sector contributing to Sikkim’s GSDP. The manufacturing sector contributed 47.2 per cent of the state’s GSDP in 2018-19. The impressive growth rate in the manufacturing sector is due to the high number of pharmaceutical companies and related production. Similarly, in the power sector, the generation of hydroelectricity from the newly commissioned projects contributed significantly.

However, despite the high GSDP, Sikkim’s tax base is relatively low leading to less revenue for the state. The manufacturing (pharmaceutical) and power sector (power generation) production is sold outside of the state and not locally consumed. As such, the pattern is that the major sectors growing rapidly and contributing to GSDP have not contributed to tax revenue to the same extent.

Dependence on the Central Government

Less revenue collected within Sikkim means that the state depends on the central government for its regular expenditure and development projects, be it physical or social infrastructure. The central funding (tax devolution and grants) is the major contributor to the state’s finances. Almost three-fourths of the state's revenue comes from the Central grants – the 2025 data posits that more than 60 per cent of the state’s revenue came from the Central funding. The central-grant-in aidstood at Rs. 2,600 crores, the share of central taxes stood at Rs. 5,519 crores and financial assistance (capital investment and flash floods) was Rs. 1,637 crores.

The creation of such a ‘dependency economy’ entraps Sikkim in a ‘vicious circle of dependency’ where the state is dependent upon an external agency to continue its growth. The ‘dependency economy’ hinders long-term economic growth and is not sustainable. Often, local development dynamics become captive to the availability of central funds or to the discretion of central authorities. If central funding through grants were to stop or weaken, or the central government were to lower the share of central tax revenue disbursed, it would put fiscal stress on the state exchequer. Political bias and regional politics have always been a factor in disbursement of the central funds (especially grants-in-aid). As the tax revenue and the non-tax revenue within the state form a marginal source of income, central government actions will have very consequential effects for inclusive growth and development in Sikkim.

Thus, as Sikkim celebrates its 50^th year of statehood, it needs to rethink its fiscal policy so that it can generate revenue on its own. Such a shift would make Sikkim’s development and growth sustainable, self-reliant and not dependent upon an external agency.