How North-East India Is Rising as a Trade hub and Why It Needs Our Attention

The North East Region of India (NER) is strategically located, sharing borders with Bangladesh, Bhutan, China, Myanmar, and Nepal, making it ideal for international trade. The region is also a biodiversity hotspot enriched with fauna and flora.

Before 1947, NER was a thriving trade and business centre and one of the country's most successful provinces. Tea gardens sprung up quickly after the first one was created in 1835, resulting in the region's first tea exports. In 1890, an oil refinery was created in Digboi, Assam, providing the groundwork for early industrial development. One of the first railway lines in Asia was the Dibrugarh-Chittagong line.

NER gradually began to lag behind other provinces post-independence where partition isolated the area.

The scenario of NER trade is beginning to shift over the past two decades. Under the wide umbrella of the Government of India's "Act East" policy, connectivity agreements with Bangladesh and infrastructure developments in NER and its neighbors have reduced the subregion's economic isolation.

NER has also been benefiting from global developments. Incomes are on the rise, thanks to growing consumer awareness and leisure spending in Indian consumers and the consumer hub of the neighboring countries. Apart from being strategically located, the presence of powerful input market triggers such as social capital (diversity and cultural richness), physical capital (possible energy supply hubs), human capital (cheap and skilled labor), and natural capital (abundant natural resources; minerals, forests) have also contributed significantly to the growth of the region.

Despite the NER rising to be an important trade hub of the subcontinent, it faces many hurdles like armed insurgency, cross-border migration, groups calling for breakaway federal states and autonomous areas, and ethnic conflicts.

The Trade Potential of NER

The NER is at the heart of the AEP, which aims to create India's land bridge to Southeast Asia so that regional economies may benefit from manufacturing networks. Subregional institutions like the Association of Southeast Asian Nations (ASEAN) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation might help improve trade and connectivity between the NER and India's neighbors in this context.

Geographic location, cultural ties, and existing trading networks with its neighbors are the arsenal in NER's hands. Raw minerals, including coal, limestone, boulders, and agro-horticultural items, are important exports from the NER to Bangladesh (ginger and citrus fruits). 

Cement, synthetic textiles, Ready Made Goods (RMG), and processed food are completed items imported from Bangladesh. Cumin seeds, cotton yarn, car components, soybean meal, wheat flour, and medicines are among the most important exports from the NER to Myanmar. Betel nuts, dried ginger, green mung beans, black mung beans, turmeric roots, resin, and medicinal plants are among the things that are imported.

Call for Attention

According to the NITI Aayog, India's trade with its East and Southeast Asian neighbors is dominated by produce outside the NER. None of India's northeastern states play a significant role in its international trade with its neighbors. This demands our attention. After all, the NER has enormous potential in agriculture trade and exports due to its appropriate soil and other agro-climatic conditions.

On the other hand, FDI inflow into the NER is exceedingly low compared to other states. The Indian business economy is dominated by a few states, such as Delhi, Gujarat, Karnataka, Maharashtra, and a few significant corporate giants. Compared to the rest of India, this necessarily traps the NER in a 'low-level equilibrium' trap.

Even though the NER's average per capita Net State Domestic Product (NSDP) increased from 2% to 8% (year-on-year) from 2011-12 to 2019-20, the region's average per capita NSDP remains well below the national average. The difference between the national average per capita NSDP and the NER's per capita NSDP has widened, rising from INR 31,000 in 2011-12 to INR 44,000 in 2018-19. 

The Centre's efforts to resurrect the economy of the region have had no results. The government invested Rs 44,000 crore in the region between 1998 and 2003. This includes Rs 5,700 crore from Prime Minister Narendra Modi's package. Furthermore, the region has one of the country's highest unemployment rates and practices subsistence agriculture.

Without proper implementation of integration of NER into the subcontinent's trade plans, the perks of NER will go without their hundred percent utilization.

The Way forward

Agriculture, horticulture, floriculture, processed food, engineering, autos, textiles, pharmaceuticals are some industries where NER's value chain potential with Bangladesh, ASEAN countries, and the rest of India has remained untapped. There are numerous trading opportunities in livestock, horticulture, fisheries, agro-processing, and natural resource industries. 

Once enabling supply chains are in place, value chains spanning NER may eventually rise. To boost trade, NER, for example, requires specific cold chains. State and Central governments must come together to accomplish this.

The development of transportation and communication linkways, such as roadways, airways, and railways, is also a crucial part of enhancing trade and commerce. While NE states have fared better in recent years, Agartala, Aizawl, Shillong, Guwahati, and Bagdogra are among the NER airports that require capacity expansion and additional domestic and international flights.

Heritage tourism and cruise tourism along the waterways connecting the NER and Bangladesh can attract millions of visitors worldwide. More investments are necessary to develop river terminals along the Brahmaputra River into full-fledged river ports. Promoting the usage of waterways can lead to increased economic activity along river banks, which can benefit the local economy and livelihoods.

Special Economic Zones (SEZ) must be established for timber, food processing, and other industries in NER states. The development of smart cities in Moreh and Dawki will boost regional economic activity. In the Northeast, industries with the potential to serve neighboring markets and ASEAN must be identified and encouraged. The harmonization of customs procedures and other trade facilitation measures would aid commerce in the region. Simultaneously, the North East Council (NEC) must be restructured to take on connectivity-related tasks to serve as a leader.

The Future of North East India

There is a little question whether India's NER has enormous economic growth and cultural interchange potential. Both of these elements are necessary for effective diplomatic ties, particularly with neighboring countries. Bangladesh and Myanmar, India's closest neighbors, have played critical roles in increasing and strengthening commerce with the Northeastern states. 

However, because the region is physically isolated from the rest of the country, it has logistical challenges that impede commerce. The harmony of the state and central governments and proper investment and strategic planning will lead NER to be a potential leader in trade and commerce.

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