"The rising tide of regional development opportunities will not lift all boats if these are separated by water locks" ~ Dr. Noeleen Heyzer
Social attitudes oftentimes take generations to change. Race remains a potent and often divisive force in our society. When common people fight with each other for scraps; using divide and rule, the wealthy draws further into their private gated communities. If we don’t create opportunity for all people, the disaffection and division that has stalled our progress will only sharpen in years to come.
How can elected officials rage about deficits when we propose to spend money on pre-school for kids, but not when we’re cutting taxes for corporations? Without action, our children won’t have time to debate the existence of climate change. They’ll be busy dealing with its effects. More environmental disasters, more economic disruptions, waves of climate refugees seeking sanctuary.
A shrinking world, growing inequality, demographic change, and the specter of terrorism. These forces haven’t just tested our security and our prosperity, but are testing our democracy as well. In the rise of naked partisanship and increasing economic and regional stratification, the splintering of our media, all this makes this great sorting seem natural, even inevitable. Increasingly we become so secure in our bubbles that we start accepting only information, whether it’s true or not, that fits our opinions, instead of basing our opinions on the evidence that is out there. This trend of talking past each other represents a third threat to our democracy. There’re no quick fixes to this long-term trend. ~ U.S. President Barack Hussein Obama II.
“Physically isolated from the rest of India, iron curtained political control and the reluctance to provide research visas to foreign scholars have cast shadows on contemporary research on political relations with its neighbours, along with issues of border trade and trans-nationalism” ~ Dilip Gogoi
1. There are over 27 million slaves in the world today.
2. 78 per cent of the 27 million are in labour slavery.
3. There are 60,000 men, women and children enslaved in the US.
In 1993, Prof DT Lakdawala revised the poverty figures, contending that the goalpost should not be 2,000 calories but 2,400 calories for people in rural areas and 2,200 in urban areas. Prices were revised for inflation and so came revised numbers, slightly. And in December 2005, Prof Suresh Tendulkar was appointed by the Planning Commission and he added another update. Which took the monthly urban figure to roughly Rs 18.60 a day and about Rs 12 for someone in the countryside. At today’s prices, these criterion — cited in the apex court — have yielded the magical, surreal numbers of Rs 32 and Rs 26. What the Rs 32 a day actually means is that a single earning member, providing for an average of five people in a city, actually earns Rs 32 multiplied by five or Rs 160 a day, or about Rs 4,800 a month.
Prof Abhijit Sen, an economist with the Planning Commission, explains calmly: “Yes, the original mapping was ridiculously low. But if we revise these indicators to include the slightly less destitute, how will we ever be able to compare what has happened in India over time? How will we be able to say, as we now can, that the very very poor numbers are down from over 70 percent to 42 percent this year, if we keep shifting the goalposts?”
THAT WOULD make perfect sense if that’s all the numbers along either side of the thin red line were actually doing. But even Sen concedes that the numbers are being used to dictate how the Central government should distribute money to the states for issuing Below Poverty Line (BPL) cards and subsidised grain to the poorest. The poverty line, says Sen, is a bit like India’s GDP figure. It’s useful when you want to compare how wealthy or how poor India is compared to other countries. And interestingly, Sen adds, India’s method for calculating its poor is what the World Bank has taken on board to calculate worldwide poor people numbers.
But just like the GDP, this number was never meant to be used to decide how the state should spend its money. BPL cardholders are never even asked what calories they consume, clarifies Sen. They are asked whether or not they have a proper house or a makeshift one, whether they own land or not, and other such verifiable, tangible questions. But then, in the mid-1990s, when the government moved from a general subsidised grain distribution system through ration cards, to targeting the very poor by issuing them BPL cards, it made, in Sen’s opinion, one big mistake. It used the poverty line figures to decide how taxpayers’ money collected by the Centre would be given out to the states.
We also have a most insensitive and rapacious forest administration. The forest guard is the most fearsome to the tribal because he is armed with the Indian Forest Act which regards tribals who go to forest to collect the necessities of their livelihood as criminals. Thousands of them are in jail for no reason. In 2006, the government enacted the Forest Rights Act, which recognised the rights of forest dwellers. The greatest opponent of this law is the forest bureaucracy. (Even six years after implementation only 11,000 individual pattas and 4,000 community pattas have been given. The forest administration does not allow tribals to harvest bamboo. They have given in only in one village - Mendha Lekha in Gadchiroli district of Maharashtra). Walter Fernandes (director of programme on tribal studies at New Delhi's Indian Social Institute) has estimated that 40 per cent people displaced (presumably since Independence) because of development projects like mining and irrigation are tribals. He puts their number at 10-15 million. Many of these tribals have been displaced multiple times. Our record of relief and rehabilitation is pathetic.
Maoism began as an uprising in Naxalbari near Siliguri in West Bengal in 1967. It was an urban phenomenon. But it has become predominantly rural. Its geography is Central India, barring Bihar, in the mineral-rich, densely-forested and tribal-dominated areas of the country. In Bihar, it is primarily caste-based. Currently, Left-wing Extremism affects 562 gram panchayats in 82 districts of nine states. Over the years, the ideological basis of Maoism has got diluted. It has two versions now: one based on ideology and the other on extortion which can be called levy-based Maoism.
Our first response was to expand security operations. We have about 70,000 paramilitary personnel and 30,000 policemen dealing with the problem of Left-wing Extremism. In the last few years the limitation of a security-only approach has become evident. So now we have adopted a security plus development response. How far have we succeeded? The evidence is sketchy. Some areas have been 'de-liberated' from the Maoists. In some areas that saw no development for the past 65 years, there is a glimmer of development.
Begin by noting that throughout the 1800s tariff revenues were a major source of operating funds for Uncle Sam. But tariffs that could significantly reduce imports would also reduce government revenues. After all, the very purpose of a “protective tariff”—as opposed to that of a “revenue tariff”—is to dramatically decrease the occurrence of the thing being taxed: imports. (In the extreme case, even a very high tariff rate on imports yields no government revenue if that rate causes Americans to stop importing completely.) Because sustained budget deficits were practically out of the question in the nineteenth century, genuine protective tariffs arguably kept government in general smaller than it would otherwise have been by keeping revenues lower than they would have been under revenue (rather than protective) tariffs.
Smaller government, in turn, meant less intrusion into the economy. The resulting freedom of entrepreneurs and consumers, and lower likelihood of government handouts (and bailouts!) to favored interest groups, promoted healthy economic growth. More generally, except for high tariffs, the U.S. economy of the nineteenth century was relatively free. Labor unions enjoyed no special legislative protections; outright industrial and agricultural subsidies were rare; nontariff taxes were either low or nonexistent; antitrust obstructionism wasn’t even possible until 1890, with the passage of the Sherman Act (and even then, it was largely held in check by the courts for a few more years); and there was no bureaucracies that haunt the economy today. (The first such agency—the Interstate Commerce Commission—wasn’t created until 1887.) Low taxes and minimal regulation paved the way for entrepreneurs to create, investors to invest, and consumers to reap the resulting benefits. America’s economic growth in the nineteenth century owed a great deal to this freedom.
One particular unregulated feature of the economy was immigration. Substantial immigration, especially during the last few decades of the 1800s, infused the American economy with productive human power and creativity. This immigration also expanded the size of the market able to be served by domestic firms, permitting these firms to take advantage of economies of scale that would otherwise have been unavailable to them because of restrictions on trade with foreign markets.
In addition to the immigrant-fed growth of the U.S. population in the nineteenth century, there was the growth of U.S. geography. By the end of the nineteenth century, the United States stretched from the Atlantic to the Pacific, and from Canada to Mexico and the Gulf. This enormous geographic area was a free-trade zone. Consumers and producers in frigid New England could specialize and trade with producers and consumers in sunny Florida and even faraway California.The different geographic features that are among the reasons why trade among different small countries is so beneficial were present within this one sprawling and geographically diverse country.
Of course, the fact that America’s economy grew impressively during the 1800s despite Uncle Sam’s restrictions on foreign trade does not mean that these restrictions weren’t harmful. The restrictions stopped specialization from going ever further; they diminished the intensity of competition from the levels that consumers would have enjoyed without high tariffs; and they hampered the ability of American producers and consumers to tap into the creativity of non-Americans who did not immigrate to America.
Fortunately, though—or is it unfortunately?—nineteenth-century America’s other advantages were so great that the bounty they made possible blinds many people to the harm caused by that era’s high tariffs.
Moreover, the structural economic problems inherited at independence were exacerbated by the costs associated with the partition of British India, which had resulted in about 2 to 4 million refugees fleeing past each other across the new borders between India and Pakistan. The settlement of refugees was a considerable financial strain. Partition also divided India into complementary economic zones. Under the British, jute and cotton were grown in the eastern part of Bengal, the area that became East Pakistan (after 1971, Bangladesh), but processing took place mostly in the western part of Bengal, which became the Indian state of West Bengal in 1947. As a result, after independence India had to employ land previously used for food production to cultivate cotton and jute for its mills. Toward the end of Nehru's term as prime minister, India would continue to face serious food shortages despite hoped for progress and increases in agricultural production. There was mass starvation in states like Bihar due to socialist controls on the economy.
( by San José State University Department of Economics)
Before the last decade, the 1990's, India was probably on the short list of almost every economist outside of India of the countries with the worst economic systems. India had and probably still has a parasitical class of politicians and bureaucrats that micromanage the economy in the interests of their class. They hypocritically aver that they are doing what they are doing in the interest of the people of India. There has been some official allegiance to socialism with a goal of achieving it through Stalinist central planning. The fact that the result has been some horrible mixture of state capitalism and moribund corporatism is usually attributed to incompetence and ineptitude on the part of the bureaucracy. The Indian American economist Jagdish Baghwati of Columbia University remarked that he agreed with the view that "India's misfortune was to have brilliant economists: an affliction that the Far Eastern super-performers were spared." The policies implemented by the Government of India before the last decade were brilliant only in maintaining the power and influence of the bureaucrats. Judged with respect to an promoting the welfare of the Indian people those policies were ridiculously bad, to the point of stupidity.
The bureaucracy has been rather competent in generating excuses for the failure of their policies. One of those exceuses has been that there is a Hindu rate of growth that is significantly lower than the rate of growth that other countries could achieve. What the bureacrats dare not say is that in maintaining a pool of economic rents the bureaucrats' policies were an outstanding success.
The disappointing economic progress in India up to 1990 cannot be attributed to any shortcoming in talent among the Indian people or the impediments resulting from Indian cultures. Indians out from under the oppression of the bureaucracy of the Indian Government have succeeded spectacularly in professions and business.
Probably the misguidance of India development can be attributed to India's first prime minister, Jawarharlal Nehru. Nehru chose the goal of economic self-sufficiency with economic development to be achieved by central planning modeled on that of the Soviet Union. By cutting off imports India gave a protected market to domestic producers. India got domestic production but it was production of low quality, obsolete products. The policies stifled economic growth and India, with its high level of population and poverty, could ill afford low rates of economic growth.
The two makes of automobiles produced in India, copied from models of the British Austin and Hillman of the 1950's, remained unchanged for more than forty years.
The planning and adminstration of the economic did not emerge full blown. The first five year plan (1951-55) called for the planned development of only a few industries, the ones that private industry had not developed for one reason or another. In the first five year plan the other industries were left to the market.
The second five year plan (1956-1961), the product of P.C. Mahalanobis' work, was more inteventionist. It tried to implement the elements of British socialism and combine them with the tenets of Mahatma Gandhi. It sought to eliminate the importation of consumer goods, particularly luxuries, by means of high tariffs and low quotas or banning some items altogether. The large enterprises in seventeen industries were nationalized. License were required for starting new companies, for producing new products or expanding production capacities. This is when India got its License Raj, the bureaucratic control over the economy. Not only did the Indian Government require businesses get bureaucratic approval for expanding productive capacity, busineeses had to have bureaucratic approval for laying off workers and for shutting down. When a business was losing money the Government would prevent them from shutting down and to keep the business going would provide assistance and subsidies. When a business was hopeless an owner might take away, illegally, all the equipment that could be moved and disappear themselves. In such cases the Government would try to keep the business functioning by means of subsidies to the employees. One can imagine how chaotic and unproductive a business would be under such conditions. Government planning also involved requiring businesses to produce in particular areas, usually economically backward areas. It also might require the production of certain goods such as cheap cloth for the poor.
The Indian Economic Plans had to be financed and this often meant taking resources away from agriculture and giving them to pet industries that were not viable on there own. Ultimately this meant starving agriculture to feed inefficient industries the Government favored. Such a program was not likely to alleviate poverty and so in 1971, under Nehru's daughter, Indira Gandhi, the Government tried to eliminate poverty by promoting small, labor intensive enterprises.
The net effect of the Government programs was to take away resources from agriculture in the countryside to give it to favored businesses in the cities. When the effects on agriculture and the countryside became significant the plan added programs to help the countryside (labor intensive small businesses) and programs to aid agriculture such as a fertilizer subsidy. These programs to help agriculture and the countryside generally came from resources which the Government took away from agriculture and the countryside. The fertilizer subsidy may have been of greater benefit to the wealthier farmers than to the poorer farmers.
India's output did grow but not as much as did that of other countries in the region. The Government of India generally takes credit for growth, but when India's performance is compared to that of other countries one sees that the Government's contribution to growth was negative.
One of the most wonderful things to happen to the world was the genetic development of high-yielding grain varieties, the Green Revolution. This development probably put an end to famine from natural causes. Between 1970 and 1989 agricultural production in India did grow but the rate of increase was only 2.1 percent per year whereas over the same per period the annual rates of growth of farm output in Indonesia, Malaysia, the Philippines and Thailand were 3.7%, 4.7%, 3.6% and 4.5%, respectively. Again the cost of the License Raj to growth in India was about half the rate of growth. The cost of the License Raj more importantly is in the slower pace of alleviating poverty.
The success pattern of development in Taiwan and other nations of Asia has involved cultivating export industries. In the case of Taiwan the first export industries were associated with agriculture, such as processing sugar cane into sugar. Later light manufacturing emerged as economically viable. Generally the labor force for manufacturing came from the surplus labor force in agriculture, often this was young women from the countryside who moved to the cities to work in the factories. Economically this was a transfer of labor from agriculture where labor productivity was to low to higher productivity occupations in manufacturing.
The products that could be successfully produced by the emerging manufacturing sector in Asian countries was often not technologically sophisticated or prestigous. For example, one of the early successful export products of South Korea was wigs made from human hair. But the successes in the low tech products led to successes in more tehnically sophisticated products. One thing that emerged out of the experiences of Japan, South Korea, Taiwan, Hong Kong and Singapore is that it is difficult to develop successful export industries without also importing products. In contrast, India virtually shut off imports with high tariffs, low quotas and outright banning.
In addition to rules concerning the imported goods there are rules based upon the nature of the importer. Imports are to be brought in only by the actual user where is subject to bureaucratic definition. The Economist cites the case in which vehicle tires cannot be imported by bus or trucking companies because only vehicle manufacturers are deemedactual users. Some products whose importation is scheduled for reduction can only be imported by certain government agencies called canalizing agencies. In 1988 40 percent of India's imports were of this canalized variety. Another 12 percent were in the category of restricted, 32 percent were limited permissible and only 16 percent fell into the category of Open General License.
Completely separate from the matter of the regulations on imports is the matter of tariffs. That is to say, even if the importation of a product is approved the tariff might be prohibitive. India in 1985 had the highest level of tariffs in the world.
The end result is that India in 1988 had the lowest ratio of imports to GDP of any country in the Asia and consequently also had a comparably low ratio of exports to GDP. It is not impossible to expand exports without having a corresponding expansion in imports but it is as a practical matter difficult to do so. India's government, however, decided in the late 1980's to try to promote exports without loosening its restrictions on imports. The system is a typical Indian bureaucratic monstrosity. Exporters in India are given Import Replenishment Licenses which can be used to buy imports. Profits on exports were made exempt from the corporate profit tax. Because the loopholes created for export industries could be used to avoid the taxes and restrictions on other parts of the economy there are numerous rules and regulation to prevent the specieal rules for exporters from being abused.
The notable differences between the high protection and low protection industries is that the average wage rate is almost 70 percent (69%) higher under high protection. One consequence of the higher wage rates is greater capital intensity in the high protection industries and that did occur. The capital/labor ratio in the high protection industries is 5.2 times that in the low protection industries. As a result the high tech industries, which produce 39 percent of the value-added only employ 18.5 percent of the labor force. The protection system promoted the substitution capital for labor in a country which has an abundant surplus of labor.
The Government nationalized heavy industry (the commanding heights of the economy) and built new state-owned enterprises, SOE's. The evidence that SOE's were inefficient was abundantly clear before the bureaucracy created their new ones. These SOE's are generally more costly to build than privately built plants. In the case of steel plants the SOE's cost 30 to 40 percent more.
Sometimes the management problems of SOE's are the fault of the operating managers but often supervising authorities impose unreasonable policies on the SOE's. For example, the Government authorities require electrical generating plants supply power to farmers at a price of zero and to households at a price insufficient for the coverage of costs. The operating deficit for the electrical utilities has to covered by a government subsidy, which is funded by a tax on economically viable enterprises.
India which has woefully inadequate production for its population set up a system in which any action to expand production, beit opening a new plant, moving existing operations to a new location or even expanding production in an old plant, required a license. In the early 1980's the License Raj rejected 50 to 60 percent of the application, most commonly on the basis that there was adequate existing capacity. What this really means is the existing producers did not want to face additional competition and give up their monopolistic control of their markets. The existing producers also discovered the strategy of applying for such licenses to thwart potential competitors from getting licenses. So of the 40 to 50 percent of the license applications that were approved some portion represented spurious application so, in effect, the rejection rate of legitimate applications was higher than 50 to 60 percent. There was a tendency for the License Raj to restrict successful firms from growing. Perhaps this is out of fear that small firms will grow to be large firms. There is a definite ideological opposition to large firms within the Indian planning establishment.
Large firms in certain industries, called core industries, have to abide by the Monopolies and Restrictive Trade Practices Act, (MRTP). Despite the name the effect of the MRTP tends to restrict competition and protect the monopoly of the firms which are already in an industry. The worst monopolies are state monopolies and the MRTP does not apply to them and nothing restricts their practices.
The Government of India has a policy of reserving certain products for "small" companies. In the late 1970's there were 800 products reserved for such companies. A small company was defined as one having plant and equipment of value less than a specified figure. Although such companies were small compared to the giants of industries the amount of wealth involved in the ownership of such companies was large compared to the average wealth of the general population of India. The Lincense Raj provided protection for a class of quite well-to-do Indians, a class ideally suited to dealing with and sharing rents with the members of the License Raj.
The Economist characterized the overall system as follows:
In combination with the industrial-licensing regime [the small company policy] has given India the worst of both worlds: too many small and inefficient companies at the bottom, too many large and monopolistic ones at the top.
The Government of India also has a policy of encouraging firms to locate in economically backward areas. These areas with high unemployed and underemployed labor are not lower cost sites for businesses because the union rules on wages prohibit these areas from competing with the prosperous areas on the basis of labor costs. Thus in these backward areas the wage costs are the same and the transportation costs are higher.
On top of all the other detrimental eeconmic policies India has price controls for many goods. Generally the control prices are set by a formula of cost plus a markup. The cost plus formulation means that firms in the affected industries not only have no incentive to keep costs down they have an incentive to increase costs.
Firms cannot in the matter of labor costs reduce their costs by laying off workers. To do so requires government permission and financial hardship of the firm is not a proper justification. As would be expected, India with this multitude of wrong-headed economic policies has a problem of failed firms. When a firm becomes bankrupt it cannot without permission legally go out of business. The Government tries to keep such failed firms running, sometimes giving subsidies and requiring the state bank to grant loans. The owners of such failed firms may illegally take those assets of the firm which are movable and disappear. But even the disappearance of a company owner may not result in the shutdown of the firm. The Government tries to keep such zombie firms operating under the management of the employees.
Since the net effect of Indian Government policies are negative and upwards of two thirds of the economy is in agriculture the policies are a terrible tax on the poor. Rather than abandon the policies the government and bureaucracy added another layer of policies to try to ameliorate the impact of the other policies. The Government created irrigation projects and fertilizer subsidies for agriculture. In addition there is a roadbuilding program for the rural areas. The bureaucracy also created a system of transfer payments for the rural poor which in its typically obfuscating fashinon called rural development.
In the support of the Indian Government for education the class interest of the government and bureaucracy can be clearly seen. The level of education which is most generously supported is higher education rather than elementary education. But it is generally the children of the well-to-do who attend colleges and universities. Thus the support of higher education is, in effect, a subsidy for the well-to-do families. It is a transfer of income from the poor to the middle and upper classes, the classes which dominate the governement and bureaucracy.
Since 1950, India ran into trade deficits that increased in magnitude in the 1960s. The Government of India had a budget deficit problem and therefore could not borrow money from abroad or from the private sector, which itself had a negative savings rate. As a result, the government issued bonds to the RBI, which increased the money supply, leading to inflation. In 1966, foreign aid, which was hitherto a key factor in preventing devaluation of the rupee was finally cut off and India was told it had to liberalise its restrictions on trade before foreign aid would again materialise. The response was the politically unpopular step of devaluation accompanied by liberalisation. The Indo-Pakistani War of 1965 led the US and other countries friendly towards Pakistan to withdraw foreign aid to India, which further necessitated devaluation. Defence spending in 1965/1966 was 24.06% of total expenditure, the highest in the period from 1965 to 1989. This, accompanied by the drought of 1965/1966, led to a severe devaluation of the rupee.
From 1984, tax reforms had cut the income and corporate tax rates which resulted in lower tax rates, tax evasion was reduced and the lower tax rates brought in 40 percent more revenue. The restrictions on the economy was reduced and the definitions that limitated by "small company" policy were modified. Some industries were removed from coverage by the MRTP Act. Broadbanding meant that a license for version of a product would serve to allow production of a closely related version of the same product rather than requiring a new license for the new version.
These reforms were considered outside of India as mild and timid adjustments but to the License Raj they were a threat to their hegemony and considered audaciously radical. Mild and timid though they were they brought results.
The biggest program is irrigation. The program is beneficial but the management of the irrigation programs is rife with corruption. Successful candidates for administrative positions in the irrigation programs spend many times the amount of the salaries they receive to get these positions. This make sense only because of the opportunities to obtain bribes. Yet the irrigation systems often operate at a loss because the charges are too low. The picture that emerges is inefficient, subsidized operations in which users can be assured of getting the product only if they bribe the administrators.
Many areas need more roads or better roads. Under self-sufficiency communication and transportation to other regions is not essential. But self-sufficiency usually means a primitive, Dark Ages life. Economic improvement requires trade and specialization and this means roads.
The Government maintains a fertilizer subsidy for the rural areas but this is again another program where the result is far different from the purpose. The purpose was to aid the poor but the allocation of the subsidized fertilizer is subject to the discretion of administrators. This presents opportunities to divert the fertilizer into unintended uses, such as to the farms of more well-to-do.
A similar program is the one to sell food to the rural poor at subsidized prices. Again this can lead to theft or diversion and hence the benefit accrues to people other than the poor.
The Economist notes that the spending of India for education is misdirected. More emphasis is placed on secondary and higher educaion than on primary (elementary) education. Thus India is subsidizing the wealthier families who are more able to finance their own educational need. This seems a case of the bureaucratic class taking care of their own interests.
Economic liberalization of 1991 followed by Information Technology industry explosion have taken India to a new growth scenario. Backed by strong fundamentals and commendable growth in the past three to four years, the resplendent Indian Economy is poised to grow even further at an average of 8 to 10% in the next 3 years. Transport requirement in the country, being primarily a derived demand, is slated to increase with elasticity of 1.25 with GDP growth by 10 to 12% in the medium and long term range. Over the last 2 to 3 years, the railway freight traffic has grown by 8 to 11%, which is projected to cross 1100 million tonnes by the end of 11th Five Year Plan.
The Indian Railways’ quadrilateral linking the four metropolitan cities of Delhi, Mumbai, Chennai and Kolkata, commonly known as the Golden Quadrilateral; and its two diagonals (Delhi-Chennai and Mumbai-Howrah), adding up to a total route length of 10,122 km carries more than 55% of revenue earning freight traffic of Indian Railways. The existing trunk routes of Howrah-Delhi on the Eastern Corridor and Mumbai-Delhi on the Western Corridor are highly saturated, line capacity utilization varying between 115% to 150%. The surging power needs requiring heavy coal movement, booming infrastructure construction and growing international trade has led to the conception of the Dedicated Freight Corridors along the Eastern and Western Routes.
(by N. Bhupendro Singh & by Wasbir Hussain & by Gulshan Sachdeva)
The most pertinent question arises in the recent years is; has the benefits of globalization disbursed to all the regions of the Indian union? To what extent the high growth rate achieved so far has been translated into development for the well-being of its people?
In the absence of major industrial establishment and other employment opportunities in the North Eastern India region, the unemployment rate, particularly urban educated youths, is not only high but also increasing rapidly. According to the Current Daily Status (CDS), unemployment level in the urban area is highest in Tripura followed by Assam which is also higher than the national level. It is this section of the society which becomes easy prey to the negative elements like insurgency and drug abusing. North East India has many HIV/AIDS patients due to drug abuse with Manipur having the highest numbers.
Historically, successive legal and administrative decisions taken between 1874 and 1935 gave the areas of the Northeast their distinct identity. The British administration initially treated the hill areas as 'Non-Regulated Areas', then declared them a 'Backward Tract' and, eventually categorised them as 'Excluded Areas' and 'Partially Excluded Areas'. Barring Assam, railways are almost non-existent in other parts of the region.
The North East India comprises of eight contiguous states of highly undulating hilly terrains, covering 263,179 sq km which is about 8% of the total geographical area of the country. The region is one of the landlocked regions of South Asia. About 4500 km i.e. 98% of its border is with five different countries of South Asia–Nepal, Bhutan, China, Myanmar and Bangladesh. No other region of the Indian union share common border with so many different countries connecting with the heartland through the tenuous 22 km Siliguri corridor. So it is of great strategic value; being located in close proximity to their foreign neighbors. The region lacks good air connectivity due to high costs. However, the economic potential and strategic importance of the Northeast is high, which we must persevere even if it does not make economic sense in the short term. With Myanmar becoming a member of the Association of South East Asian Nations (ASEAN), a common market of 500 million consumers is at the doorstep of the Northeast.
Tripura (16.03%) and Assam (18.92%), two of the most populated states, have recorded lower growth rate than all India level. While Assam’s growth rate is lower in the post globalization but grows at an accelerating rate which is a positive sign. Assam, and to some extent Meghalaya, are the states ahead in industrial development but their industrialization is centered on tea, oil and timber.
The per capita income growth rates of all the states, baring Tripura, falls below the national level in the corresponding period. While Arunachal Pradesh, Assam and Nagaland have worsened, the performance of Manipur, Meghalaya and Tripura seem to be relatively better than the previous decade.
The benefits of higher growth rate experienced, though marginally, in the post reform period have not been tickled down to the poorer sections of the society in the desired pace and the problem of income inequality within the state has worsened. Only Mizoram seems to have done exceptionally well in poverty eradication where the percentage has declined from 36 per cent in 1983 to 19.47 per cent in 1999-2000.
The large number of checkposts on National Highways 39 and 53 would create a problem in switching over from illegal to legal trade. Traders claim that the expenditure on transportation from Moreh to Dimapur is about Rs 50,000 per truck, which includes hire charges, payments to various underground groups, and money paid to almost every police and forest checkpost. Similarly, transport expenditure from Imphal to Guwahati is more than Rs 35,000 per truck. The main reason is that the commodities that are coming from the border are not legal. The list of items agreed by the governments of India and Myanmar is not of much use to traders. However, even if the products were legal, the usual 'tax' would still need to be paid at every checkpoint.
The National Highway 39 that runs from Numaligarh in Assam through Nagaland into Manipur and ends at Moreh on the Indo-Myanmar border- remains closed for nearly one-third of the year, either due to strikes and law and order problems or due to landslide and other natural calamities—can open up big business avenues. The NH-39 appears more like a primitive pot-holed road than one maintained by the state Public Works Department.39 Also road connectivity to towns and villages get completely cut off at times during the monsoon months of April-August due to rains and landslides. The railways also face hazardous conditions and it has become a routine affair for railway bridges in the North East to collapse during the rains (some of these bridges date back to the colonial period). The road to Moreh and Champai, significant border towns for potentially huge border trade in the future, are in worse conditions.
To prevent land alienation from tribals, Tribal belts and blocks have been constituted in the plains areas. The regulation of the Inner Line Permit System prohibits entry of outsiders into Arunachal Pradesh, Mizoram and Nagaland without a permit, and debars a non-native from acquiring any interest in land or the produce of land. All the “constituent states of the region are internally locked–themselves locked and locking out others, unable to connect with each other physically in terms of poor transport links, and more seriously, unable to make connections intellectually and emotionally with their closest neighbours, or even with and among their own people.” It has displaced the common understanding and linkages for peaceful coexistence and regional cooperation.
In most cases, the State governments turn a blind eye to the border trade in illegal items because it creates a lot of economic activity in the region. But, since these commodities are not officially declared legal, there is corruption at every turn. It would be a good idea to declare certain areas in the region as Free Trade Areas officially since, for all practical purposes, they are free trade areas anyway.
North East: Many Strengths
- Rich in natural gas
- Rich in mineral and water resources
- Fertile Soils
- Non-extreme climatic conditions
- Cash crops such as tea
- Tremendous potential for the expansion of horticulture and plantation crops
- Great potential for tourism. There is a link between Hospitality industry and IT industry. The cities in the region however do not have good hotels and other quality tourist and recreation facilities. NER has about 50,000 Internet connections “which is woefully inadequate”. The bandwidth connectivity is poor in the region.
- Mountainous terrain can be used to generate hydel power. The S.P. Shukla Commission, which was set up mainly to look into infrastructural gaps in the region, averred that infrastructural requirements for the region are in the tune of Rs 936 billion. The Commission estimated the requirements for the Ninth Plan period at about Rs 180 billion. However, of the total estimates, more than Rs 600 billion are for the power sector alone. This is the critical sector. All the States in the region except Meghalaya face a shortage of power. Ironically, the north east region has a huge reserve hydro-electric potential — estimated to be between 30,000 and 40,0000 MW. Arunachal Pradesh claims that it alone has a potential of about 30,000 MW, of which only 25 MW has been harnessed so far.
- Apart from Arunachal Pradesh, Assam and Meghalaya the literacy rate in the remaining states are higher than the national average. Only Arunachal Pradesh is below the national level for female literacy.
Bangladesh can provide easier connectivity for North East India to the rest of India and through Chittagong Port to the rest of the world. What it requires are customs stations for detailed inspection by customs officials at port of entry and exit. Viable provision of connectivity would require modernisation of customs station on both sides.
"The inadequate transport and transit system in the northeastern region and between India and its neighbours has led to high transaction costs," says D.D. Ingty, the commissioner of customs (preventive). "The transport costs of export and import items in this region and Bangladesh are far higher than in other parts of the world. Thus a large part of the trade is taking place informally in order to curb costs" "Further, lack of infrastructure in the Land Customs Stations (LCS), the customs administration, aggravates the smooth transaction of formal trade."
According to the official, many of the LCSs in the northeast do not have basic amenities like potable water, electricity and staff quarters. The border areas are underdeveloped and often difficult to access.
"Road connectivity in this region continues to be skimpy due to missing links and poor road conditions, most of which are still fair-weather roads. Condition of roads leading to international borders from production centres is a major hurdle to international trade. Roads need to be straightened and broadened so that maximum transportation can be done in a minimum time. These roads can be constructed under a pay for itself scheme by collecting toll-tax from users." The 103-km-long Shilong-Guwahati road can be reduced to 60 km" Calculating an average traffic of 10,000 transport vehicles (both ways) every day, Rs.500 per vehicle will generate Rs.1.83 billion per year, not to speak of fuel savings in the bargain," "Since Bangladesh and India are signatories to the South Asian Free Trade Area (SAFTA) accord, Bangladesh must extend transit facility to goods from the northeast to our mainland and vice versa through land."
Today Bangladesh is trading with Nepal through India under the Transportation of Goods (Through Foreign Territory) Regulation Act of India, 1965. Bangladesh has allowed transit facility to India through their river routes under the Protocol on Inland Water Transit and Trade.
"The declared bus routes of Agartala-Dhaka and Dhaka-Kolkata already in use can be used for trade transportation."
Ingty says Inter-zonal rail connectivity also remains insufficient and this mode of transportation is yet to reach any of the LCSs of the northeast. Under the Asian land transport infrastructure development project, two routes were suggested for development - Mughal Sarai-Lumding-Silcher as a route of sub-regional significance and Attari-Mahishashan-Badarpur-Jiriban-Tamu as a route of international significance, connecting Bangladesh, India and Myanmar. "It would be necessary that these routes are developed on a priority basis to make our industries and trade flourish. Similar restoration of rail links among other ASEAN countries should be accorded top priority," "The development of road corridors and rail links will not only compliment sea trade but will also provide a shorter, faster and perhaps cheaper alternative to the sea route."
He said the Brahmaputra having been declared a national waterway by the central government, the river can be developed as a major inland water trade and transport route, carrying people and goods from both Bangladesh and India. "This can give access to the seaport in Chittagong (Bangladesh), Kolkata and Haldia in West Bengal."
In recent years there has been a growing realization within the Indian establishment that improvement of infrastructure along the border areas, particularly roads, is of utmost importance. This realization has sunk in after China has transformed the far-flung Tibet Autonomous Region into a well connected area, complete with a rail link through one of the world’s most difficult terrains. The Look East Policy of India, framed by the Narasimha Rao government in the early nineties, is a substantial manifestation of India’s focused foreign policy orientation towards South East Asia; an immensely resourceful and flourishing region. New Delhi has taken some initiatives for improving connectivity but the absence of three critical components preventing India’s integration with ASEAN are: first, standardization of railway network, second, all-weather paved roads and third. uninterrupted power. Projects such as the East –West corridor (from Northeast to Gujrat) might help improve the economic plight and connectivity of the Northeast.
"The important ongoing and potential infrastructure projects in this regard are Moreh-Tamu-Kalewa Road, India-Myanmar-Thailand Trilateral Highway, Trans Asian Highway, India-Myanmar rail linkages, Kaladan Multimodal project, the Stilwell road, Myanmar-India- Bangladesh gas or oil pipeline, Tamanthi Hydroelectricity project and optical fiber network between North East India and South East Asia.
Indian government has taken several initiatives. Work on the Tipaimukh and Loktak Downstream Hydro Electric Projects, costing about Rs.6,000 crores and Rs. 800 crores respectively, has been expedited. The 726 MW Palatana Gas based Power Plant, with an outlay of Rs.3,000 crores, a 750 MW Thermal Power Plant at Bongaigaon with an outlay of Rs. 4375 crores, and the Assam Gas Cracker Project have all broken ground. The Kumarghat-Agartala railway line has been approved as a National project, with an outlay of Rs. 750 crores. The Jiribam–Tupu-Imphal railway line, which will put the Manipur valley on the rail map of India, has also been sanctioned as a National project for Rs. 727 crores.
The centre has decided to link all State Capitals with railway lines. These projects have been given the status of National Projects with a special funding pattern. But certain obstacles like lack of infrastructural development, absence of enthusiastic response from local people, frequent insurgencies, poor governance in the states, the easy availability of arms and weapons from across the international border to be utilized in armed movements and criminal activities impede increased relations between North-East India and South East Asia. Moreover, the geographic location of the North-Eastern region makes it more vulnerable to be the core of hostility with massive negative outcomes."
Special Accelerated Road Development Programme for the North East (SARDP-NE) and an amount of Rs. 31,000 crore is being invested on roads in the 11th Five Year Plan. There are relaxed guidelines for rural roads under the Pradhan Mantri Gram Sadak Yojana (PMGSY) so that even the farthest hamlets on the border are linked by road.
But India is wary of the dependencies of the Northeast region given the relatively industrialised south-western regions of China. In this situation, India had proposed direct links with Southeast Asia (through Myanmar) or through the maritime dimensions rather than linking up with China. On the other hand, China had been lukewarm to the Indian proposals for pan-Asian FTA as this might enhance Japan, Singapore and other countries leverages.
Besides economics, there is also a human element. For instance, often it is the Northeast people themselves that oppose, the construction of a railway line out of fears such as Malabari businessmen coming to destroy their livelihoods.
It has to be understood that the Northeastern region is a labour scarce economy rather than a labour surplus economy. This is perhaps one of the main reasons for the failure of the various labour intensive government schemes in the areas of animal husbandry, fisheries, the Jawahar Rozgar Yojana, etc. Despite all the talk of outsider invasion, labour (both skilled and unskilled) is a big problem in the region with the possible exception of the Brahmaputra Valley and Tripura. Already outside labour (mainly from Bangladesh, Myanmar and other parts of India) is a crucial factor in both agricultural as well as non-agricultural activities of the region.
Discussions with local entrepreneurs revealed that, with an increase in economic activities, the problem of labour shortage is expected to be aggravated. Unless the region is opened up for outside labour, economic development is going to suffer. Labour, however, is a highly sensitive issue; the States are afraid of a repeat of what happened in Tripura, where tribals have become a minority.
Negative Political propaganda and narrow–mindedness also has a role to play. Policy makers of the region are aware of the problem but do not accept it officially for obvious reasons. Unofficially, however, some States have already started an exercise to deal with the problem and are considering a control mechanism to allay tribal apprehensions of an influx of outsiders.
Unfettered freedoms to companies can in fact have the consequence of exploiting the local population. In the long run, however, manufacturing matters. You cannot be an economic hub without it. Businesses are interested in making money, not doing charity. More businesses contribute towards making a region attractive. The spillover effect can happen only after the businesses are a success. Inefficient economic processes and barriers to market entry make a critical economic difference and will define the distinctions between success and failure.
(by Namrata Goswami)
The “Look East” policy also threatens the lives of small traders in Moreh town as the Asian Highway bypasses Moreh town. There are also 58 checkpoints between Moreh and Imphal hampering border trade. The vision statements were written for the “Look East” policy without even conducting a field survey in Moreh. When policy makers and crafters of the North East Vision talk about great industrial exchange between NER and Myanmar further towards South East Asia, these appears absurd as there is no industry in Myanmar.
Local business persons involved in procuring smuggled South East Asian goods from Moreh (Manipur), Champhai (Mizoram) and Namphalang (Myanmar) to the North East expressed doubt at the idea that with a legal “Look East” trade, the money they had to pay to insurgencies and local policemen will be monitored. They indicated that they had to pay large illegal levies to insurgents under the very
nose of legitimate state administrations at present; so how does legalizing the trade help?
Recently, precious stones from Myanmar like ruby and sapphire have been seized from Champhai, Mizoram en route to markets across India. The stones mines are mostly located in Sagying division, Myitkyina and Mogok in Myanmar. Interestingly, the KIA is in control of the Myitkyina mines.
For the change of the barter system between India and Mynamar, and improve the balance of trade, which is perhaps difficult as there is no stable foreign exchange mechanism in Myanmar. Even with regard to border trade, the Indo-Myanmar trade agreement of 1994 does not provide for trade in agricultural goods, and hence it does not account for the needs of the North East, which is heavily dependent on agriculture. Further, there are too many administrative restrictions in trade with no motorized vehicles allowed for border trade, which is restricted to barter trade under the Reserve Bank of India barter mechanisms and subjected to strict customary documentation. Hence, trade can only be conducted by the border residents.
The transfer and devolution of resources from the Centre to the States is essentially via three channels. First, there are statutory transfers (comprising tax sharing and grants-in-aid) through Finance Commission recommendations. Second, there are Plan grants through the Planning Commission guidelines. The Planning Commission fixes the assistance to States to carry out their Plans, while the Finance Commission determines the assistance required for current account budgetary support. There are also 'discretionary' grants through central ministries, primarily for centrally sponsored schemes. There are also some indirect channels, such as loans from the central government and allocation of credit by financial institutions controlled by the central government.
Between 1990-91 to 1998-99, Assam received about Rs. 250 billion from the Centre. Both Arunachal and Manipur received about Rs 55 billion each. Meghalaya received about Rs. 50 billion, and Tripura's share exceeded Rs. 70 billion. Similarly, figures for the same period for Nagaland and Mizoram are about Rs. 66 billion and 48 billion respectively. The total figure for the region for these nine years is about Rs 600 billion. Orissa, which has almost the same population as the Northeast and is economically even more backward, received only about Rs. 250 billion from the Centre for the same period.
These are gross figures. A portion of that money is also returned to the Central government as repayment on loans and interest payments. Thus the cumulative net devolution from the Centre to the Northeast for the period between 1990-91 and 1998-99 is actually about Rs. 510 billion.
"M.G.Kiran, IT Secretary of Sikkim also said in an interview that it would be “a good idea to have a corpus fund for the development of IT in the North-East. A fraction of the Non Lapsable Pool of Central Resources (NLPCR) should be kept aside for fuelling the growth of IT industry in the region which would lead to the strengthening the economy, creation of employment opportunities and income generation in the private sector.”