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Economic Confidence Building in Northeast India

Economic Confidence Building in Northeast India

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  1 Oct 2018 9:44 AM GMT

Kumar Padmapani Bora

(The writer belongs to Indian Revenue Service and currently working as Deputy Commissioner of Income Tax, Guwahati, He can be reached at

Northeast India which comprises seven sisters and Himalayan state of Sikkim is undoubtedly important from the geo-strategic perspective. The region shares 98% of its boundaries with other countries and occupies vital position in country’s defence architecture. It has been witnessing various kinds of militancy and conflicts since 1947, ranging from demand for separate ‘statehood’ to assertion of smaller tribal groups against political and cultural hegemony of certain others, movements for sub-regional aspirations. Insurgency in the Northeast, is the product of multiple factors and such movements have come to greatly challenge national security. The root cause of such situations is found in the field of socio- economic and political realm.

While northeast India is one of the country’s most economically backward regions, in terms of the availability of natural resources and their potentials no other part of the country can challenge it. In Political Economy of Underdevelopment of North-East India, Rafiul Ahmed & Prasenjit Biswas offered that the development in the region began with the region’s initial absorption into the world economy as a marginal periphery, a part of frontier of the British rule and which eventually led to the region’s peripheral position within the Indian nation-state after independence. Economic underdevelopment was one of the core factors of genesis of separatist insurgency in the northeast India and also fuelled its further expansions.

The origin of the underdevelopment in the region dates back to the British period when the growth of the modem sectors of tea, oil and plywood took place. However, such growth could not bring about a high standard of living to the people of this region as localities hardly got any opportunity to participate in the economic activities. Investments came from outside and labour supply was also met from the external market. The region that had hitherto been underdeveloped remained as it was and could not be benefited from the capitalist path of British industrialization. The redrawing of the country’s boundary after independence made the region land -locked with shaky connection with the mainland India through the 22-kilometer long “chicken neck,” and the region had lost its access to roadways, railways and waterways existed in the pre-independence period through East Bengal. Such redrawing of the political boundary brought adverse consequences for the economy of northeast India by making it isolated.

In the post-independence era too the core and periphery model of economic underdevelopment which originated with the World System theory proposed by sociologist Immanual Wallerstein remained unchanged in the case of the northeast India. The end of British colonial rule was replaced by flow of migrants into the region. The majority of the resources came under the control of such non-resident capitalist migrants from the mainland and region became an internal periphery. Many scholars termed this model of development in the region as ‘internal colonialism’. The exploitation of resources by peripheral modes did not allow the integration of periphery with the core and gradually fuelled separatist tendencies and insurgency in the region. Economic exploitation and underdevelopment contributed towards insurgency, political turmoil and such turmoil in return obstructed further development in the region. Even in the case of ethno-centric insurgencies in the region, economic underdevelopment and unemployment worked as one of the immediate causes.

The paradigm shift in Indian economy in 1991 through liberalization brought avenues for economic growth of the certain state economies having favourable infrastructure. Those states attracted foreign investments and emerged as hub for economic activities, but at the same time it further widened the pre-existing regional disparities. Northeast region remained untouched by the avenues of the economic liberalization due to ongoing insurgencies in that period of time and lack of infrastructure in the region. So, vicious cycle of underdevelopment -insurgency and underdevelopment stopped the region from getting benefited from the liberalized economy in India.

With squeezing of the effect of insurgency in the region due to various factors in the last one decade, improvement in the standard of living of the localities of the region through inclusive economic development and growth is highly important. In such model of economic development, the region has to evolve as core instead of being periphery of the economic activities. The essence of such model of development was understood and thus the central government started declaring number of economic packages for the region since mid 90s’. Ministry of the Development of the North-Eastern Region (DoNER) was set up in 2001 with the mandate for special focus on the development of the region. To promote industrialization in the region North-East Industrial and Investment Promotion Policy (NEIIPP), 2007 was announced to give incentives in the form of subsidies like capital, transport, interest along with ten years of tax holidays to registered eligible sectors. Even earlier too, the central government had announced economic packages from time to time. But serious concerns have been raised that many a times such schemes of subsidies and tax holidays were misused by the beneficiaries with vested interest. Benefits of various economic packages have also not reached to the actual beneficiaries due to lack in effective implementation.

The region has abundance of natural resources and positive prospects for economic growth. There are good reasons to believe that the region will attract the global capital and prove to be a favourable destination for foreign investments. Northeast India is India’s connecting bridge with Southeast Asia and East Asia. Looking to the east is a natural marketing option for the region. One of the prime focuses of the government’s “Act East Policy” is to break the isolation of the region by connecting it with the growing economies of the east. The region has huge potential in the fields of tourism, hydel power sector, energy security, indigenous localized industries, food processing, service sector, education, health etc.

The region is a driving force of India’s Act East Policy and with gradual progress; it will be able to lead its population towards prosperity. The country’s Act –East Policy along with several other policy initiatives undertaken for rapid economic development are considered to be a strategic plan to achieve greater political space with increasing confidence in the region. With such confidence, several industries, logistic centres and investments are coming up in Assam and other parts of the Northeast. Many big companies like ITC, Britannia, Dabur, Patanjali, Hindustan Unilever, Emami, NATCO Pharma, Sun Pharma, premier hospital chains like Apollo, Narayana, hotel chains like Taj, Novotel, Radission etc. have started their operations in the region. Investments are also coming into the education sector too. Such investments need to be spread across the region for more inclusive development and to achieve inclusiveness the region requires huge investments in building physical infrastructures like transport, communication, electricity, banking etc.

The state capitals of the region are getting connected through railways. Recently started Agartala-Delhi Rajdhani Express is a milestone. Development in railway infrastructure place a positive impact on the locals and create a sense of confidence among the investors. Therefore, building railway infrastructure within the region and across the international border is of urgent need. The air connectivity in the region is also improving rapidly. Direct international flight between Guwahati-Singapore sector is likely to start very soon. More such international flights connecting economies of Southeast Asia and Bangladesh are expected in near future. With improved infrastructure, prospects for the region to emerge as core of economic activities are very high.

Unemployment and lack of opportunities have been major challenges in the region and were the root cause of insurgencies. Therefore, along with investment opportunities and industry-friendly policies, skills development among the youth of the region in the sectors like tourism, hospitality, IT services, retail and other forms of manufacturing and service sectors is essentially required to absorb the actual benefits of the economic activities. With an ambitious plan for skill development, capacity building and entrepreneurship among the locals would ensure economic growth and inclusive development in the region. Such plans and focus on opening up of the economy of the region to the Southeast Asian countries and extended neighbourhood would help in addressing the age-old trust deficit and act as a medium of conflict transformation in the region too.

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