The eight states of Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura that constitute the northeastern region (NER) of India show great potential in emerging as a focal point for international trade because of their strategic location. About 98 per cent of these states’ borders merge with the international borders of either Bangladesh, Bhutan, China, Myanmar or Nepal. Recent years have seen a significant number of investors being diverted to these states and therefore, their potential as nodes of future growth cannot be undermined (Roche, 2017; Cyrill, 2018).   

            As a part of the frontier during the colonial period, the NER was absorbed into the global economy and experienced a brief developmental spurt. In 1835, tea gardens were established in Assam. Following this, industrialization took roots in the early 1850s and the railway connectivity from Debrugarh to Chittagong became operational in the 1880s. soon an oil refinery was setup in Digboy in 1901.   

            However, the redrawing of the country’s boundary after independence in 1947 made the region landlocked which eventually led to the NERs peripheral position within the Indian nation-state. As a result, the situation changed dramatically and the NER became isolated from the mainland. Even though the region has an abundance of natural resources, possesses a rich cultural heritage, abundant skilled labour and vibrant neighbourhood, higher transportation cost and remoteness from markets resulted in economic isolation and contributed to the slow economic growth in the region. The physical isolation from the country’s mainland coupled with militancy, insurgencies and regional conflicts largely prevented the NER from achieving a staggering growth. The situation began to change when the country opened up its market post liberalization, in 1991.

            The government of India initiated the ‘Look East Policy’ (LEP) in the year 1991 with the aim of promoting economic growth by attracting foreign investments. The same has been rechristened as ‘Act East Policy’ (AEP) in 2014 as a part of the economic and strategic partnership with Association of Southeast Asian Nations (ASEAN). The initiation of this partnership has provided a common market for India with special concern to the NER. Given the strategic location, the eight states of the NER may be developed as the base for India’s growing economic links with east and south east Asia. Thus, the ‘Act East’ can be considered a catalyst and may provide a ‘big push’ to the development of NER; reducing its isolation from the mainland.

Current Scenario of the Northeast India

The NER house about 3.77 per cent of the national population and occupies about 8 per cent of country’s total geographical area. The region performs poorly in terms of key economic region performs poorly in terms of key economic indicators; its per capita GDP being much lower than the rest of the country. Amongst the states in the NER, agriculture in Sikkim has the lowest contribution (12.3 per cent) to the gross state domestic product (GSDP), whereas industry in the state contributes the highest (55.8 per cent). On the other hand, in terms of social indicators, the NER conforms to the national average, with a sex ratio of 943 and an overall literacy rate of 74 per cent. However, a great variation is noticed within the NER states for different social indicators. While the sex ratio among the northeast states ranges from 890 (Sikkim) to 992 (Manipur), lowest literacy rate 65.4 per cent is recorded in Arunachal Pradesh and a highest of 91.3 per cent in Mizoram.

            As noted earlier, the spread of basic infrastructural services is quite poor in the region. People in the NER do not have access to good roads, healthcare services and the availability of power supply is inefficient as compared to the rest of India. Besides, the NER states suffer from inefficiency in the functioning of the service providers. Physical infrastructure such as transportation, communication, electricity and finance are limited and not distributed homogeneously in urban and rural areas. Presents the basic infrastructure and logistics indicators of the NER for 2014. While Assam has a road density of 367 km/1000 sq km, it is only 33 km/1000 sq km for Arunachal Pradesh. Similarly, the installed electricity per 10000 population is lowest (0.43) in Assam and highest (2.24) for Sikkim.

            Roads are of particular importance as they provide access to far out areas of the NER. The higher transportation cost has deterred the mobility to and from this region, which in turn has affected road development. The non-availability of road networks has to a great extent barred the region from the benefits of shared international boundaries.

            Industrialization has failed to take off in this neglected region. In relative terms, Assam is by far the largest industrialized state in the NER, having nearly 88 per cent of the total industrial units of the region. Nearly 74 per cent of the manufactured output of the registered manufacturing sector in the northeast (2014-15) originates in Assam, while, at the other end of the spectrum, Arunachal Pradesh shows no registered manufacturing industry. The northeastern states contributed 3.37 per cent to the gross value added in India (INR 916530 million) in 2014-15 (Annual Survey of Industries, 2015). Sikkim has seen a strong industrial growth between 2004-05 and 2014-15 as many pharmaceutical companies have significantly invested in the state.

Opportunities Under ‘Act East’ Policy

The setting up of the Ministry of Development of North Eastern Region (DoNER) in 2001 for these eight states may be considered an important milestone acting as a catalyst to its growth. The NER, which had once set into a vicious cycle of underdevelopment post-independence, started progressing in response to the policy initiatives taken by DoNER, though at a slow pace. This was mainly because of the time over-runs, paucity of available funds to complete the projects (DoNER, 2013). Though not much progress could be made in terms of the physical infrastructure, the North Eastern Region Community Resource Management Project (NERCORMP) was successful in forming 494 natural resource management groups (NaRMGs), 1216 self help groups (SHGs) across 21212 households, in the six project districts. The reaffirmation of an ‘Act East’ policy may provide a direction for further socio-economic development desirable in the region. A large number of projects have been undertaken in different sectors such as infrastructure (power, road, railways, air connectivity, inland waterways, telecommunication and information technology), plantations, irrigation and flood control, tourism, human resource development education and health), handlooms and handicrafts, etc. in the NER.

            The government of India with Asian Development Bank, the World Bank, and the Japanese government have started several infrastructure projects of which East-West Corridor, Kaladan Multi-Modal Transit Transport (KMMTT) project and the India-Myanmar-Thailand Trilateral Highway may be mentioned. All these are dedicated to improve connectivity with the mainland as well as with the neighbouring countries.

            The East-West Corridor, part of Golden Quadrilateral project in India, is near completion. The KMMTT project, formulated to connect Kolkata Port with Sittwe in Myanmar, is estimated to be operational by 2019-20, India has ploughed in additional resources to complete the Trilateral Highway, which will connect India with Myanmar and Thailand. Thus, NERs improved performance in a medium to long-run, when the proposed projects are completed, is highly awaited.    

            In addition to road, railway connectivity too has improved in the region. Most capitals of the NER states are being connected by a rail network to major cities of mainland India. Agartala and Silchar now have a broad gauge railway line and are connected to Kolkata and Delhi. Agartala-Delhi Rajdhani Express was launched on Octoer 25, 2018 and is expected to be extended upto Imphal by 2020 (Ministry of Railways, Government of India). Recent developments in the railway system have given way to integration and connectivity in the northeast.  

            The NER faces a vast array of logistic handicaps, which is intended to be eliminated through the new ‘Act East Policy’. The region also has a huge potential to emerge as a hub for health services. Establishing health facilities in the region can attract overseas patients from Bhutan, Bangladesh, and Myanmar. In Imphal, for instance, Shija Hospital has become a medical destination for people from Myanmar. Even the tourism sector has a vast potential and can provide a great impetus to the regional economy.

            Guwahati, the capital city of Assam, is the industrial and business hub of the NER, which has set an example of connectivity-driven integration. The government of Assam has opened a new Act East Policy Affairs Department. Some reputed companies like Patanjali Ayurved have invested INR 13,000 million in Assam with a promise to generate employment for 5000 people and benefit 100,000 farmers. Dabur is investing INR 2500 million to set up its biggest manufacturing unit in central Assam, while ITC Ltd, is likely to invest INR 5000 million into its fast moving consumer goods (FMCG) sector, especially in the food processing industry in Assam (The Telegraph, 2013). Guwahati is the new destination of India’s premier hospital chains; investments have come from Apollo, Sankar Netralaya, Narayana Health, Fortis, etc. International hotel chains like Taj Vivanta and Radisson have already established resorts and hotels in the city (De, 2017).  

            Similarly, Manipur is setting up a township near Moreh, which shares its boundary with Myanmar. A special economic zone (SEZ) and a food park is proposed in Thoubal, near Imphal. Once completed, this could emerge as a major food processing center in the region. Exports from this food park to Myanmar have already begun.

            Through the ‘Act East’ policy economic relationship seems to be improving between Bangladesh, Bhutan and Nepal too. New Bangladeshi consulates have been established in Guwahati and Agartala. Also, Bhutan and Nepal are to closely follow suit. Under the ‘Ude Desh ka Aam Naagrik’ (UDAN) Draft Scheme Document for International Air Connectivity, the Union Civil Aviation Ministry has reposed to connect Guwahati with six international destinations (Available at: https://bit.y/2Eidi8) and in response, Air India along with other private players are operating between Guwahati and Dhaka.    

            Production networks with Bangladesh and Myanmar and the rest of India in agriculture, horticulture, processed food, etc. are other potential avenues to bring in dynamism to the economic sector of the NER. The NER is expanding production networks in cement, processed food and horticulture with countries like Bangladesh (CUTS and FICCI, 2017). The NER has been traditionally popular in handicrafts, tea, bamboo, spices and processed food products and can gain fillip with the economic growth in the region. The prospects of NER in reaping benefits from increased trade and economic cooperation between India and with east and Southeast Asia depend on the complementarities between availability of products in the NER and their demand in the international market.     

 

Endnote

In order to really reap the benefits of the ‘Act East’ policy, the NER states have to first strengthen their internal connectivity. Thereafter, NER’S integration with the mainland with better infrastructure and connectivity is likely to offer enough opportunities for the holistic development of the region.

            ‘Act East’ is a policy, not the panacea. Once investment picks up, the NER is expected to rise to glory. However, the lacunae include the prioritization of a just a few projects in the NER, which is clearly not enough. Also, the government needs to boost incentives that shape local economices–promoting industries and the service sector. Adequate attention towards tourism, education and the health sector can offer advantages that have hitherto not been reaped. For this to come to realization, the onus is on the government to create a more regulatory space and provide a facilitating environment for the involvement of the private sector as well.   

 

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