Abstract
The article delves into three aspects: (a) India–ASEAN economic relationship since the last three decades of Look East Policy (LEP), (b) the achievements of North-east India (NEI) under LEP and Act East Policy (AEP) and (c) adding a note on AEP as a new ‘development paradigm’ in NEI. The study finds that the India–ASEAN economic relationship deepened in the post-LEP period as merchandise trade and foreign direct investment (FDI) inflows increased manifold. However, neither LEP nor AEP made any significant impact on NEI in terms of economic growth, exports and FDI inflows. Economic growth stagnated and even decelerated in some states in NEI, while exports and FDI inflows remained abysmally low. LEP was a failed policy instrument for NEI despite many claims and assumptions. The major reason was infrastructure deficits and poor connectivity in the region for a prolonged period. AEP has emerged as a new ‘development paradigm’ with renewed thrust on infrastructure buildup and connectivity constructions. The ongoing and completed connectivity projects in rail, road, air and water, improvement in power and telecom, multimodal logistic park in Assam and improvement of trade infrastructure in NEI under AEP would attract investment from both domestic foreign sources, enhance productive capacity, increase exports and accelerate economic growth. AEP is expected to open new possibilities for trade and investments in NEI through regional economic integration with South Asian and South-east Asian economies given geographical location, ethno-cultural proximity, historical linkages and resource endowments.
Introduction
India’s attraction towards the East and South-east Asian countries (also known as ASEAN 1 countries) is not a new phenomenon. There have been historical, cultural, civilisational, economic, political and strategic linkages and exchanges between India and South-east Asian countries since antiquity. The economic reform measures and Look East Policy (LEP) launched in the early 1990s strengthened the economic linkages between India and South-east Asian countries. The magnitude and intensity of merchandise trade and investment flows between India and South-east Asian countries increased manifold since the last three decades of the launch of LEP. LEP was rechristened as Act East Policy (AEP) in 2014 with some added features and broader perspectives. The subtle distinctions between LEP and AEP include the extended coverage of the latter to East Asia and the Asia Pacific region and especially to Cambodia, Laos, Myanmar and Vietnam (CLMV countries), inclusion of dimensions other than economic like strategic, political, cultural and security aspects and most importantly highlighting North-east India (NEI) 2 as an integral part of India’s foreign policy and according the region a position as the main beneficiary and primary actor in the policy concerning Southeast and East Asian countries.
The primary reason for making NEI an integral part of the Look (Act) East Policy is the strategic location of the region. The region shares an international border of 5,182 km (about 98% of its total geographical boundary) with several neighbouring countries. It shares borders with the Tibet Autonomous Region, China in the north (around 1,395 km), Myanmar in the east (around 1,640 km), Bangladesh in the south-west (around 1,596 km), Nepal in the west (around 97 km) and Bhutan in the north-west (455 km) (Ghosh, 2023). The region is economically underdeveloped compared to other regions of India primarily due to poor connectivity. NEI is connected to mainland India only through ‘Chicken’s Neck’ 3 . The partition of India in 1947 and the creation of Bangladesh in 1971 rendered this region ‘landlocked’, paralysing the economic progress for decades. That is why it is often viewed that integration of NEI with East Asia, South Asia and South-east Asian countries under LEP (now AEP) will open up opportunities for trade and investments and thereby ushering economic development of the region.
The exports of India to ASEAN increased from ₹969.57 million in 1999–2000 to ₹26,212 million in 2018–2019, showing a 27-fold increase in exports. As per the report of the Ministry of Commerce, the share of ASEAN nations in India’s total exports has increased from 6.08% in 1999–2000 to 11.27% in 2018–2019. This shows that ASEAN has become an important export destination for India. The foreign direct investment (FDI) inflows into India from ASEAN countries from April 2000 to December 2016 were US$54.97 billion, which represents 16.81% of the cumulative inflows received by India (Ghosh, 2023). These figures clearly show the growing economic integration between India and ASEAN economies. But what happened to NEI?
The article mainly intends to investigate the achievements of NEI since the last three decades of the Look (Act) East Policy. The article first studies the quantum and intensity of economic engagements between India and ASEAN economies and then investigates the performance of NEI in this regard. The article specifically intends to investigate how much India–ASEAN economic relations have helped growth and development in NEI both under LEP and AEP. The article also adds a note on AEP as a new ‘development paradigm’ in NEI given renewed thrust on infrastructure and connectivity development. The article briefly analyses the infrastructure development in NEI under AEP and thereby making it a new and different policy instrument for NEI.
India–ASEAN Economic Relations
Trade
There has been a tectonic shift in India’s foreign trade since the adoption of the Look (Act) East Policy in 1992. Moreover, the economic engagements with ASEAN countries have deepened and the direction of India’s foreign trade has gradually shifted from the West to East, which has caused a fundamental change in India’s economic interdependence (Das et al., 2017; Ghosh, 2023) (Table 1).
Share of Total Export of India in ASEAN and Other Regions*.
It is observed that the share of the ASEAN region in India’s total exports has been on the rise while that of other regions such as EU countries, NE Asia and North America has fallen except West Asia GCC. The share of ASEAN countries in India’s total exports has increased from 6.07% in 1999–2000 to 10.15 in 2009–2010 and then to 11.35% in 2018–2019 (Table 1). However, in 2022–2023, the share has declined to 9.74% (Table 1). Despite this marginal fall, it can be said that ASEAN has emerged as one of the major export destinations for India. The Look (Act) East Policy has changed the architecture of India’s foreign trade within three decades (Ghosh, 2023). The trend of India–ASEAN trade has been on the rise since 1996–1997 (Figure 1). However, India experienced a negative trade balance as imports were higher than exports.
In 2022–2023, India’s top ten export items to ASEAN include mineral fuels, nuclear reactors, natural and cultured pearls, ships, boats and floating structures, organic chemicals, vehicles other than railways, edible meat, electrical machinery, aluminium articles and cereals. These items constituted 64.92% of India’s total exports to ASEAN (Table 2) during 2022–2023. The top ten import items from ASEAN during 2022–2023 consisted of mineral fuels, animal or vegetable fats, electrical machinery, nuclear reactors, organic chemicals, plastic products, ships, boats and floating structures, iron and steel, natural and cultured pearls and miscellaneous chemical products. The volume of trade in these top ten import items constitutes around 78% of India’s imports from ASEAN countries in 2022–2023 (Table 3).
India’s Top Ten Export Commodities to ASEAN in 2022–2023.
India’s Top Ten Import Commodities from ASEAN in 2022–2023.
India’s Exports to ASEAN Economies.
*Amount is in ₹ Million and share is in percentage.
The country-wise share of India’s exports to ASEAN shows that five countries comprise almost 93% share in 2022–2023. The five countries are Indonesia, Malaysia, Singapore, Thailand and Vietnam. The share of Brunei, Cambodia and Laos is negligible (Table 4 and Figure 2). In so far as India’s imports from ASEAN countries are concerned, 97% of imports are from these five countries, namely, Indonesia, Malaysia, Singapore, Thailand and Vietnam in 2022–2023 (Table 5 and Figure 3). The share of Brunei, Cambodia, Myanmar and the Philippines is negligible. This shows that the deepening of economic integration with ASEAN countries is mainly with five nations, that is, Indonesia, Malaysia, Singapore, Thailand and Vietnam. The rise in the share of Vietnam is noted in India–ASEAN engagement (Figures 2 and 3).
India’s Imports to ASEAN Economies.
The present study has not included India–ASEAN trade in services. The India–ASEAN trade in services was signed in November 2014, which needs to be executed diligently to intensify the pace of economic engagement with ASEAN. India needs to work on the proper execution of FTA in services that would provide space for Indian services industries, in which India has a comparative advantage. This is also important to improve India’s trade balance as India has been experiencing a negative trade balance in the current account (Table 6).
Moreover, India had a negative balance of trade (BoT) with ASEAN countries in the years 1999–2000, 2009–2010 and 2022–2023 (Table 6). In fact, since the inception of the LEP, India has been experiencing a deficit in trade balance as seen from Figure 1. The negative trade balance implies that India imports more from ASEAN economies than it exports to these countries. The magnitude of BoT deficit of India with ASEAN countries exhibits a rising trend over the decades. The BoT deficit was ₹103,636.88 million in 1999, which has increased to ₹363,173.06 million in 2009–2010 and finally soared up to ₹3,499,646.82 million in the year 2022–2023. The country-wise break up of India’s BoT with ASEAN shows that there has been a positive BoT with Cambodia and the Philippines. Apart from these countries, India had a huge negative trade balance with Brunei, Indonesia, Lao PDR, Malaysia, Myanmar, Singapore, Thailand and Vietnam in 2022–2023. Thus, India experiences BoT deficit with its significant trading countries in ASEAN. The rising negative trade balance implies that India’s imports from ASEAN countries are higher than its exports. Examining the causes of this regular negative BoT requires further empirical investigation, but this is a serious concern for India as it puts severe pressure on the foreign exchange reserves.
India’s Balance of Trade with ASEAN Economies (in ₹ Million).
Investment
Investment flows between India and ASEAN countries have also increased since the inception of LEP (Ghosh, 2023). The FDI inflow in India from ASEAN countries has increased from US$144.36 million in 2000 to US$18,909.19 million in 2020. The cumulative FDI inflow in India from ASEAN countries from January 2000 to December 2020 stands at US$116,103.59 million, which is 22.23% of total FDI inflows in India. Figure 4 shows that both total FDI and FDI from ASEAN countries have been on the rise. The share of FDI inflows from ASEAN countries has also increased since 2000 (Figure 5). On average, around one-fourth of the total FDI inflow in India is from ASEAN countries.
The top five sectors that attracted the highest amount of FDI equity inflows from ASEAN countries during 2000–2022 are the service sector, computer software and hardware, trading, telecommunications and construction activities. These five sectors together attracted 63.12% FDI from ASEAN (Table 7). The top five Indian states that attracted the highest amount of FDI inflows from ASEAN countries during January 2000–September 2019 include Delhi, Maharashtra, Karnataka, Tamil Nadu and Andhra Pradesh. These five states together attracted around 76.41% FDI from ASEAN (Table 8). In addition, during October 2019–December 2022, the five states that attracted the highest FDI from ASEAN countries were Delhi, Maharashtra, Karnataka, Gujarat and Haryana. These five states attracted 90.57% of the total FDI from ASEAN. The share of Karnataka has increased from 16.26% to 31.15% within a short period (Table 8).
Share of Top Sectors Attracting FDI Inflows from ASEAN Countries (from 2000 to 2022).
Share of Top States Attracting FDI Inflows from ASEAN Countries.
1Also includes part of UP and Haryana; 2and Dadra and Nagar Haveli, Daman and Diu; 3and Pondicherry.
RBI regional office-wise data have been discontinued and these have been replaced with state-wise data w.e.f. October 2019.
Table 9 shows that cumulative total FDI inflows from ASEAN countries during the period from 2000 to 2022 were to the tune of US$147,636.38 million and the highest FDI inflow was from Singapore. The FDI inflow from Singapore during the period from 2000 to 2022 was US$144, 044.96 million which was 97.57%. The FDI inflows from other ASEAN countries appear to be negligible. The cumulative FDI inflow from Indonesia from 2000 to 2022 was to the tune of US$647.0669 million which is only 0.44%. Similarly, FDI inflow from Malaysia during the same period was to the tune of US$1,167.41 million (0.79%), Philippines US$478.9543 million (0.32%), Thailand US$ 1,194.27 million (0.81%). The cumulative FDI inflows during the same period from other ASEAN countries such as Vietnam, Myanmar, Brunei and Cambodia were negligible. India received no FDI from Laos during this period and received FDI mainly from Singapore.
FDI Inflows to India from ASEAN Countries (Amount in US$ Million).
The Performance of NEI under LEP
Income
NEI is still an economically ‘underdeveloped’ region of India even after three decades of economic reforms and liberalisation. The share of NEI in India’s net domestic product (NDP) has declined from 3.59% in 1989–1990 to 2.82% in 2020–2021 (Figure 6). This declining trend indicates that the region has been growing at a slower rate than the rest of the country. The average share of various states of NEI in India’s NDP from 1989–1990 to 2020–2021 depicted in Figure 7 shows that Assam alone contributes two-thirds of the total share of NEI. The share of other states is negligible. This indicates the economic stagnation of the region since the adoption of liberal economic policy and LEP.
The dominant sector in the region is the service sector, which contributes the lion’s share in the region’s total income. The service contributed around 53% followed by industry, contributing around 26% to the total income of NEI. The share of the agricultural sector in the region has declined, which contributed around 20% in 2020–2021 (Figure 8). This implies that there has been a structural change in the economy of NEI in conformity with the Indian economy, although interstate variation exists in this regard (Figure 8).
Trade
LEP failed to augment trade in NEI for the last two and half decades. LEP bypassed NEI in terms of exports, although India’s exports to ASEAN countries increased significantly. India’s exports to ASEAN economies increased significantly. However, the contribution of NEI states was negligible. NEI was neglected in the policy framework of LEP in its initial phase despite geographical, historical and ethno-cultural proximity with Southeast Asian countries. The maximum benefits of LEP in trade, investment and technology transfer accrued to states in southern part of India through the maritime route. The picture becomes clear if we examine the trade figures of NEI to Myanmar, Bangladesh and other neighbouring countries as shown in Tables 10–12.
NEI’s Trade with Myanmar (US$ Million).
India’s trade with Myanmar increased manifold, but the export share of NEI declined from 3.11% in 2005–2006 to 2.25% in 2013–2014 (Table 10). Similarly, as shown in Table 11, the export share of NEI to Bangladesh remained very low from 2000–2001 to 2008–2009. It declined from 3.09% in 2000–2001 to 2.56% in 2008–2009. Thus, LEP failed to augment exports from NEI even to its neighbouring countries such as Myanmar and Bangladesh. While the share of northeast neighbours in India’s total trade increased at a considerable rate, trade figures from NEI remained very low. Table 12 shows that India’s trade with eastern neighbours such as Nepal, Bhutan, Bangladesh, Cambodia, Lao PDR, Myanmar, Thailand and Vietnam has increased since 2010. India’s total trade with these countries increased from ₹813.85 billion in 2010 to ₹1,846.87 billion, with a CAGR of 23%. However, trade from NEI marginally increased from ₹16.28 billion to ₹26.15 billion with a CAGR of 13%. The share of NEI in total trade as seen from Table 12 has been hovering in the 1%–2% range. Thus, NEI has failed to accelerate its exports to the desired level under LEP and liberal economic policy.
NEI’s Exports to Bangladesh (in ₹ Million).
India’s Trade with Eastern Neighbours and NEI (in ₹ Billion).
*Implies percentage of NE trade to the total potential.
Actual FDI Inflow in NEI.
FDI
FDI is an important source of investment for developing economies, which not only fulfils capital deficiency but also brings knowledge, managerial skill and technology with it, which accelerates economic growth. Although India received a huge amount of FDI from ASEAN economies since the launch of LEP, NEI failed in this regard (Tables 13 and 14). The states in NEI including Assam could attract only a negligible amount of FDI under LEP.
The regional distribution of FDI in India is highly skewed and uneven, and the percentage share of FDI received by NEI states has remained abysmally low during two and half decades of LEP. The lion’s share of FDI has been received by the western part of India (37%) followed by the northern part (20%) and the southern part (17%). The Eastern and North-eastern regions received a very negligible amount of FDI from 2000 to 2013 (Table 14). Thus, LEP also failed to attract investment to NEI states.
FDI Received by Various Regions of India During 2000–2013.
The Performance under AEP
AEP is considered as a different policy instrument for NEI compared to LEP due to renewed the thrust of the government on infrastructure and connectivity development. NEI did not witness any significant improvement in terms of economic growth, trade and investment under AEP. However, the intent and willingness of the government to increase the allocation of funds to infrastructure (as can be seen in the following section) since 2014 created new possibilities for trade and investment and thereby economic growth in NEI under AEP.
The downward trend of the share of NEI in India’s NDP continued under AEP, as shown in Figure 6. Moreover, the annual average growth rate of NSDP of almost all states in NEI has decelerated under AEP except in Assam (Table 15). Similarly, all states in NEI experienced a deceleration in the growth rate of per capita NSDP except in Assam and Mizoram under AEP.
Average Annual Growth Rate of Income of NEI States.
Gujarat, Maharashtra, Tamil Nadu, Karnataka, Uttar Pradesh, Andhra Pradesh, Odisha, Haryana, West Bengal and Telangana were the top ten exporting states in absolute terms in 2021–2022, accounting for more than 85% of the country’s total exports (Parveen, 2023). NEI accounted for only 0.13% of India’s total exports in the fiscal year 2019 due to insufficient infrastructure, which hampers its economic activities and trade (Basu Das & Chattapadhyay, 2022). By fiscal year 2020–2021, the region’s share in exports has seen a minimal increase to 0.156%, which is quite low compared to the rest of the country. The region failed to become a centre of trade despite having huge geographical potentialities and endowments. The poor interstate and intrastate transport connectivity in NEI has impeded trade and industrial development in the region (Parliamentary Committee, 2023). Table 16 shows a dismal picture of exports from NEI states, which are negligible in amount. It has not improved at all in recent times. The export shares of NEI states in percentage terms in 2020–2021 and 2021–2022 are almost zero except Assam, which accounts for 0.14% and 0.11%, respectively.
Exports from NEI States (in US$ Million).
Moreover, NEI failed to attract a significant amount of FDI under AEP (Table 17). The percentage share of FDI in NEI remained stagnant during AEP, similar to LEP. However, FDI inflow in NEI increased under AEP in absolute terms. While the cumulative amount of FDI inflow in NEI was ₹3,484.21 million from 2000 to 2013 (13 years), the amount was ₹3,527.77 million during 2014–2015 to 2022–2023 (9 years). Moreover, from October 2019 to December 2022, the total FDI inflow in NEI was to the tune of ₹2,053.10 million, which is again a negligible amount in comparison to other regions in India (DPIIT, 2022).
State-wise FDI Inflows in India and NEI.
Initiatives under LEP
NEI was incorporated into the framework of LEP in 2008 (after one and half decades since its inception) with the preparation of ‘North East Vision Document, 2020’ by MDONER and North Eastern Council (NEC). The LEP also stressed on Kaladan Multimodal Transit Route through Mizoram to Sittwe port for integration of NEI. The government of India also undertook several projects for improvement in roadways, railways, air, connectivity, communication and telecom networks in the region under LEP. Many programmes have been initiated in NEI under LEP, which include East–West Corridor Roads (2005–2006), Special Accelerated Road Development Programme for North East and massive hydropower project construction. The statement of former Prime Minister Manmohan Singh shows the desire of the government for infrastructure development in NEI: The government viewed infrastructure development in the North East as a key element in the strategy for developing the region and increasing the connectivity with the rest of the country. 4 In fact, the ‘Northeast Vision 2020’ document focused on augmenting connectivity and transport infrastructure with adequate resources in the form of public and private investment.
The Non-lapsable Central Pool of Resources (NLCPR), which is an exclusive fund for the developmental activities in NEI, has been one of the significant sources of road development in the region. Table 18 shows that from 2004 to 2012, an amount of ₹43.75 billion was approved for the development of critical roads in the region. However, only 50% of the sanctioned amount was utilised. Similarly, NEC has sanctioned ₹25.24 billion and released ₹11.12 billion in a period from 2004 to 2012 to each of the states in NEI. Moreover, the provision of earmarking at least 10% of gross budgetary support (GBS) by the central ministries or departments has been made for the development of NEI states and the provision of NLCPR, a fund accumulated by the unspent amount of 10% of GBS of different ministries and departments. The North Eastern Industrial Policy (NEIP) was launched in 1997 to create a conducive business environment for industrial development by promoting incentive-oriented industrial investment in the region. The policy made a provision for capital investment subsidy at the rate of 15% on plant and machinery, subject to a ceiling of ₹3 million. In addition, provisions for the exemption of income tax and excise duty for a period of 10 years were made. An amount of ₹10.67 billion was invested to set up 681 industrial units in NEI during 1999–2004. The new industrial policy for NEI introduced in 2007 for a period of 10 years called for North East Industrial and Investment Promotion Policy (NEIIPP) to provide income tax and excise exemption, capital investment subsidy, interest subsidy, insurance subsidy and transport subsidy for industrial units set up in NEI. However, LEP failed to provide much benefit in terms of trade and investment in NEI due to poor connectivity and infrastructure The stress on connectivity and infrastructure development in NEI under LEP was not emphatic. This is visible from the allocation of funds, implementation and completion of connectivity projects. The renewed thrust on connectivity makes AEP a different policy for NEI from LEP. In fact, NEI was not a part of LEP, and the emphasis on the part of the government was also half-hearted (Fernandes, 2018; Srikanth, 2016).
Road Development under NLCPR in NEI (During 2004–2012).
Act East Policy: A New Paradigm?
LEP did not work for NEI. There has not been a significant improvement in trade and investment in NEI for one decade of AEP. Rather, economic growth has decelerated in NEI states except in Assam and Mizoram (Table 15). The major reasons for this economic stagnation and low trade and investment are infrastructural bottlenecks and connectivity constraints in NEI for a long time. The implementation of mega projects in infrastructure and connectivity in NEI has started under AEP with increased allocation of funds. This is the reason the government as well as experts claim that AEP would accelerate economic growth in NEI through trade and investment. AEP included NEI in its policy framework and emphasised infrastructure and connectivity constructions. The intention and willingness of the government are clear from the statement of Prime Minister Narendra Modi
5
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It is my conviction to bring NEI at par with other developed regions of India. The government has been focusing on the development of the region through its pro-active ‘Act East Policy’. The focus is on improving all round connectivity of NEI through rail, road, telecom, power and waterways. NEI is the gateway to Southeast Asia and we need to take advantage of this. There are a number of strengths in NEI which we need to harness for healthy growth of the region.
The states of NEI remained economically underdeveloped due to poor infrastructure, inadequate governance, low productivity of the factors of production, inadequate market access, high dependence on central government, poor investments and severe inaccessibility (Bhattacharjee, 2011; Dikshit & Dikshit, 2014; MDONER & NEC, 2007; Rao, 2009). The five Is which act as barriers in the development process of NEI include initial conditions, infrastructure deficiency, insurgency, imperfection in factor and product market, and indifferent governance (Sarma, 2005). NEI suffers from four deficits that include a basic needs deficit; an infrastructural deficit; a resource deficit and a two-way deficit of understanding with the rest of India which compounds the others (Planning Commission, 1997). Poor connectivity is the primary cause of high logistics costs for business in the region, thereby discouraging investment flows.
The government has stressed on infrastructure and connectivity in NEI under AEP through increased budgetary support. As per the estimate, the actual expenditure in NEI during 2014–2015 to 2020–2021 has been ₹2,657.67 billion. The budget allocation for NEI from 2014–2015 to 2020–2021 is shown in Figure 9, which shows an increasing trend in actual expenditure. The government has been implementing various infrastructure development projects, including air, road, waterways, rail, power and telecom connectivity. A total of 28 projects in air connectivity have been completed from 2016–2017 to 2021–2022 with a completion cost of ₹9.79 billion and 15 ongoing projects amounting to ₹22.12 billion in NEI.
In respect of railway connectivity, 20 projects costing ₹744.85 billion for 2,011 km length are under way in different stages such as planning, approval or execution. Moreover, 321 km length has been commissioned, and an expenditure of ₹268.74 billion was incurred up to March 2021 (PIB, 2022). Railway expansion in NEI includes 14 new line projects covering 1,181 km at a cost of ₹565.53 billion, out of which 253 km has been commissioned and an expenditure of ₹239.94 billion incurred up to March 2021. Moreover, six doubling and multi-tracking projects cover 830 km at a cost of ₹179.32 billion, out of which 68 km length has been commissioned and an expenditure of ₹28.80 billion incurred up to March 2021 (PIB, 2022).
The ongoing project in road connectivity in NEI includes a total of 4016.22 km costing ₹583.85 billion are ongoing in NEI. The completed projects in NEI cover a length of 3,099.50 km at a cost of ₹155.70 billion up to March 2021. To improve power connectivity in NEI, the government launched certain schemes such as the Deendayal Upadhyaya Gram Jyoti Yojana and the Integrated Power Development Scheme. Moreover, the North Eastern Region Power System Improvement Project has been launched for six states of Assam, Manipur, Meghalaya, Mizoram, Tripura and Nagaland to strengthen the intrastate transmission and distribution system. Telecom connectivity has also witnessed progress in NEI under the Bharat Net Project (PIB, 2022). To provide mobile services in uncovered villages in Assam, Manipur, Mizoram, Nagaland, Tripura, Sikkim and Arunachal Pradesh of NEI and for seamless coverage along the National Highway, the installation work of the feasible sites has been completed. The funds disbursed under this scheme are ₹6.34 billion during 2016–2017 to 2020–2021. In respect of waterway connectivity, the Brahmaputra river from Dhubri (Bangladesh Border) to Sadiya (891 km) was declared a National Waterway (NW 2) in 1988 and a fund was allocated for the creation of facilities like day and night navigation aids and terminals during 2020–2025. River Barak connecting Silchar, Karimganj and Badarpur in Cachar Valley of Assam with Haldia and Kolkata ports through the Indo-Bangladesh Protocol Route was declared NW 16 in 2016, and a fund of ₹1.45 billion was earmarked for 2020–2025 for the development of the route.
The completed railway projects in NEI given in Table 19 show that the government is keen on developing the connectivity infrastructure in the region. The ongoing and completed road development projects in different states in NEI (Table 20) are steps taken towards developing interstate connectivity in the region.
Completed Railway Projects in NEI.
Road Development Projects in NEI.
Moreover, India’s first Multimodal Logistics Park (MMLP) being constructed at Jogighopa in Assam is expected to be a game changer for NEI. The estimated cost of this mega project is US$407 million with an area of 317 acres having the potential to provide 2 million direct and indirect employment in the region. This MMLP aims to reduce trade costs by 10%, have a cargo capacity of 13 million metric tonnes per year and act as a single platform for cargo, warehousing, custom clearance, parking, yard facility, workshops, petrol pumps, truck parking, administrative building, boarding lodging, eating joints, water treatment plant, and so on
Moreover, NEI is going to be highly beneficial if projects such as Kaladan Multimodal Transit Transport Project, India–Myanmar–Thailand Trilateral Highway, Bangladesh–China–India–Myanmar corridor, Mekong India Economic Corridor are completed. However, these highly ambitious projects are facing serious setbacks due to political and other factors which India alone cannot address. However, these projects are highly beneficial for NEI due to its strategic location. The detailed discussion on the delays of these projects is beyond the scope of this article, but these are always prioritised under AEP. The bridge over river Feni in South Tripura, called ‘Maitri Setu’, has been built to link Tripura with Bangladesh so that goods can be transported to NEI through Chittagong port. Recently, the Agartala–Akhaura rail link between Tripura and Bangladesh has been inaugurated.
The connectivity projects in NEI under AEP are expected to open new possibilities for trade and investments in NEI through integration with South and South-east Asian economies given geographical location, ethno-cultural proximity, historical linkages and resource endowments. The emphasis on connectivity would attract investment in NEI and thereby positively affect economic growth. However, connectivity is viewed as a necessary but not sufficient condition for trade and investment in NEI. The scepticism is always expressed due to poor industrialisation, high dependency on central grants, underdeveloped manufacturing sector, low ranks in ease of doing business, inadequate governance, aggravated low and order situation and insurgency problems. Under these circumstances, the ‘trade-based’ development model for ailing NEI under AEP is also questioned. The government needs to concentrate on institutional efficiency and governance; otherwise, the region would continue to remain as a ‘dependent’ territory and AEP would merely be another lip service like its older version.
Conclusion
The article discussed three aspects: (i) the trend and pattern of economic relationship (trade and investment) between India and South-east Asian economies in the last three decades of LEP and AEP, (ii) the achievements of NEI in income, trade and investment under LEP and AEP and (iii) a note on AEP as a new development paradigm given the renewed thrust on infrastructure and connectivity. A comparison with LEP has also been made in this regard.
There has been a considerable increase in merchandise trade and investment flows (FDI) between India and South-east Asian countries in the last three decades. ASEAN economies have emerged as export destinations for India under LEP and in this sense LEP is a successful policy in respect of economic dimension. However, NEI states have not witnessed any significant impact in terms of income, trade and investment since the last two and half decades of LEP and economic reforms. The economic growth stagnated and decelerated in some states in the post-LEP period. The contribution of NEI in India’s NDP decelerated from 3.59% in 1989–1990 to 2.82% in 2020–2021, indicating sluggishness in the growth rate of income. The exports from NEI states remained negligible in the post-LEP regime. The export share of NEI states in India shows poor figures. There has not been any significant improvement in NEI in terms of economic growth, trade and investment (FDI) under AEP since 2014. However, there has been much emphasis on infrastructure and connectivity development in NEI under AEP, which makes it a new ‘development paradigm’ for the region.
The article added a note on AEP as a new development paradigm in NEI given the recent stress on infrastructure and connectivity development with increased allocation of funds. The article reviewed the infrastructure development initiatives in NEI both under AEP and LEP and found that the emphasis on connectivity projects is much higher under AEP than under LEP. The government has started and to some extent completed connectivity development projects in road, rail, air and water transport which were delayed for decades. The allocation of funds and investment in infrastructure and connectivity development in NEI has increased under AEP compared to LEP. The renewed thrust on connectivity development under AEP would open new opportunities for trade and investment in the near future. The enhanced trade and investment would accelerate economic growth. The AEP would prove to be a successful ‘development paradigm’ for NEI given renewed thrust on connectivity if the intention and momentum prevail with desired institutional, social and political corrections in NEI.
Footnotes
Declaration of Conflicting Interests
The author declares that there is no potential conflict of interest with respect to the research, authorship and/or publication of this article.
Funding
This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.