Galvanising trade via the North-East

Act East Policy promises to be a harbinger of economic transformation for the north-eastern region. The region used to be a hub of thriving mercantile activity in the colonial period. The dynamics of trade were guided purely by expansionist imperial ambition and quest for commercial gains. People of the region, however, were completely bypassed in terms of infrastructure or economic opportunity.

A diverse portfolio marked trade with the neighbourhood. British woollens and Indian cottons were traded for Chinese tea and silk. Exports from Burma largely comprised cotton, jade, teak, silk tamarind and jaggery, while European imports were dominated by manufactured goods — cars, whisky, soaps, cigarettes. Dhaka was a flourishing centre of muslin exports. Discovery of tea and oil in Assam significantly enhanced commercial prospects. The Bombay-Burmah Trading dominated global tea trade for close to eight decades.

The British established a meter gauge rail link between Digboi and Chittagong . The steam navigation cartel led by the Scottish owned Irrawady Flotilla Company prevented any major developments along the land route and a steamer link connected Dibrugarh with Bengal.

There was a disruption in trade in the post-Independence period as boundaries of sovereign nations were redrawn. The Act East policy can give a boost to local economies of the north-eastern region, provided we develop a robust land-based trade across the borders. The fact that there are ties of kinship across the border is surely an asset, though it can also serve as a deterrent, given convenient local arrangements.

India’s trade across the border with Bangladesh and Myanmar presents a study in contrasts. India’s trade with Bangladesh in 2017-18 was in the range of $9 billion, of which, nearly 70 per cent was transacted across the land customs station at Petrapole-Benapole. The 24x7 operationalisation of the integrated check-post last year has given a further impetus to trade, though teething troubles of delayed cargo movement remain on the Bangladesh side. India exports cotton, vehicles and cereals to Bangladesh and imports textiles and apparels.

India’s trade with Myanmar was nearly $1.5 billion last year, a drop from $2.1 billion in 2016-17. Pharmaceuticals is the largest export from India, while we import beans and cereals from Myanmar. Trade with Myanmar earlier used to be restricted to 62 items on formal channels.

Post 2015, barter trade has been dispensed with and formal trade is only permissible across notified customs posts. However, India accounts for less than one per cent of Myanmar’s land-based trade, with China in the lead, and Thailand and Bangladesh also ahead of India. The integrated check-post at Moreh, in Manipur, is the only one which is truly operational. Formal trade along Mizoram border is negligible, though there is visible informal trade across the border.

Boosting trade

In order to truly galvanise trade through the north-eastern region, a mix of infrastructure investments and trade facilitation measures are warranted.

A blue print of transnational multi-modal connectivity projects has already been prepared and several of these projects, such as Kaladan Multimodal highway, are in an advanced stage of execution. The North Eastern Railways is in the process of connecting Aizawl and Imphal by rail over the next few years.

Work for construction of broad gauge connectivity from Agartala to Akhaura near Chittagong has recently been awarded. This will substantially reduce the distance between Agartala and Kolkata and provide an efficient access to Chittagong port. A north-eastern economic corridor is proposed under the Bharatmala project for enhanced intra-regional connectivity. Multi-modal freight movement is proposed through seven waterway terminals on Brahmaputra.

However, it is equally important to develop a robust supply chain and logistics infrastructure on a hub-and-spoke model to ensure smooth transportation. The Centre has already notified logistics as an infrastructure investment. An SPV could be created to develop logistics hubs across the north-eastern region in a PPP framework, going up to Guwahati and Kolkata.

A Commerce Ministry report mentions that the Chinese have established production centres near the border to penetrate cross-border markets. A suitable variant of this approach is worth exploring in the Indian context.

The Land Port Authority of India has declared its intent to take over all land customs stations and upgrade them to integrated check-posts with warehousing facilities. These need to be provided with high quality IT infrastructure, quality testing labs and quarantine facilities for agricultural trade, banking and foreign exchange facilitation centres.

Facilitation programmes

It is equally important to ensure that the people of the region develop a major stake in trade development. A special outreach and capacity building programme would be required for building foreign trade capabilities. Trade facilitation programmes to encourage local entrepreneurs to actively participate in foreign trade would build a local buy-in.

A strong linkage with mainland manufacturers and traders will be a crucial ingredient for a successful export strategy. Some local value-addition near the border through packaging or assembling facilities could also be established. Regular exchange of trade delegations and buyer-seller meets between neighbouring States of north-east and Myanmar and Bangladesh in pre-identified verticals would serve as a useful enabler.

The India ASEAN Trade in Goods Agreement provides the framework for trade with Myanmar, apart from the special dispensation for least developed countries under Duty Free Tariff Preference Scheme. As negotiations for Regional Comprehensive Economic Partnership (including China) reach near conclusion, the imperative of strengthening border trade capabilities assumes greater urgency.

Development of manufacturing capabilities in the north-eastern region will take some time. The region can well serve as a model for export-led growth in India. A north-east trade development authority, involving all State chief ministers of the region, would help bring foreign trade agenda on the economic priority of the States.

ASEAN has demonstrated how efficient economic integration of a region, even with economies at different levels of development, can be mutually beneficial. The north-eastern region needs to evolve a comprehensive bottom-up strategy of export development which supplements the efforts of infrastructure development of the Central government.

The author is an IAS officer based in Aizawl. The views are personal.

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