Dialogue  January - March, 2009 , Volume 10  No. 3


Understanding Economic Growth in the North Eastern Region  of India


E. Bijoykumar Singh*





Nothing describes the North eastern region (hereafter to be referred to as NER) of India comprising of 8 states better than  NER VISION which   describes the region as “a rainbow country—extraordinarily diverse and colourful ,mysterious when seen through parted clouds”. To me it is an admission of the state of understanding of matters related with the region and it is also painful because  it is so after six decades of independence. Most  of us have seen it only through parted clouds. A sense of urgency has been aroused   in response to the people’s pursuit for a place in the sun to ensure that the region catches up with  the country  by  including it in the process of development. The most important thing is to identify the  matrix of policy variables  impinging on  target  variables such as per capita income, employment,  expectancy of life at birth, literacy rate  and poverty ratio. However  unfortunately  economic policies have either failed to deliver or delivered an unrecognisable baby due to the simple fact that economic policies used to base on  fleeting glimpses of the North eastern reality seen through parted clouds. There is a persistent denial to recognise the  constraints to growth in the region. The issue of Interstate disparities in income growth has become  more prominent in the post reform era. The question   of convergence or divergence  has not been answered unequivocally. The Eleventh plan notes  a widespread  perception  all over the country  that disparities  among states and regions within  states, between urban and rural areas and between  various sections of the community have been steadily increasing  in the past few years. This has been vindicated by available statistics on a number of indicators. The North eastern region has always remained at the other side of the  divide. That  something is seriously wrong is clear from the turmoil  the region has been going through during the last few decades . In 2006 22.47% of civilian killings and 20.73% of security forces killings in terrorist  related violence in India occurred in the NER .1 This  is like  circumstantial evidence in a criminal case. What is attempted  here is to examine the nature of economic growth  among the states in the region

    The current paper will be divided into two parts. The first part will survey selectively a cross section of thinking on the reasons of backwardness. The second part  will analyse the nature of growth , both at the aggregate level and sectoral level, among the eight states in the region using NSDP data . A proper understanding of the nature of growth in the region  should be one of the essential building blocks on which  any growth strategy  should be based.

The contending perspectives:

    The starting point of any narrative of India’s NER will invariably point out the richness and diversity of natural resources  along with the backwardness of the region. They however differ  on the diagnosis  of why these states  have remained backward , literally a black box of economic policy. Unlike other parts of India where the problems of poverty and unemployment are borne stoically as the outcome of one’s karma , in the NER  ideas of secession easily sprout  in response to any problem  indicating the incomplete process of nation formation in the region. The sense of identification with the country to say the least is highly fragile. It also reflects the inadequacies in the diffusion of modern democratic values in the region.

     Sarma (2006) puts forward  five I’s  which are still acting   as binding constraints on the economic development of the NER viz initial conditions, infrastructure deficiency, insurgency, imperfection in factor and product market and indifferent governance. No other region in India  had been as adversely  affected as  the NER due to partition in 1947 which disrupted the centuries old  channels of exchange in the region with  neighbours which  had become foreign countries.  He  argues that the development initiatives  for the region  are largely  based on  security perspective and the perspective based on least interference in traditional practices and institutions. Shukla commission (1997)  diagnosed correctly the handicap with which  the region had started in the post independence era.” Partition further isolated an already isolated  geo-politically sequestered region. It was left with over 4500 km of external frontier with Bhutan,China, Myanmar and Bangladesh but not more than a slender 22km connection with Indian hinterland through the tenous Siliguri corridor, the gateway to the north east. The very considerable market disruption,socio-economic distancing and retardation that resulted has not been adequately appreciated and compensated.”Madhab (1999) opined that “ it would have been simpler to describe these phenomena as a natural corollary to or a fallout from the process when society modernises. While this is partially true, the main problems lie elsewhere. The crisis is one of identity,security and underdevelopment- all interlinked.” The issue of losing one’s identity is nowhere better show-cased than that of Tripura as the classic and uncontested case of a region being swamped by immigrants. The ever increasing inflow of migrant workers from Bangladesh and regions outside the NER threaten to affect the character of society with implications for contested political space. That explains the continual outbursts against outsiders experienced by every state in the region .2 Madhab (1999) further comments “ At the beginning of the planning era , the north east economy compared well with the rest of the states. No sooner the effects of partition were felt, the economies started faltering. For the region lost the most vital transportation routes through East Pakistan. Instead it had to take a long, fragile and circuitous route which was costly.”Yumnam (2005) argues that the various policies for the NER implemented so far have led to growth of political competition rather than economic competition. He emphasised three factors hindering economic growth in the region– basing national policy for regional development on political weights, region’s inability to articulate its own development agenda and the government of India’s approach of basing policies towards the region on security principle. Elangbam (2005) and Sachdeva (2005) argued that wrong assumptions and inappropriate policy framework have led to this impasse. The false paradigm model attributes underdevelopment in NER to faulty and inappropriate advice provided by well meaning but biased advisors. It is argued that behind the problem of the NER lies the inability of policy makers to appreciate the north east reality in proper perspective. The subsequent policy measures accentuated the problem further.3

  At this juncture India’s Look East Policy has emerged as an alternative vintage point from which the development paradigm for the NER can be discussed. It is essentially an export led growth strategy. The most successful example of how IT and trade policy can transform an underdeveloped country from a condition of widespread poverty to one of high income status in a single generation is South Korea. Lacking natural resources Korea’s greatest assets are its industrious literate people and its strategic alliance between government and private industries in selecting and promoting exports. Taiwan is another example of export led growth. Its imports are dominated by raw materials and capital goods which account for more than 90 % of all import. It relies on import to meet more than 75% of its energy needs. All along in the case of the NER the emphasis for export has been on natural resource based products with little regard for the demand pattern in the emerging South East Asian markets.

     The Eleventh Five Year Plan  (2008)discusses the critical parameters  for growth of the North Eastern Region. The growth strategy  proposed consists of  creation of critical infrastructure and creation of employment opportunities. Governance, capacity building, connectivity & power, social infrastructure, realising the full potential of the primary sector, active involvement of the grass root social institutions in development planning, encouragement of private investment and PPP, and capitalising on the opportunities provided by India’s Look east policy constitute the critical parameters.

    Finally  there is the NER Vision 2020 (2008) incorporating  the principles of participatory planning. The NER Vision 2020 diagnoses the challenges confronting the region and closely examines the developmental aspirations of the people to identify as clearly as possible the felt needs of the people  through  a survey of  40,000 households. The realisation  of people’s vision of development requires a paradigm shift in the planning process – from the one in which investment allocations  are imposed from  above to the one determined according to the needs and requirements of the people. The document stresses   the following five components of development strategy

      (i)    Participatory development strategy articulated through grass roots planning to harness the natural resource advantage of the region

     (ii)    Capacity development of the people and institutions to reach the targeted  groups

     (iii)   Augmenting infrastructure particularly connectivity and transport infrastructure

      (iv) Ensuring adequate resources for public investment in infrastructure alongwith  a framework for private participation in augmenting infrastructure and an enabling environment for the flow of investments

   (v)     Transforming governance by providing a secure, responsive and market friendly environment  including protection of property rights of the investors and ensuring a corruption free administration. It includes resolving insurgencies and putting an end to the leakages in the system.

     No other scheme  for the NER has been as comprehensive  as the strategy spelt out  in the Vision document.

     There are several related issues:

     How have these  state economies grown ?

     Has this growth enhanced the quality of life of the people ?

     What are the implications of this pattern of growth ?

How have they grown ?

    The growth rates of all the NER states have increased during the 3 five year plans with Manipur and Tripura  registering  persistently higher growth. Sikkim and Manipur  grew fastest among Indian states during IXth and X th  plan.

Table 1

Growth  Rate  of state domestic products of North eastern India

State                                Eighth                Ninth                  Tenth           Eleventh

                                          plan                   plan                  plan*              plan


Arunachal                             5.1                   4.4                    5.8                  6.4


Assam                                   2.8                   2.1                      6.1                6.5

Manipur                               4.6                   6.4                    11.6                5.9

Meghalaya                            3.8                   6.2                      5.6                7.3

Mizoram                              NA                  NA                      5.9                7.1

Nagaland                               8.9                   2.6                      8.3                9.3

Sikkim                                   5.3                   8.3                      7.7                6.7

Tripura                                 5.3                   7.4                      8.7                6.9

Highest among       Gujarat 12.4       Sikkim 8.3     Manipur 11.6      Goa  12.1


Lowest among           Orissa 2.1       Assam 2.1             M.P. 4.3     Manipur /

states/UTs                                                                                                                             Punjab 5.9

Notes: *Average  of 2002-3 to 2005-6 for all states except J & K, Mizoram, Nagaland 2002-03 to 2004-5 and Tripura 2002-3 to 2003-4 at 1999-2000 prices.

Source: CSO

However this growth has not been adequate to catch up with all India per capita income. The challenge of growth before the North eastern states is shown by table 2 which shows how fast these states should grow to catch up  with  the per capita GDP  of the country by 2020. The  enormity  of the challenge  becomes  clear when it is examined in the context of the achievements of the states in the last three five year plans  in table 1.

Table 2

Average  annual  growth of GSDP at 2006-7 prices

States                             2007-12           2012-17         2017-20           2007-20

Arunachal Pradesh            8.15                10.75              12.75                9.93

Assam                              10.00               14.90              17.25               13.21

Manipur                           9.00                12.85              15.75               11.73

Meghalaya                         8.0                 10.75               12.0                 9.86

Mizoram                           9.68                 9.68                9.68                 9.68

Nagaland                           8.52                 8.52                8.52                 8.52

Sikkim                               7.80                 7.80                7.80                 7.80

Tripura                             7.50                 8.50                8.50                 8.16

NER                                  9.25                12.65              14.50               11.78

India                                   8.0                   8.0                  8.0                   8.0

Source: NIPFP

Table 3

Share of primary, secondary and tertiary sector in total NSDP4

(1999-2000 price) (As percentage of NSDP)

                             Primary                   Secondary                         Tertiary

                              1980-1    1990-1      2006-7     1980-1      1990-1    2006-7    1980-1  1990-1  2006-7

Arunachal     46.70   46.84    25.07   16.73    18.28   32.59   36.57  34.88  42.34


Assam          43.01   39.42    34.20   14.99    14.56   15.50   42.00  46.01  50.30

Manipur       43.83   35.93    24.66   18.22    15.72   39.00   37.95  48.34  36.34

Meghalaya*  62.16   46.68    32.37   15.48    11.30   15.33   22.36  42.02  52.10

Mizoram*                24.24    16.24                 14.15   16.07              61.61  67.69

Nagaland      40.49   23.32    34.91     7.42    13.73   13.59   52.08  62.95  51.49

Sikkim          39.93   43.62    21.69   14.13    20.13   26.21   45.94  36.25  52.10

Tripura         53.01   46.19    25.57   20.26      5.34   21.05   26.72  48.47  53.38

Note : * terminal year for Mizoram is 2007-8

       The structure of the economy in terms of the relative importance of primary, secondary and tertiary sectors will throw light on the quality  of growth.The evolving structure of the state economies is shown by table 3.

    During  the entire period  the  share of primary sector has declined substantially and that of tertiary has increased. By 2006-7 except for Manipur tertiary sector has become the predominant sector in all the states. In Manipur  due to a spurt in construction activities secondary sector surpassed the  tertiary sector. Besides Manipur Arunachal pradesh is another state  with  a high share of secondary sector. The contribution of these sectors to growth of real NSDP is shown in table 4.                                                     

Table  4

Contribution of  sectors to growth of  NSDP (in percent) 1980-81 to 2006-7 at 1980-1 prices

State                                 Average annual               Contribution of

                                             growth  rate        primary   secondary     tertiary

Arunachal  Pradesh                   7.956                 32.6             36.0         31.4

Assam                                       3.328               30.81           16.78       52.41

Manipur                                   5.510               18.42           45.61       35.97

Meghalaya                                5.197               21.09           13.76       63.15

Mizoram                                   6.018                   2.0           21.38       76.62

Nagaland                                 6.8976               26.35           19.81       53.84

Tripura                                     6.253               18.91           19.33       61.76

Sikkim                                       8.851               33.88           29.93       36.19

      Except for Arunachal Pradesh and Manipur the main source of growth in per capita income is tertiary sector. In Mizoram the contribution of tertiary sector is exceedingly high. In Manipur and Arunachal Pradesh the main source of growth is the secondary sector. In none of the states is the primary sector the main source of growth though it contributes a significant proportion in Arunachal Pradesh, Assam and Sikkim. It shows the growing role of the non commodity producing sector in the growth of the economy. It  should be noted that  public administration is an important sub sector of the  tertiary sector and it is not related with commodity production  as directly as the activities in primary and secondary sector.                                                                              An interesting  aspect of analysis of growth is  the search for structural breaks because such breaks indicate the impact of identifiable phases of economic policy. One such episode is the structural reforms initiated  in  1991. The break years for time series of per capita income, net state domestic product, income generated in primary, secondary and tertiary sector  during the period 1980-1 and 2006-7 all in  1999-2000 prices are shown in  table 5. 5 It shows no close association between   the period of structural reforms and structural breaks implying the irrelevancy of  the much lauded economic policy measures

Table 5

Break  year

State              Per capita      Net state        Income          Income           Income                     income     domestic  generated                generated                    generated in                                           product at   in primary        in             tertiary                                    1999-2000               sector                     secondary        sector                                                          prices                                   sector     

Arunachal           1986-7       1987-8         1988-9      1999-2000          1992-3   Pradesh                                                                  

Assam                2001-2       1998-9         1993-4       1999-2000          1993-4

Manipur             2000-1       2000-1         2004-5             2003-4          2004-5

Meghalaya          1987-8       1986-7         1986-7             1986-7          1987-8

Nagaland       1999-2000       1984-5         1987-8       1999-2000          1985-6

Tripura               1988-9       1986-7       1989-90             1987-8    1999-2000

Sikkim                1992-3       1991-2         1986-7             1983-4          1987-8

     Having identified the break years , the next question is about the growth rate after the break. Table 6 shows that growth of per capita income declined in all states except in Meghalaya and Tripura which registered increases in all series except for tertiary sector. Only Sikkim registered higher growth rate after the break in tertiary sector which has become more dominant than the primary sector in most of the states. This result further substantiates the irrelevancy of economic policy .

    The falling share of primary sector in income generation alongwith  the high share in employment indicates falling productivity in this sector. The benefits of growth  accrue largely to the small portion of workers in the tertiary sector. This will accentuate  the  extent of inequality.

      Household amenities  such as pucca housing, access to safe drinking water, per capita consumption of electricity and the extent of urbanisation indicate the quality of life. The proportion of pucca houses except for Mizoram is much lower than the all India level. Both Manipur and Tripura have low  proportion of  pucca houses and  the per capita consumption of electricity is uniformly low in all states. Deprivation index of rural areas is much higher than that of urban area. The low level of urbanisation and  relatively higher deprivation index of rural areas indicate the low overall quality of life.

                                                     Table 6                                                                          Relative  change after the break

State                Per capita   Net state        Income          Income           Income                     income     domestic  generated                generated                      generated in

                                          product at    in primary           in               tertiary

                                          1999-2000       sector        secondary         sector

                                              prices                                sector                

Arunachal pradesh   decline     decline          decline          increase          decline

Assam              decline            decline          decline           decline          decline

Manipur           decline   inconclusive  inconclusive   inconclusive  inconclusive

Meghalaya        increase        increase         increase          increase          decline

Nagaland           decline          increase         increase           decline          decline

Tripura           increase          increase         increase          increase          decline

Sikkim              decline            decline          decline           decline         increase

Has this growth enhanced the quality of life of the people ?


Table 7

Sectoral distribution of workers (2001)

State                              Rural                                               Urban

                     Primary   Secondary  Tertiary   Primary   Secondary  Tertiary

Arunachal           83.4           7.5            9               8.7            13.4           77.9   pradesh

Assam                67.7           6.2          26.2              6             13.5           80.5

Manipur             75.3           8.9          15.8            28.3           15.6           55.9

Meghalaya          86.5            3            10.5             1.3            14.6           84.1

Mizoram            88.5           2.4          12.2            30.3           14.7             55

Nagaland             79.7           2.2          18.1             8.4            12.1           79.5

Sikkim                60.8           9.9          29.3             2.1            16.1           81.8

Tripura               45.7           12           42.3             2.7              8              89.3

India                   76.3          11.4         12.4             8.8             32             59.2

Source: Census of India  2001

Table 8

Household amenities  in NER states (as percentage of respective totals)

State                PH          SW             PCe       Hec       Deprivation           Urban

                    (2001)     (2001)    (1999-   (2001)             Index             population

                                                   2000)                          (2001)               (2001)

                                                    Kwh                      rural      urban

Arunachal     20.68       77.5         95.5        54.7       41.54    18.15          20.4      pradesh                                                                                                                      Assam     19.47         58.8        95.5         24.9    43.59        18.47      12.7         Manipur  8.39         37.0         69.5         60.0         39.22       23.18                       23.9 Meghalaya   22.14        39.0       160.3      42.7        49.55      16.50       19.6         Mizoram 52.84       36.0         120.8       69.6         42.55                     19.43       49.5 Nagaland      16.19         46.5      84.7          63.6      40.92       18.96       17.7         Sikkim     37.87       70.7         192.4       77.8                       37.7       4.93         11.1   Tripura         9.81      52.5          95.5      41.8         40.3         17.43       17.0         India       51.62       77.9         354.7                       55.9     45.74       16.79        27.8

Note : PH pucca housing  SW access to safe drinking water PCe per capita consumption of electricity in kwh Hec  Household  with electricity connection DI  deprivation index UP urban population

Source : Census 2001

      Youth unemployment rate  in urban areas is quite high, with most of the states having a much higher unemployment rate than the all India rate. This is in sharp contrast with the overall unemployment rates which are much lower than the all India rate. Low rural unemployment rate need not necessarily  mean abundant work opportunities in rural areas. It may be attributed  to the inability of the rural labour force to remain unemployed  for long  because of their poverty.

Table 9

Youth unemployment rate (2004-5) usual principal status

                                      State                                         Rural                                                            Urban

                                                                           Male        Female          Total         Male        Female      Total

Arunachal             3              1.7            2.5               5.6               7.4             4   pradesh                                                                                  

Assam                8.5            15.3            9.7             20.9             33.4        23.3

Manipur            5.1              2.3            3.9             19.7             18.5        19.3


Meghalaya         0.2              1.6            0.8             12.9                12        12.5

Mizoram               2              0.3            1.3               4.4               6.2          4.9

Nagaland          20.8              9.5          14.9             22.1             35.5        27.7

Sikkim                8.6                 4               7               6.7               6.3             8

Tripura            25.7            60.8             33             45.4             83.7        61.4

India                  5.2                 7            5.7                10             19.9        11.9

Source: NSSO(2006) “Employment and Unemployment  Situation in India 2004-05” Report no.515

    Does a low growth rate or a declining growth rate of various income aggregates doom the people of the region in an unenviable position? Not necessarily so because table 9 shows that in terms of the more encompassing measure of development i.e. human development index the states in the region have been doing quite well. In 1981 Manipur ‘s rank was fourth and in 1991 Mizoram was the 7th Indian state. In 2001 also three out of the five states whose HDI have been estimated had HDI higher than that of all India. Thus the income gap has been made up by better performance in education and health. This indicates the strength of social capital which needs to be nurtured to attain higher level, by not insisting on mainstreaming. The problem arises when we try to impose on others what we consider to be good for them without regard to how they themselves feel about it. If some amount of growth has to be sacrificed to develop the special capital that may be more productive in the long run. Afterall nation building is not a short term exercise.

Table  10

Human Development Index of North Eastern states 1981-2001

State                                                1981                       1991                2001*

Mizoram                                   0.411(8)                 0.548(7)                    n.e.

Manipur                                    0.481(4)                 0.536(9)                    n.e.

Nagaland                                  0.328(20)               0.486(11)                   0.62

Sikkim                                     0.342(18)               0.425(18)                 0.454

Tripura                                    0.287(24)                0. 389(22)                   0.59   

Meghalaya                              0.317(21)                0.365(24)                    n.e                                 

Arunachal Pradesh                   0.242(31)               0.328(29)                0.515

Assam                                     0.272(26)               0.348(26)                 0.407

All India                                         0.302                      0.381                 0.472

Source: Human development Report 2001, Planning Commission

Note:  *The HDI’s in 2001 are from HDRs of the states n.e.  not estimated Figures in parenthesis are all India ranks



     Lots of changes have occurred in the development discourse. Yet one cannot free oneself of what one may call the minority syndrome. What does development  mean when the people  for whom it is meant are no longer there ? The unchecked influx of migrants from  UP, Bihar, Orissa and other states and also from Bangladesh , Nepal and  Myanmar is a threat to demographic balance. Globalisation surprisingly can also immiserise the region by further outcompeting the industries in the region. The knee- jerk response to these challenges is to advocate for restrictions to labour movement e.g. the inner line permit and also restricting the import of items which are both anachronisms. Globalisation and liberalization need not  solve the problems of the region. Both  are opportunities and challenges. Better preparation of infrastructure along with higher degree of industrialization  can convert them as engines of growth. Lack of preparation can endanger us  further intensifying the alienation process. Much of the problems of this region can be attributed to deficiencies in nation  building. One of  the lessons of nation building is  that accountability for past injustices can be a powerful  component of nation building. It should be attempted only if there a long term commitment  to it. The region  has become  notorious  because of the regular cycle of violence and increasing  use of violence in making any point. But there  are  many  activities in which our people have excelled. What is needed is imagination to tap the hidden potential of individuals and institutions of the region so that their genius can flower. We should realise that nation building is an incomplete exercise in the NER. Any insensitivity of policy  makers can undo painstakingly developed edifices  in a short time.




Government of India (1997) Transforming the North East, High Level Commission report to the Prime Minister, Planning Commission

Madhab, J. (1999) North east:” Crisis of Identity, Security and Underdevelopment” Economic and political Weekly Feb 6

Sachdeva,G. (2005) Preparing the North Eastern Economy for the Future Eastern Quarterly, Vol 3 Issue III Oct- Dec,

Sarma,A.(2006)  “Why the North eastern states continue to decelerate”

Serialised in Imphal Free Press, January

Shetty,S.L. (2006) “ Growth of SDP and Structural changes in the state economies: Interstate Comparisons” in Uma Kapila  edt (2006) Indian economy since Independence :  Academic Foundation.

Singh, E.Bijoykumar & N.Bhupendra Singh (2007) “Nature of Unemployment and Employment in the North east: A case Study of  Manipur “ ICCSR sponsored project , Manipur University


1 Source: Indiastat.com     In 2006  29.4 %  of terrorist related  violence  in India  happened in NER  with Manipur  topping with 10.87% closely followed by Assam with 8.68%

2 Sikkim is an exception. The problems of Sikkim  need to be looked at from a different perspective.

3 For instance the poverty ratios in the NER states  have been proxied all along with the poverty ratio of  Assam. The North eastern council is waiting for  the approval of the Planning  Commission for state specific poverty ratios estimated by its Expert Committee. In the meantime the experience  of Assam in poverty alleviation  has been superimposed on the other NER states.

4 The 1999-2000 series  has been constructed by splicing the trend values of the values  for the period 1980-1 to 1998-99.

5 The breakpoints are identified by using Chow test. The year with the highest F statistic  is taken as the break  year. The test is applied sequentially .



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