Expediting the flow of FDI into Northeast India

Keywords: FDI Inflow, Northeast India, Awareness Campaigns, Comparative Advantages

Date:15 June 2023

The partition of the subcontinent in 1947 abruptly cut off the Assam province (present Northeast India) from its main trade routes and access to the Bay of Bengal, turning it into a landlocked area. The region was further isolated after the 1962 debacle with China and the 1965 war with Pakistan. 

In recent years, especially under the ‘Act East’ policy (AEP) introduced in 2014, New Delhi has been putting serious efforts into improving the road and rail infrastructure in the NER. Steps are underway to effectively utilise the opportunities arising from the global trend towards increased regionalism and geoeconomic competition to NER’s advantage.

Attracting foreign investments into the NER and building value chain links with Bangladesh and the Mekong subregion is one of the core objectives under AEP. Naturally, as a first step, rapid efforts to improve the connectivity infrastructure in the NER are underway. Similarly, efforts to revive traditional and new transport links with Bangladesh and Myanmar are in full swing. 

For instance, the long-awaited Agartala-Akhaura railway line, which would link India's northeast with Bangladesh, is expected to be finished by September 2023. It will be 15.6km in length. Similarly, Assam, Meghalaya and Tripura, three landlocked states, have been granted access to open maritime routes by the declaration of sixteen transit routes allowing cargo movement from Chattogram (Chittagong) and Mongla Ports in Bangladesh. More importantly, Tokyo has joined hands with New Delhi to help link NER with its neighbours.

However, it becomes essential to understand that ending physical barriers alone cannot guarantee the inflow of tourists, FDI and MNCs into the region, especially when the mental obstacles are even more substantial. For instance, despite having unique tourist attractions like the cleanest village in Asia, the only floating national park in the world and the world’s largest river island, out of 6.9 million foreign visitors to India in 2022, only around 0.1 million had NER’s locations in their itinerary. 

NER currently lacks export-oriented production capabilities and thus badly needs domestic and foreign investments. From October 2019 through March 2022, FDI inflows to the NER amounted to only about 0.0180% of the overall FDI inflow into India. A lack of interest from foreign investors is perplexing given the region’s abundant mineral resources.

Nagaland has come under the foreign investors’ radar for the first time since independence, although with just $.0.0139 million FDI. Whereas Mizoram, Manipur and Sikkim are yet to attract any FDI. The lack of awareness about the unique potential of the NER at both domestic and international levels is a critical obstacle to attracting investments into the region. 

NER has certain advantages that the vast parts of the rest of India lack, such as enormous natural resources, the high scope for tourism, gender parity in economic activities, tech-savvy youths, etc. However, such distinct advantages are not showcased sufficiently on the global stage. Thus, all the stakeholders involved must step up efforts in this direction.

The lack of awareness added to negative perceptions built around security situations in NER over several decades is also one of the hindrances toward attracting tourists and investments. Today, the security situation has dramatically improved in most parts of NER. 

For instance, in recent years several parts of Assam, Nagaland and Manipur, previously under AFSPA, were removed from the disturbed areas list. Similarly, according to the 2022 annual report of the Ministry of Home Affairs, incidents of insurgency have reduced by 80 percent since 2014. However, it appears that we have not done enough to showcase this improvement domestically and internationally.

NER’s huge hydroelectric potential can offer a distinct edge to several developed countries that aim to secure their Nationally Determined Contributions (NDC) through overseas cooperation projects to reach their 2050 carbon neutrality target. 

Meanwhile, NER is already a major player in producing various crops with considerable export potential. Yet it is concerning that very little has been done to use the region’s tremendous biodiversity, diverse crop-growing opportunities and a plethora of untapped resources. Among many promising chances, the food processing industry is widely considered to be one of the most promising in this area.

Such distinct advantages of NER must be effectively canvassed at various international stages to attract investments into the region. Likewise, NER’s edge in wellness, cultural, eco-tourism and medical tourism must be properly publicized and utilised. 

The most crucial element that hinders foreign investors from investing in India, especially NER, is the lack of understanding of the local market ecosystem. Thus, it becomes necessary to help global investors and startups explore market synergies to expand their business in NER. A multidimensional approach must be taken to increase awareness about the resources, opportunities, and talents NER can offer global businesses. 

In this direction, scaling up awareness efforts that are carried out through the  Indian embassies in our development partner countries is essential. Furthermore, the role of national media in India, especially those from NER, is vital in this regard, as it steadily helps create the necessary groundwork for building mutual awareness.

Although regional integration through projects under AEP brings numerous benefits to NER, most regional state government officials are still in the dark about these opportunities. Thus, creating enough awareness about the benefits of the ongoing planned transnational connectivity among both the public and the local officials to take them into confidence becomes critical in building timely and sustainable projects in the region. 

NER indeed has its own challenges, but it also has advantages compared to the rest of India. It is only through NER that India shares its territorial borders with the economically vibrant ASEAN region. The Matarbari deep sea port that Japan is developing in the Cox Bazar region of Bangladesh is only about 300 km from Agartala, Tripura.

Thus, the scope for developmental cooperation with global partners is very high in NER. Given the unique opportunities and challenges that prevail in NER, showcasing and promoting the entire India as one block may not serve the purpose. Instead, organizing and arranging special platforms to project the NER’s potential to attract FDI may be more beneficial.

Efforts such as organizing several recent G20-related activities in the NER, especially the four B-20 meets on themes relevant to NER needs, are a welcome step in the right direction. Finally, education and awareness campaigns, effective use of local media and the active cooperation of decision-makers, institutions and experts are needed to expedite the flow of investments into the NER. 

Prasanna Kumar is a Research Analyst and Program Coordinator at Asian Confluence and is pursuing his PhD from the Jindal School of International Affairs, O.P. Jindal Global University.

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