North-East can be a window for service exports

Bornali Bhandari | Updated on September 23, 2021

Prosperity: The services road   -  The Hindu

With better transport and communication facilities, this region has the potential to grow trade with bordering nations

The ‘Look East’ policy of 1991 gave way to the ‘Act East’ policy” of 2015. The objective of the latter is to promote economic cooperation, cultural ties and strategic relationship with countries in the Asia-Pacific region. This would involve providing enhanced connectivity to India’s North Eastern Region (NER) with our bordering countries.

In contrast to global experiences, the border districts in South Asia tend to lag behind others, especially in the East. There is a vast amount of literature to show that transport and connectivity are among the major challenges to improving trade ties in the East, especially the chicken neck area in the Siliguri corridor. This corridor falls in the North Bengal region of West Bengal.

Several of the districts in the region, which border Bangladesh, Bhutan and Nepal, had been classified as “backward” by the erstwhile Planning Commission.

The ‘Act East’ policy has led to infrastructural investment and signing of agreements in transport, power, etc. The Prime Minister in his 2021 Independence Day speech noted the achievements of the policy.

The focus here is on the potential of the services sector in North Bengal and NER. While it is challenging to think of the services sector in a pandemic, the idea is to be future ready. The key services sectors that hold potential are:

Producer services: Each of the border districts must develop a perspective plan identifying their comparative advantages and sync them with schemes like District Export Hubs and One District One Product. Scaling up of key sectors will require significant enhancement of what economic literature calls ‘producer service’ sectors, which include management services, research and development, financial and accounting services, and marketing.

A related recommendation is that all States should produce district level statistics using the latest 2011-12 base year so as to facilitate economic analysis.

Financial services: Barring Sikkim, the NER lags behind in terms of financial inclusion (NCAER DBT Research). The sector can spur regional growth and it has both efficiency and equity implications. The innovations from the fintech sector can be another line of export.

ICT connectivity: The nature of this sector is similar to financial services. Poor connectivity plagues the NER, which is largely due to its geographical terrain (NCAER DBT Research). If India can tap into Bangladesh’s submarine cable networks, then a combination of optical fibre, satellite and microwave technologies could be used to provide digital connectivity in NER. Cooperation, trade and innovations in this area will also help our neighbours.

Tea and bamboo: Eighty-one per cent of Indian tea is produced in Assam and West Bengal. The most significant product of the North Bengal economy is tea. NCAER research on border tea trade in North Bengal shows that Nepal and Bangladesh also provide competition to Indian tea producers. However, India’s tea infrastructure and regulations are far superior to those of its neighbours.

Online Indian tea auctions provide transparent prices. If Nepalese and Bangladeshi tea are sold in India via Indian tea auctions, the “tea services” industry can be further enhanced. The branding of tea products from each country will benefit India. Similarly, the Tripura Bamboo Mission is one-of-a-kind model, which can be applied to the eastern region.

Tourism: Improved connectivity will boost tourism in this region. The natural beauty combined with its religious and historical sites can spur tourism.

NCAER research has found that Nepali citizens living in border regions come to Siliguri for shopping. Day trips for shopping/picnicking from neighbouring countries could be encouraged and monetised. Both short and long trips can generate foreign revenue. The border haats between India and Bangladesh must be enhanced.

Education: The NCAER has found that the share of educational services in Darjeeling district, West Bengal, is relatively large. It houses good quality boarding schools, which can attract international students from bordering districts, with spillovers in tourism.

Similarly, other districts could identify their respective comparative advantage. Higher education, especially through research institutes and edtech companies, could be another potential area of service exports. Same languages being spoken in districts across neighbouring international borders may be an enabling factor.

Logistics: The current infrastructural investment will boost demand for logistics services. India is developing several airports in the region. Bagdogra airport, Darjeeling, is the only international airport in North Bengal, and it is close to many districts in Bangladesh and Nepal. There are plans to expand this airport, and it could potentially cater to passengers from neighbouring countries.

Both North Bengal and NER offer tremendous potential in terms of growth of the services sector. The unique nature of each of the border districts in the region needs to be identified, developed and scaled for sustainable growth and development of these areas.

The writer is a Senior Fellow at NCAER. Views are personal

Published on September 23, 2021

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