ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Development of North East India

The Potential of Participation in Global Value Chains

Low demand, high trade costs, poor infrastructure, unstable law and order and the lackadaisical nature of government impede the economic growth of the North Eastern Region. This prolonged underdevelopment points to the urgent need of the NER to integrate with the global economy for faster economic growth. Such an integration and subsequent economic transformation can be made possible through participation in global value chains. The NER has comparative trade advantage in producing labour-intensive products, and participation in services-based GVCs, particularly tourism, can be very profitable for the NER.

The North Eastern Region (NER) of India comprises eight states, namely Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura, with a total landmass of 2,62,500 square kilometres, accounting for 7.7% of the country’s area, with a population of around 3.8% of India’s total (Srivastav 2010). Ninety–eight percent of its boundary is bordered by India’s foreign neighbours, Nepal, Bhutan, China, Myanmar, and Bangladesh. The regional economy has been witnessing a low level of economic growth. The net state domestic product (NSDP) increased from 6.8% in 2005 to 7.8% in 2013 and the average per capita NSDP increased from 25,142 in 2005 to 42,806 in 2013 (Table 1).

The NER has a traditional economy, with more or less no industrialisation. The industrial sector plays a marginal role in the regional economy and its share decreased from 15.3% in 2004 to 11.6% in 2013 (Table 2). The percentage share of manufacturing in NSDP of NER also decreased from 7.59% in 2004–05 to 6.84% in 2011–12 (Ministry of Development of North Eastern Region 2013–14). Until recently, agriculture and its allied activities were the engine of growth, contributing more than 50% in the composition of NSDP, but they have been overtaken by the services sector (De 2011). The share of the agricultural sector in NSDP has decreased from 41% in 2004 to 34.3% in 2013. In comparison, the share of the services sector increased from 44.02% in 2004 to 54.1% in 2013, mainly due to a rise in state-sponsored public administration expenditure (Srivastav 2010). Even though the services sector is growing significantly, it does not create any additional employment or income-generating opportunities, and its basic structure has not changed (Srivastav 2010).

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Updated On : 28th Sep, 2018

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