How India's Northeast can be a zone of sustainable industrial development

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In the recent decades, asymmetric migration into the Northeast has caused a sense of deep insecurity among the local population which kept crucial development debates overtly impacted. Consequently, and it's hardly surprising, observers find that Northeastern states have a lot of potential, though most of it still remains untapped.

This cannot be taken as a compliment since the region needs to benefit from the boom in the national economy. There is a glaring need today to facilitate inclusive growth in the Northeastern region, and for that to happen, the developmental discourses should be democratised in a way that keeps participatory governance as a model to be widely practiced and emulated.

In post-Independence India, industrialisation strategies for the Northeast have been dominated with a weightage in favour of heavy industries. That made the Micro, Small and Medium Enterprises (MSMEs) sector secondary in value until its real contribution was felt in the industrial development of the Northeast and the Indian economy at large. As per the Confederation of Indian Industry (CII) report, Creating Competitive SMEs, "SMEs constitute over 90 percent of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. In India too, the SMEs play a pivotal role in the overall industrial economy of the country. SMEs are thus important for the national objectives of growth with equity and inclusion."

Despite an impressive standing, the MSMEs continue facing problems at every stage of operation — whether it is in the purchase of raw materials, manufacturing of products, marketing of goods or raising finance. Moreover, the market reforms since 1991 have intensified the competition for MSMEs — both in domestic and overseas markets. That has made it essential for Indian MSMEs to cope with these challenges as well as improve and sustain competitiveness through rational cost optimisation, improved quality, offering better choices by introducing innovative measures and upgraded technology.

According to a CII-PWC report, Innovation: Changing the MSME Landscape, “Statistics are already emerging on the increasing importance of innovation and its scale and scope among the country’s firms today.”

Also, a National Knowledge Commission of India study reveals that 42 percent of large firms and 17 percent of MSMEs have introduced ‘new to the world’ innovations during the course of their business. About 17 percent of the large companies rank innovation as the top strategic priority and 75 percent rank it among the top three priorities. So innovation is an area where light industries are making the voyage with positive outcomes. The SMEs functional in the Northeast should also make strides to catch up with this essential trend.

In the last two decades, economic growth in the Northeast has been satisfactory with an annual growth rate in excess of 8 percent. A spectacular rise in the service sector has helped in the sustenance of high growth in the region. Over the decades, however, agriculture has suffered very badly due to unpredictable monsoons and faulty mechanisation offers. As early efforts of unsystematic heavy industrialisation mostly failed in the region, manufacturing became dominated by SMEs in due course of time.

Assam is better in terms of entrepreneurship development when compared to the other states in the Northeast. With an upscale market and good road/rail connectivity, Guwahati is naturally placed to lead the entrepreneurial activities and attract large-scale investments. But it is also true that the rest six states also present favourable atmospheres for SMEs, as the concern for environmental degradation is quite high among the local population. The local residents prefer light industries, as opposed to heavy and polluting industries that create big tussles among the different stakeholders of the industries concerned and harm the ecosystem.

A few years back, the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Konrad Adenauer Foundation (KAF) jointly undertook a study, State Level Reforms: Increasing Investments in the North East.

This report initiates the condition for constructive dialogue and engagement with policymakers and the administrative machinery in the Northeast and the steps that need to be taken to harness the true potential of the region. The ideas and suggestions presented in this report reflect the industry's agenda for improving industrial growth in the states. The suggestions are however preliminary and are meant to form the groundwork for developing a blueprint for removing the impediments in the way of higher investments and growth in the region.

Sensing the promising opportunities available in the Northeast, now industry chambers such as Ph.D. Chamber of Commerce and Industry (PHDCCI), CII, FICCI are increasingly focusing on this region to score well by infusing energy in SMEs, supported by local entrepreneurial skills. The spread of SMEs in the Northeast will proportionally generate quality employment and will also check outbound migration besides creating the base of sustainable industrial development in the region. Consequently, the big political issue of 'Northeast's alienation' from the rest of India can come to a halt.

It would be worthwhile to recall that the asymmetric outcome of heavy industrialisation and certain policies adopted towards natural/human resources insecure the prospects of natural harmony. Those mistakes need to be rectified by relying more on the local choice (model) of development, rather than imposing tailor-made solutions in the Northeastern states. The growing sensitivity on this is a welcome sign and should help the Northeast to come to the centre stage of growth and prosperity.

Despite having many commonalities, all the seven states of the Northeast are distinct in their own ways. Thus, keeping this diversity in mind is also essential for policymakers and prospective entrepreneurs. Also, there is a need to sideline all misplaced apprehensions related to the complex geography of the Northeast and the adjoining international borders: A business in no significant way has much chance of being influenced too much by all these factors.

In the changing times, the issues of politics and economy cannot be taken separately, as the integration among the groups and individuals is an established phenomenon. So, a greater adjustment is possible from industries for the local conditions prevailing in the entire Northeast.

As economic rebounding is the need of the hour to brave a new world in post-pandemic times, the government-industry collaboration should reach further heights for collaborating efforts. Noticeably, the global pandemic coronavirus or Covid-19 is being regarded as a ‘one in hundred years’ crisis, which has already impacted lives and livelihoods in an unprecedented manner. Trade has been stopped, borders locked down, and people forced to either stay home or reach their respective homes. Some of the biggest changes that were never expected have taken place. As the crisis has had global nature, India is severely impacted as well.

The world is self-assured to see a sort of reset, it is the time for the government and industry to reckon the urgency of figuring out their immediate priorities, including supporting the MSMEs, the backbone of the Indian economy. A change in approach is much needed at this point in time before the fundamentals of the world order go in reset mode. There should be the determination to revive the MSME financing to support the much-needed demand factor of the economy.

This is the time for proactive collective action to come out of the trying time with a blueprint for the revival of the economy. At the idea front, it is well-understood now why the MSME sector is seen as the most significant contributor to the socio-economic development of the country — and acting as the growth engine of the Indian economy.

In the last few decades, especially followed by the economic liberalisation plan in the early 1990s, the sector has formidably contributed to the Gross Domestic Product (GDP) of the country, enhancing exports and creating the highest numbers of employment.

Noticeably, the sector has provided a much-needed traction to entrepreneurship development and industrialisation across India, even reaching the places hitherto left out of economic processes.

The Government of India has made number of policies for the growth of the Indian MSMEs and letting them globally competitive with new innovations and technology, among others, they are:

• MSME Credit Health Index (Launched on 2 November 2020)
• MoMSMEs adoption of the latest IT tools for MSMEs (October 2020)
• GoI Task Forces on MSMEs (September 2020)
• Udyog Aadhaar Memorandum (UAM) for online registration
• MSME Data Bank
• My MSME
• MSME Sampark
• Digital Payment

To encourage local production, the government is working on policies to increase MSME exports and lower imports. In addition, a Rs 200 crore ($28.4 million) scheme has been sanctioned to set up 12 technology centres, which are expected to be completed by 2021.

The MSME ministry runs numerous schemes targeted at providing credit and financial assistance, skill development training, infrastructure development, marketing assistance, technological and quality upgradation and other services for MSMEs across the country. In order to achieve the goal of doubling the Indian economy to $5 trillion in five years, MSMEs are being rightly given the innovative push and this should help the Indian economy in going forward progressively.

While the Northeastern region has been part of the structural reforms processes that India started way back in 1991 with a greater economic liberalisation drive and ceaselessly pursued since then, it is also time to project the region as a major investment destination with immense business opportunities. Surrounded by international borders including Nepal, Bhutan, Bangladesh and Myanmar — the region is uniquely placed to strengthen India’s peaceful growth mission of regional and subregional economic cooperation in the neighbourhood.

An ever-increasing focus on MSMEs is surely helping the startup culture to grow in the region, with the bright soft skills and geographic advantages, the youth of the Northeastern region is leading from the front in re-scripting the business fundamentals in India.

Essentially, better inclusion of thoughts and processes related to planning for the Northeast will usher in a new phase of development. The entrepreneurial spirit in the region is quite positive and with greater traction of support at policy fronts and from the lenders are certainly giving a new growth impetus to MSMEs to grow and support the youth in finding gainful employment. Among the key success stories, it is important to recollect the journey of Sikkim as the place for authentic organic farming with impressive logistic support and market linkages — and thus enabling the farmers’ to avail the actual dividend of economic reforms. The growth of MSMEs will be one among many desirable outcomes, which is going to shape the future of the very promising Northeastern region of India.

As the world’s largest democracy and one of the most significant economies of the world, India is a zone of hope. Its Northeast region must be viewed from the same prism and should be supported and projected as the major growth corridor with close proximity to nature. In fact, the Northeast region has all the reasons to be a zone of sustainable industrial development. A view of that sort is already driving a silent transformation in the Northeast, something that should be noticed and acknowledged too.

The writer is a policy professional, columnist and author with a special focus on South Asia. The views expressed here are personal.

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How India's Northeast can be a zone of sustainable industrial development
How India's Northeast can be a zone of sustainable industrial development
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