It seems that due to special constitutional arrangements, historical background as well as geographical location, the Central government has been trying to integrate the NER with the national economy through certain policy framework. It has accepted the right of tribals to retain their way of life and identity and has sought to integrate them through democratic means into the federal frame of the Constitution of India. The policy framework for the region so far is guided by a combination of political economy and culture. The main focus of the ‘political economy approach’ is on the relations between the state and the economy. In this approach, the role of the bureaucratic state arrangements is strongly emphasised. The ‘cultural approach’, however, focuses on the socially constructed character of economic organisation where the economic system is a product of the social order.

Through an attempted combined approach, the importance of the bureaucratic arrangements in the process of economic development has been unduly exaggerated. Besides, wherever possible, an attempt has been made by policy makers to work through the unique social and cultural institutions existing in the region instead of imposing new institutions. This ‘special approach’ has been adjusted with the Central government’s policies of a regional planning development model.

Under the influence of this policy, various schemes for the development of infrastructure and economy of the NER have been formulated. The schemes include the formation of the NEC, HADP and sub-plans (Tribal Area Sub-Plan and Tribal Development Agency Projects). In addition, these seven states have been declared as Special Category States; they get Central Assistance on the basis of 90 per cent grant and 10 per cent loan. Some public sector units have also been set up in the region. The policies of industrial licensing, concessional finance and investment subsidy, growth centres, as well as freight equalisation of some major industrial inputs have also been used towards economic development. Under the announcement made by the then Indian Prime Minister Deve Gowda in October 1996, all developmental ministries and departments of the Central government have been directed to earmark at least 10 per cent of their annual budget for the progammes in the Northeast. In case any Central government ministry fails to achieve this target, the unutilised 10 per cent portion is pooled in the non-lapsable central pool of resources, which will be re-utilised to finance developmental projects in the Northeast. Creation of a separate Department of Development of North Eastern Region (DONER) is another new initiative by the government. Further, to protect tribal interests, policies of less interference with the cultural traditions and customs of the tribal people are being followed and additional political and administrative framework has been provided for the region. Under the Sixth Schedule of the Constitution, the concept of Autonomous District Councils has also been applied.7

Restrictions have been imposed on the rights of citizens of other states as well as non-tribals from the same state to acquire landed property in some parts of the Northeast. The regulation of Inner Line Permit prohibits entry of outsiders into Arunachal Pradesh, Mizoram and Nagaland without a permit, and debars a non-native to acquire any interest in land or its produces. Tribal belts and blocks have been constituted in the plain areas to prevent land alienation from tribals there.

The regional average growth rates in the 1980s were slightly lower than the national economy (see Fig. 2). During this period, except for Assam, all other economies in the region grew at higher growth rates than the national economy. This growth was close to national economy even in the case of Assam. In the post-liberalisation phase during the nineties, while the national economy was growing fast after initial contraction, overall Northeastern economy has slowed down. As a result, the gap between national growth rates and regional growth rates has further widened. Assam, the largest economy of the region is in a very critical state, both in agriculture and industry. During the eighties, the average rate of growth in Assam was more than 4 per cent. In the nineties, it grew at a much lower rate. Except for Arunachal Pradesh and Tripura, economies of the other states have not shown much difference in terms of growth rates in the last twenty years or so. The economy of Tripura, in fact, had grown fast in the 1990s. As a result of these trends, it could be concluded that the gap between the Northeast and the national economy would be widened if certain corrective measures are not attempted in the years to come. The improved agricultural production and productivity in some pockets of the Northeast, however, indicate that there is still a large untapped potential in the agricultural sector

Similarly, long term trend in the per capita income growth also shows that the gap between the national and the state growth rates has also widened (Figs. 5 & 6). If this trend continues for another decade, the gap between different growth rates of Manipur and the national economy will widen further. This will have serious socio-political implications, particularly for a state like Manipur where there is already a serious sense of grievance at all levels of the society. In these circumstances, there is an urgent need to seriously rethink the develop-ment pattern followed in the Northeast and Manipur. This kind of development pattern will not be able to face the forces of liberalization and globalization, unless some serious radical policies are implemented. For that civil societies need to be engaged in serious debates about different alternatives and their implications.

Any discussion regarding the region starts with its tribal nature. It is almost unanimously accepted as a tribal region. Surprisingly, facts on the ground are totally different. According to 2001 census, only about one-fourth of the population of the region is tribal. It is always emphasised that in the four states—Mizoram, Meghalaya, Nagaland and Arunachal Pradesh—tribals are in majority. But tribal majority in these states does not make the whole region tribal. Moreover, in today’s Northeast, tribals are not ‘head hunters’; on the contrary, a large number of them are educated and have adopted western life style. It would be misleading to equate them with marginalised tribals in other parts of the country. The policy of protective discrimination for ‘scheduled tribes’ in the region raises serious questions of justice, and equality for the non-tribal population.8 As Sanjib Baruah argues, this kind of policy ‘effectively compromises the constitutional right to free movement of Indian citizens.’9 Moreover, rigid barriers—which aim at restricting outside penetration—are contrary to the processes of contemporary globalization.10 In these circumstances, it would be more productive and useful if we start treating the Northeastern economic problems in a normal way rather than in a ‘special tribal way’. The region is not a ‘tribal region’ and ‘special solutions’ have created more problems than solving it.

Secondly, the myth about ‘neglect’ of the region needs to be seriously examined. There is obviously some neglect of the Northeast in Delhi politics and national media. There could also be some knowledge deficit. But most vocal writings and speeches regarding ‘neglect theory’ often cite economic figures to show the neglect. There could be any other kind of neglect, but the facts about devolutions and transfers of resources from the Centre reveal an entirely different story. Between 1990–91 and 2002–03, the region received about Rs. 1,08,504 crores from the Centre. A portion of that money was also given back to the Central government as repayment on loans and interest payments. Still, the cumulative net devolution from the Centre to the Northeast for the period between 1990–91 and 2002–03 is about Rs. 92,000 crores. Only the grant portion to the region during these 13 years is about Rs 65,000 crores.11 So the lack of development could not be because of shortage of funds. In fact, as economist and Congress leader Jairam Ramesh has recently argued that this kind of public expenditure has become very much a part of the problem of the Northeast.12 In fact, a significant portion of development funding actually ends up in the hands of underground groups.

Thirdly, the importance of high literacy rates in the Northeast should not be over emphasised. Although the region has done well in education due to several socio-historical factors, but there lies underneath some serious problems—that of imbalance. Results of 2001 census indicate that despite some pockets of high literacy the combined literacy level in the region is 64.5 per cent, which is below the national average. Even in the neighbouring West Bengal, the literary rate is 69.22 per cent. Low literacy rates in Arunachal Pradesh, Assam and Meghalaya are responsible for this. According to 2001 census, 35 out of 72 districts of the region record literacy levels below national average. Even high literacy rates in other districts are accompanied by low educational levels due to high dropout and low standards. Active student politics and the culture of bandhs in the region have created havoc with the education system. There are enough teachers in the region but many of them are not trained. According to sixth NCERT survey only 45 per cent of the total school teachers in the region are trained. The corresponding figure for the national level was about 87 per cent. The situation was particularly bad in Assam and Nagaland where only about 30 per cent teachers at the secondary and higher secondary levels were trained. Latest figures from the Ministry of Human Resource Development also indicate that except Manipur, all the states in the region have high gross drop out rates at all stages. Even in a state like Mizoram, which has almost 90 per cent literacy, about 76 per cent students could not complete high school. (13)

Another factor is that major parts of the region face labour scarcity. This is perhaps one of the main reasons for the failure of various labour intensive government schemes like animal husbandry, Jawahar Rozgar Yozana, etc. Despite all the talk of outside invasion, labour (both skilled and unskilled) is a big problem with the possible exception of Brahmaputra valley and Tripura. Already outside labour (mainly from Bangladesh, Myanmar, Nepal and other parts of India) is a crucial factor in both agricultural as well as non-agricultural activities. With any increase in economic activities, the problem of labour shortage is expected to be aggravated. Unless the ‘inner line restricted areas’ are opened for outside labours, economic development is going to suffer. Or worse, it would be an open invitation to illegal Bangladeshi immigrants.

Another standard argument is its disadvantageous geographical situation. This has been argued in writings as one of the main stumbling block for its economic development. The region shares less than 1 per cent of its borders with the rest of the country, and the rest with Bhutan, Bangladesh, Myanmar and China. For the most part this international border has been artificially created. The result has been the elimination of the region’s trade, commerce and other linkages which existed in the pre-partition days. This locational disadvantage could be converted into a boon as these states are very close to the dynamic South-East and East Asian economies. It is imperative to develop coherent policy thinking in this area. The reason being that there is not only a failure of the economic policy framework in the region but also a weakness of the country’s foreign policy which had ignored Southeast Asia for a long time. So far the major border trade activity of the region with Bangladesh and Myanmar has been ‘unauthorised trade’. China is an important player in the border trade even though its trading activities are mainly through Myanmar. The major policy issue, therefore, would be to synchronise these realities into Indian trade policies. But first of all the region should start producing globally competitive products. Otherwise, the region would be a transit point of goods which may create further discontent.

In a liberalised economy, any new policy has to be based on some kind of market oriented approach. This framework should concentrate more on economic factors and less on political and cultural factors. The economic factors include labour cost, comparative advantages, technology, efficiency and returns on investment. In a market economy environment, the inefficient economic processes (jhum) and barriers to market entry (inner line regulations, restricted area permits, trading licensees, existing land tenure policies in hilly areas, etc.) will clearly make an economic difference.

Although market forces will play a greater role, the state institutions will have to be geared up for the new task. The stimulus to expansion at the national level is likely to run up against supply bottlenecks due to insufficient infrastructure, entrepreneurship, business supporting institutions as well as the insurgency. This is where the states would have to play a role, specifically the state governments. Therefore, there is an urgent need to reappraise the role of the Central as well as the state governments in developing the region with the right degree and intensity in the context of a decentralised liberal economy. The Central government will play the role of a facilitator rather than a promoter of development. The actual action regarding land policies, inner line regulations, law and order, and above all, changes in attitude towards investors (read outsiders) will have to begin at the state level.