The North-East economy: an overview of opportunities and Challenges

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$img_titleIndia’s north east region (NER) is endowed with huge untapped natural resources and is acknowledged as the eastern gateway for the country’s ‘Look East Policy’.

The region is witnessing a series of insurgencies and is alienated from the economic resurgence that the rest of the country is experiencing. The World Bank describes conditions in the region as a low-level equilibrium of poverty, non-development, civil conflict and lack of faith in political leadership.

The states comprising the NER, while unique in most respects, have similar economic and geographical attributes that merits special policy interventions.

$img_titleHowever, in spite of being endowed with vast natural resources in terms of forests, biological diversity, hydro-electricity, the region has remained largely underdeveloped. A key constraint to the growth has been poor infrastructure and limited connectivity, both within the region as well as with the rest of the country. The region, connected to the rest of India by a narrow stretch of land called the ‘chicken’s neck’, needs infrastructure to support and ensure significant investments and developmental aids.

Exploitation of the large hydro potential in the NER could be used for exporting to the power deficit northern and western regions of the country. The spill-over benefits for the region will be the development of infrastructure such as roads, communications, and electricity supply to remote hilly areas, resulting in better quality of life.

The improvement in power generation will in turn help in establishing lead industries (e.g., cement) by annulling the effects of high transportation costs. This in turn will help in skilling workers in modern industry oriented production activities and address the gap in the ready availability of an industrial workforce in the region.

Opening up and augmenting trade with the neighbouring countries such as Bangladesh,Myanmar and through Myanmar to South East Asia will also help in realising the full potential of the region.

Considering that development of any kind, particularly infrastructure, in this part of India will be associated with socio-political issues such as land acquisition and displacement of people, the policy and aids of the central and state governments should address these issues to accelerate the completion of developmental projects.

Demographics and Social infrastructure

The region comprises eight states-Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Assam. Occupying 8% of India’s geographical spread, the states are home to only 4% of the country’s population, while Assam accounts for 68% of the population.

The region stands way below in comparison with the rest of India in socio-economic indicators. As per the 2001 census, the annual per capita income of NER is 6,625 INR against the rest of India average of 10,254 INR. Nearly 34.28% of the population is below poverty line as compared to the national average of 26.1%. However, the NER is a highly literate region. Except for Arunachal Pradesh, all the other states have literacy rates about or above national average of 64.8% which provides a good pool of educated human resources in the region.

All the eight states have different developmental prospects and resources to support their efforts in contributing to the regional as well as national economy. A critical appraisal of the key economic indicators along with a detailed sketch of the individual strengths of the seven states is necessary to achieve a holistic framework to target growth in the region.

The region is endowed with a varied topography and agro-climactic conditions which offer vast potential for agriculture, horticulture and forestry. However, the region is lagging in agricultural development contrary to the national ethos. Reasons include a lack of appropriate strategies for the development of natural resources, inadequate infrastructure facilities and low adoption of improved technology.

The region, which is heavily dependent on the agriculture sector, needs a green revolution to eradicate poverty and boost its economy. Such a green revolution must be adequately backed by financial institutions, marketing functionaries and R&D.

Current scenario

Agriculture provides livelihood to 70% of the region’s population. In Mizoram, around 51% of the population lives in rural areas and is dependent on agriculture. The figure in Sikkim is high at 89%. However, the pattern of agricultural growth has remained uneven across regions. The states continue to be net importers of food grains even for their own consumption.


This is due to the limited land available for agriculture. The region has a forest cover of more than 66.1% (ranging from 35.3% in Assam to 90.7% in Mizoram) against the national average of 21.1%. Even though, it accounts for about 8% of the total geographical area of the country, it has only 3.4% of land for agricultural purposes (CMIE, 2007). It contributes only 2.8% to the total agricultural production, underscoring the low productivity of the region (RBI, 2005).


Opportunities for investment in agriculture and food processing


Rubber and bamboo are among the important agricultural produces which can attract a lot of investment opportunities. Tripura is the chief production hub and has been declared as the ‘second rubber capital of India’ right after Kerala by the Indian Rubber Board. The state has the potential to produce 10,000 hectares of rubber (the available plantation area is 35,760 hectares). Other rubber producing states in the region are Mizoram and Assam. Coupled with the fact that globally India ranks third in the production and fourth in the consumption of rubber creates a huge market for investors. The NE states also produce a substantial percentage of bamboo, accounting for 65% of India’s production value and 20% of the global production value. Mizoram alone contributes to around 40% of the country’s bamboo production. While India’s bamboo market is expected to grow to 5.5 billion USD by 2015, the UN’s Industrial Development Organisation estimates the NE’s bamboo production to grow up to 1.25 billion USD in the same period.

on a massive scale. With proper processing, many of the agri-horticultural crops of the state look promising for export. Another focus area for the agro based industry is the processing for extracts of spices, medicinal and herbal plants. The state government has established a food park at Nilakuthi with a project cost of 6.6 million USD. This park will provide common facilities like cold storage, warehouse, quality control laboratories, packaging, tool room, power and water supply, sewerage treatment, etc. The Nagaland Food Private Limited (NFPL) established in the Dimapur Industrial Estate specializes in bamboo shoot processing, pineapple, passion fruit and orange juice processing. The food and meat processing sector also provides immense potential for investment in the state. The Nagaland Industrial Development Corporation has received approval for developing an agro and food processing SEZ in Dimapur.

There is also scope for dairy processing and poultry, fishery processing in the region. There is huge demand for dried fish in the region, processing of which is not capital intensive. The National Dairy Development Board (NDDB), which has extensive experience in mobilising producers in milk, vegetables as well as other areas, could play a key enabling role in this process. Increase in milk production will encourage the milk, butter and cheese processing industry in the region.

Private entrepreneurs need to be encouraged to set up storage, distribution and marketing infrastructure such as a cold storage chain along major arterial highways. This will help exploit the horticulture potential of the region and bring perishables speedily to marketing hubs. For cold chain operations, a public-private partnership (PPP) or lease could also be explored. Similar initiatives can already be seen in Meghalaya and Mizoram where flowers are being distributed outside the region by a private distributor, Zopar, which also supplies seed varieties to farmers.



Challenges remain in realizing the full potential of the region’s agricultural resources. Fragmented land holdings by small and marginal farmers which dominate the landholding pattern in the north east is uneconomical. The region has low proportion of irrigated area and investment in building irrigation capacity has been insufficient and ineffective. The use of agricultural inputs in the north east is also low compared to the rest of the country. Fertilisers used per hectare during 2010-11 were negligible in the region, especially in Nagaland (2.35 kg), Arunachal Pradesh (3.01 kg); and ranged between 13 kg in Meghalaya and 63 kg in Assam compared to the national average of 135.27 kg per hectare. Also the share of agriculture in total electricity used is just under 1% in all the north-eastern states, except Tripura (7.41%), as against the national average of 20.43%.


Roads and railways

Road is an important mode of travel in the hilly areas as other mode of travel is either too expensive or difficult. The road infrastructure is relatively deficient in the NER although the region’s road density per capita is significantly higher as compared to the rest of the country. Given the low density of population and the hilly terrain of the region this is an expected outcome. The road length per unit area is higher only in Nagaland, Assam, and Tripura.

To address this The Ministry of Road Transport and Highways (Morth) has been paying special attention to the development of national highways in the region. The ministry has earmarked 10% of the total allocation for the NE region. The total length of NHs in the region is 8,480 km and these are being developed and maintained by three agencies-the state Public Works Departments, Border Road Organization (BRO) and National Highway authority of India (NHAI). Of the total length of 8,480 km, about 2,118 km is with the BRO and 5,409 km is with the respective state PWDs. The remaining length of 953 km is with the NHAI. There has also been a special thrust in building the road infrastructure. Sufficient funds have also been allocated in building the road infrastructure in the NE states. The states have 2,473 km of NHs, 5,711 km of state highways, and 15,154 km of major district roads. The states have funds (from various agencies such as Asian Development Bank, etc.) to upgrade the worn out state roads.

In most NE states, village and district roads are dominant. These roads are particularly important for facilitating intra-state movement of people and freight.

The major road programmes that are being undertaken in the region are as follows:

1.National Highway Development Programme (NHDP)-II proposes to link the east-west corridor beginning at Porbandar, Gujarat to the NE through a 678 km four-lane highway connecting Silchar to Srirampur via Lumding-Daboka-Nagaon-Guwahati in Assam. This has been entrusted to the NHAI under the NHDP phase-II.
2.NHDP-III proposes to widen 1,051 km stretches of various NHs to improve connectivity of state capital towns.
3.The Arunachal package envisages improving the connectivity to the Arunachal dramatically. The package incorporates the following:

•Construction of public roads to link the hydel power project

•Four-lane connectivity to Itanagar

•Two-lane connectivity of district headquarters

•Trans-Arunachal highway


Special Accelerated Road Development Programme for North East (SARDP-NE) Phases ‘A’ and ‘B’ will cover construction and improvement of 8,737 km of road length. Major objectives of this programme includes providing a two-lane NH connectivity to all state capitals with East-west corridor, providing connectivity to all district headquarter of NER by at least a two-lane road and providing inter-connectivity to all the state capitals by at least a two-lane NH.

Besides, there is a proposal to connect India and Myanmar through a single road running on either side of the borders. Earlier, the stretch of road in Myanmar was to start from Kaletwa, which will now start from Paletwa. The DPR for this new stretch is being prepared. In India, the road is to start from Lawngtlai in Mizoram. The technical specification of the road has been revised and consequently revised cost estimates are being worked out.

Railways are the best mode of mass transportation in the country. However, in the hilly terrains of the NER it is difficult and expensive to setup rail networks. This accounts for the absence or nominal presence of railway lines in hilly states like Arunachal Pradesh, Manipur, Meghalaya and Mizoram. Even in Nagaland and Tripura the railway route has been setup in the plain areas of the region.

In the Rail Budget 2012-13, a survey for railway electrification project has been sanctioned for Assam. It also envisaged bringing the northern banks of the Brahmaputra river under rail connectivity. Tripura is another state in the NER where development of railway infrastructure is picking up well. From 2000 to 2010, the length of railway route in Tripura has increased from 41 km to 152 km. There are three major railway stations located in Dharmanagar, Agartala and Kumarghat. The government has proposed a 14 km metre gauge railway line between Agartala (Tripura) and Akhaura (Bangladesh). In addition, there is a proposed railway-link to be developed between Agartala and Sabroom, covering 110 km and expected to be complete by 2014.In Arunachal, the nearest railway station is location at Harmoti in Assam 33 km from Itanagar. The major functional rail head linking Manipur with the rest of India is at Dimapur (Nagaland), 215 km away from Imphal. However, a railway line from Jiribam (on the Manipur-Assam border) is under construction as a national priority project. It is expected to connect Imphal with the rest of India by 2016. New railway lines on Azra-Byrnihat, Dudnoi-Mehendipather and Byrnihat-Shillong routes in Meghalaya are under construction. The construction of the extension of a vital broad gauge rail link between Bairabi rail terminus on the Mizoram-Assam border and Sairang, a village 20 km west of Aizawl, is in progress. In Sikkim rail connectivity is being created between Rangpoo and Siliguri in West Bengal. A railway track is also to be laid for connecting Agartala with Akhaura in Bangladesh.

Airways and waterways

Inland water transport can be a viable, cost-effective alternative in the plain areas of NER given the high cost of expanding other mode of transportation. It will also create employment opportunities, promote tourism and open up inter-country routes for trade and commerce. However, the following needs to be done:

•There is a need to improve facilities for night navigation and mechanical handling.

•Cargo vessels and terminals should be increased to meet the rising demands.

•Emphasis should be on PPPs for the development of fairways and infrastructure in IWT.

Major river routes in the NER are the Brahmaputra and the Barak in Assam which has a combined navigable length of around 1,000 km. In all the NER has about 3,839* km of navigable river routes. There are seven operational port locations in the state for import and export to the Kolkata and Haldia ports. There is an inland container depot (ICD) at Amingaon, 10 km from Guwahati, operated by the Container Corporation of India Ltd (CONCOR). Waterway connectivity between Mizoram and the port of Akyab Sittwe is under construction and this could lead to enhanced trade opportunities within the country.

The NE region has one international airport in Guwahati, Assam-the Lokpriya Gopinath Bordoloi International (LGBI) Airport. The Airport Authority of India (AAI) plans to make it one of the major international airports, connecting Southeast Asia with India. Besides, Assam has six domestic airports at Guwahati, Tezpur, Jorhat, Dibrugarh, Silchar and North Lakhimpur. During 2011-12, the Guwahati airport received 2.2 million passengers. Mizoram has one operational airport at Lengpui where daily air connectivity is available through multiple air carriers. In 2009-10, Lengpui airport handled 1,790 aircrafts with 120,000 passengers. The Shillong airport (Umroi Airport) is fully-operational, while the Baljek Airport is under construction and upgradation. In Sikkim, the airport construction is underway in Pakyong. A greenfield airport has been proposed near Itanagar, for which environmental clearance has been received in April 2010. The Ministry of Civil Aviation has also planned to operationalise airports at Daporijo and Tezu in Arunachal. Nagaland has one operational airport at Dimapur. A second airport is being planned for Kohima.

Under the ‘Look-East Policy’, improved links with international neighbours is a priority. Bangladesh, Bhutan, Myanmar and TAR should be connected to Guwahati in addition to Bangkok. Another international airport for the southern part of NER in Agartala can be prioritized.


The region is endowed with perennial rivers and water bodies, therefore, it has a huge hydroelectricity potential. This potential, if tapped well, can be used to export power to other regions of the country. The spill-over benefits will be the development of infrastructure such as roads, communications, and electricity supply to remote hilly areas, resulting in better quality of life. States such as Arunachal Pradesh, Sikkim and Meghalaya have huge potential in hydropower generation.

$img_titleMany policies such as the ‘50,000MW hydro initiative’, the Hydro Policy 2008 have been formulated by the central government to promote investment in hydropower in the region. Under the Mega Power Policy, the qualifying threshold capacity for setting up hydropower plants in the region and for availing the special benefits thereof is 350 MW, whereas for the rest of the country, it is 500 MW.

Under the Hydro Policy 2008 the project developers in the central and state sector can explore the possibility of foreign assistance to finance their projects. This assistance is already being utilised by NEEPCO for Pare Hydro Electric Project and MeSEB for Renovation and Modernisation of Umiam II HEP.

As per the ‘North Eastern Industrial and Investment Promotion Policy (NEIIPP), 2007’ by Ministry of Commerce and Industry, the whole of NER has been declared a SEZ and many subsidies, tax exemptions and waivers are offered on cost of infrastructure, transport, power, etc. The central government is also promoting private sector in the region to boost investment in the power sector. About 14,000 MW has already been allotted to private players in NER for development as part of the ‘50,000 MW hydro initiative’.



According to the study on development and employment generation potential of the north-eastern states, between 2011 and 2021, the region will have only 2.6 million jobs. And half of this demand will be in Assam alone, which is about 1,234,357 jobs. As opposed to the low demand, there will also be a supply of 17 million people in 2011-2022, an excess of 14 million job seekers.

The region will generate 2.6 million jobs, but the manpower supply will be 16.8 million persons. So there is a need for a twin approach for developing skills for both local employment and for those who seek to migrate.

To realise the economic potential the region holds, it is imperative to utilise the demographic advantages and parameters that will lead to market linked skill development. The key thrust areas that evolve from an analysis of these parameters are as follows:

•The forest plays a major part in the economies of these states. Sadly, the NER forest resources are facing degradation and deforestation. Large investment outlays for capacity building of knowledge and skills centres aimed at preserving the ecology are required. The states are unable to address such resource needs. Planned outlays in training and awareness for imparting correct skills-set to the community for the states to preserve the biomass is required.

•Institutions of higher education focussing on environment sciences (viz. forest sciences, social forestry, botany, environment and ecology sciences, etc.) need to come up for building local community awareness to ensure conservation of NER’s forest resources.

•The agricultural growth has been uneven across NER, which comprises 8% of India’s total geographical area but produces only 1.5% of the nation’s foodgrains. The NER has not been able to benefit from the ‘Green Revolution’ as much as the rest of the country. Agriculture, horticulture, animal husbandry and fisheries are important livelihoods but have low levels of productivity. Poor connectivity has compounded the constraints of logistics, preservation and distribution of the perishable produce. This makes farm prices unremunerative, deters the growth of food processing industries, cultivation of vegetables and commercialisation of fruits and spices, even with investments in marketing and storage facilities.

--Agricultural universities need to encourage research in improved cropping and productivity that will address food stockpiling needs for meeting local demand. Equally important are the training institutes in food processing.

--Given the huge reservoirs of oil and gas hydrocarbons, there is an opportunity to train the local population in trades relating to exploration and production of oil and gas.

--The entire region has tremendous potential for generating hydro-electric power and there will always be demand for engineers and technicians in generation, transmission and distribution of electricity.

--Prospects for this sector’s development are common place in almost the entire NER. Therefore, there is a need to build up skills-set and human capital in the areas of vocational and technical training, sericulture, use of modern tools and implements to help provide a scientific basis to further enrich traditional skills that help produce handloom and handicrafts having unique geographical origin.

--The rich cultural canvas, the flora and fauna of the region calls for a measured policy intervention that should aim at preserving and economically exploiting the cultural heritage. A growth in tourism will be followed by growth in the hospitality sector. This region has a large English speaking population that finds employment in the hospitality industry across India and outside. There are thus opportunities for leveraging the local talent by setting up training institutes in hospitality and hotel management.

--Good English language skills also can find employment in call centres and the government can create the environment by improving connectivity and adding courses in its ITIs for this trade.

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