Can The ‘Act East Policy’ Boost The Economy Of India’s Northeastern States?

Given the history of foreign policies functioning on the country’s border, there is a general tendency to view the borders more like barriers than entries of opportunity and prospect. As a result, the borders have remained stagnant and economic activities are limited to the central part of the country for years. With the growth and expansion of the economies, it is gradually accepted that cross-border economies need to participate and operate as a single market to realize the full impact of integration.

If we see the geographical location of India, it is strategically positioned in South Asia, which shares 98 per cent of India’s international border with Bangladesh, Bhutan, China, Myanmar, and Nepal, which are at the heart of India’s international relations. And it goes without saying that the North East Region (NER) is the focal point for direct physical contact with all surrounded neighbouring countries.

Prime Minister Narendra Modi and ASEAN heads of state and government. Presidential Communications Operations Office, Philippines, via Wikimedia Commons

Realising the capacity and the opportunity waiting on the doorstep of the country, a major policy regime is in operation as a part of the economic and strategic partnership with Association of Southeast Asian Nations (ASEAN), namely, ‘Act East Policy’ (AEP). This emphasises the importance of NER states in India’s foreign policy decision-making, and the initiation encourages the partner to engage and act with the northeast.

However, NER, considered remote and landlocked, stands to perform poorly in terms of its key economic indicators; the per capita GDP is much lower than the rest of the country. Moreover, the region suffers from a critical connecting link nationally and internationally and is clearly struggling with security issues, economic stagnation, to name a few. On the other hand, the northeast has the uniqueness in terms of social indicators; the region reflects the national average.

For instance, it has a sex ratio of 943 and an overall literacy rate of 74 per cent, which is quite similar to the figures of the country as a whole. Moreover, this is the region as a whole, consist of the 30th-largest region in population in the world and the 11th largest in India, bigger than Telangana and Odisha. In terms of geography, with 265,000 sq. Km of land area, it is bigger than the United Kingdom and stands the 4th largest in India—bigger than Uttar Pradesh and Karnataka.

Therefore, the initiation of ‘Act East’ can be considered as an important milestone for northeast development through which this region can become highly valuable in the context of India’s foreign relations. The advantage of skilled (mostly English speaking) demographic dividend and the abundant availability of natural resources in the region is sufficient to perform as the ‘epitome’ of India’s Act East.

The region has a vast potential to emerge as a hub for education, health and tourism. An education sector boom would bring in considerable returns to the entire northeast economy—if the sector follows suit. Even the tourism sector has a vast potential and once popularised, can provide a great impetus to the regional economy. Similarly, establishing health facilities in the region can attract overseas patients from Bhutan, Bangladesh, and Myanmar.

A man rides his motorised two-wheeler across the Indo-Myanmar border bridge at the border town of Moreh, in the northeastern Indian state of Manipur. REUTERS/Rupak De Chowdhuri

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 northeast. The northeast states are expanding production networks in cement, processed food and horticulture with countries like Bangladesh. The same is expected with Myanmar with its is rich limestone reserves and cement production.

Northeast India is popular in handicrafts, tea, bamboo, spices, and processed food products. The prospects of NER in reaping benefits from increased trade and economic cooperation between India with Southeast and East Asia critically depend on the availability of products in the NER and their demand in the international market.

The main challenge of the NER is the connectivity, which faces a vast array of logistical handicaps. Of late, this has been taken care of by the government of India under the AEP. The government of India, along with Asian Development Bank, the World Bank, and the Japanese government have started many infrastructural projects of which East-West Corridor, KMMTT (Kaladan Multi-Modal Transit Transport), India-Myanmar-Thailand Trilateral Highway may be mentioned.

Not only these, the government of India, under sub-regional cooperation initiatives like BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) and BBIN (Bangladesh-Bhutan-India-Nepal), has initiated various projects to improve the connectivity of the northeast with the eastern neighbours. All these are dedicated to improving connectivity with the mainland as well as with the neighbouring countries.

A recent study by Research and Information System for Developing Countries (RIS), New Delhi, suggests that the completion of current and proposed infrastructural projects, like East-West Corridor (EWC) and other international projects could herald greater economic growth for the connected region and increase its geopolitical importance. The estimation of EWC itself will increase freight volumes by up to 90 per cent in the Indian states that ports, etc., are part of the corridor expected to provide cost-effective and efficient logistical services to promote trade and development.

In addition to road connectivity, railway connectivity has also improved. Most capitals of the NER states are being connected by rail network to major cities of the country. Agartala and Silchar now have a broad gauge railway line and are connected to Kolkata and Delhi along with the other parts of India (Ministry of Railways, Government of India). Agartala-Delhi Rajdhani Express has been launched on October 25, 2018, and is expected to be extended to Imphal and Bangladesh border by 2020 (Ministry of Railways, Government of India).

Recent developments in the railway system have given way to integration and connectivity in the northeast. Railway development has made positive impacts on common people, who are now well connected with the rest of India. Following the vision of the Prime Minister, various state governments have taken up projects to increase people-to-people connectivity. The UDAN scheme of the Civil Aviation ministry is enhancing intra-regional air connectivity.

The economic partnership with neighbouring countries has already started looking towards the east. The northeast has to move smartly to use it. The northeast region is no longer a ‘Gateway’ to the ASEAN under ‘Act East Policy’, it is a hub of geographic, demographic and natural diversity which is largely unexplored and available for use.

In this perspective, the outcomes of the state elections in Meghalaya, Nagaland and Tripura assume significance since the supportive state governments with the centre could roll out the development schemes and infrastructure projects quickly, as has been the case with Assam. The ruling government and its alliance had already secured electoral victories in Assam, Arunachal Pradesh and Manipur earlier.

Thereafter, NER’s integration with the mainland by providing infrastructure development and better connectivity is likely to offer enough opportunities for the holistic development of the region. The region has bountiful opportunities for investment in the development of various sectors mentioned above. NER is no longer the gateway of South East Asia; once investment picks up, with proper focus and investment, it can truly become the main epicentre for India’s ‘Act East Policy’.

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