Situated between the Himalayas and the Bay of Bengal, Northeast region of India (NER possesses a distinct geography and environment that may not be suitable for large-scale industries. However, this presents an opportunity for the development of Micro, Small and Medium Enterprises (MSMEs) in the region.  

The region is known for its rich biodiversity and heritage of indigenous crafts. Organic farming, horticulture, weaving, bamboo and woodwork and handicrafts are potential areas for MSMEs to leverage local resources and skills. MSMEs of the NER – over 18 lakhs – represents only about 3 per cent of India's total number of enterprises with Assam (12 lakhs) having the highest number of micro-enterprises followed by Tripura (2 lakh), Manipur (1.8 lakh) and Meghalaya (1 lakh).  

The MSME sector is a significant contributor to the NER's economy by generating employment opportunities with over 29 lakh jobs in NER and providing livelihoods to a large number of people. Recognizing this, the central and state governments have taken various steps such as the setting up of North-East Industrial Development Scheme (NEIDS); Udayam registration portal (revamping Udyog Aadhaar); modernizing existing technology parks, industrial estates; incubation centres and MSME technology centres and skill development centres.  

The Union Budget 2023-24 has allocated Rs. 5892.00 crores to the Ministry of Development of North East Region (MDoNER) to facilitate better planning, execution and monitoring of development schemes and projects in the Northeastern states. The funds will support various initiatives and programs aimed at promoting socio-economic growth and infrastructure development in the region. This will further enable the growth of MSMEs in the region. 

In recent years, India's Northeast region has witnessed significant improvement in physical connectivity within the region and the rest of the country. Several highway projects, railway connectivity initiatives and air connectivity projects have been successfully completed, enhancing transportation infrastructure in the region.  

Currently, the NER has a total of 16 airports and the National Waterways 2 and 16 have opened up opportunities for efficient water transportation and trade in the region. These developments have played a crucial role in promoting economic growth, tourism and overall connectivity within the NER, with the rest of the country and with the neighbouring countries. 

Japan: New Avenue for Northeast MSMEs 

The growth of MSMEs in the NER has contributed to the local economy and opened up avenues for regional and international trade. Japan has been working closely with the Northeastern states to promote the region’s overall development. Japan has launched a new initiative for the sustainable development of the NER in March 2022. 

One of the programmes under this initiative is the Initiative for Strengthening Bamboo Value Chain for the Northeast with the objectives of developing the region as a hub of innovation and design for bamboo-based products in collaboration with Japan. This collaboration can bring in technological advancements, investments and knowledge sharing may further boost the growth of MSMEs in the NER.  

As part of sustainable development initiatives, Japan is actively involved in food processing industries in the NER through SMEs, this includes tea industries, organic farming and horticulture. Recognizing the potential of NER's agricultural resources, Japan aims to enhance their value through value addition and processing. Japan also supports women entrepreneurs in the NER, contributing to women empowerment and socio-economic development in the region. Going forward, Japan may assist Northeastern people in setting up B2B businesses, building capacity, innovation and technology and sharing best practices in order to encourage and strengthen entrepreneurs of this region.   

During his visit to India earlier this year, Japanese Prime Minister Fumio Kishida introduced the "Bay of Bengal-Northeast India Industrial Value Chain Concept" to promote industrialization in the Northeast region and Bangladesh, thereby fostering the growth of the entire region. This initiative will also encourage the growth of MSMEs in the NER, creating a strong industrial value chain.  

India-Japan SME Business Council and India-Japan Startup-hub platforms may also serve as catalysts in fostering innovation, entrepreneurship and economic growth in the NER by facilitating collaboration between Indian and Japanese SMEs and startups. Such collaboration can contribute to the development of a vibrant ecosystem that opens new avenues for the people of the NER and promotes regional prosperity. 

Way forward: The Trilateral Cooperation 

The strategic location of the NER provides a unique opportunity to unlock its untapped potential with the assistance of Japan and collaborative efforts with neighboring countries.  Being the largest foreign development partner for both the NER and Bangladesh, Japan has been actively promoting connectivity and economic development in the region. Japan has undertaken several regional developmental initiatives and is working towards synergizing the development cooperation between the two countries.

Japan is developing a deep seaport in Matarbari, Bangladesh. If the Bangladesh government allows third-country trade for India via the Matarbari port, it will significantly reduce logistic costs and enhance industrialization in the landlocked Northeastern region. This, in turn, will promote the growth of MSMEs in the region to a great extent. 

Bangladesh, being located in close proximity to the Northeastern region, has the potential to create a cross-border value chain that can increase the region's export potential, job creation and contribute to its economic growth. India-Bangladesh connectivity projects, Japan's sustainable development program for the NER, Industrial Value Chain Concept and Big-B initiative can collectively play a catalyst role in providing an impetus in this direction.

Furthermore, India, Bangladesh and Japan can explore the possibility of establishing trilateral cooperation to boost the regional value chain with a specific focus on the NER. By collaborating and leveraging their respective strengths, resources and expertise, the three countries can create a comprehensive framework for enhancing the value chain in the NER. Such a collaboration would strengthen the micro, small and medium entrepreneurs of the region and also contribute to achieving economic sustainability in the long run.

Sreya Mitra Pan is Research Fellow at the Asian Confluence 

Disclaimer: The views expressed above and the information available are those of the author/s and can therefore in no way be taken to reflect the position of Asian Confluence