The Union Cabinet’s recent approval of the ‘Uttar Poorva Transformative Industrialization Scheme’ (UNNATI2024) signifies a landmark step in unlocking the Northeast Region’s (NER) long-stifled industrial potential. With an outlay of Rs. 10,037 crore, to be spent over a decade (with an additional eight years for committed liabilities), this ambitious initiative aims to foster much-needed industrial development and gainful employment opportunities in NER, India’s strategically vital frontier.

The economic rationale underpinning place-based policies like UNNATI-24 is grounded in addressing pervasive regional disparities, a challenge observed globally, including in India. Factors such as geography, resource endowments, and historical legacies contribute to uneven economic development within a country. Tackling these disparities is essential not just for promoting inclusive growth but also for national cohesion and stability. Neglecting disadvantaged regions can breed discontent, undermine economic potential, and even pose security challenges.

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For India, the imperative of balanced regional growth dates back to the First FiveYear Plan (1950-55), which prioritized industrialization in economically disadvantaged regions. Subsequent initiatives, such as the identification of industrially backward areas by the Pande Committee in 1968 and incentive schemes recommended by the Wanchoo Committee in 1970, laid the groundwork. However, it was the Seventh FYP (1985-90) that unequivocally classified all NER states as industrially backward, necessitating comprehensive government interventions, including investment and transport subsidy schemes, to redress the regional imbalance.

Previous initiatives for NER, including the North East Industrial Policy (NEIP) of 1997 and the North East Industrial and Investment Promotion Policy (NEIIPP) of 2007, yielded modest gains but fell short of catalyzing transformative change. A policy evaluation study by Tata Economic Consultancy Services revealed that NEIP facilitated the setup of 650 units with an investment of Rs. 753.28 crore, generating 17,279 jobs. However, benefits were concentrated in a few states, with Assam and Meghalaya accounting for a staggering 94 per cent of the total investment. Despite these investments, the disparity in regional development persisted.

A Government of India report of the Task Force on Micro, Small, and Medium Enterprises pointed out significant regional unevenness in the distribution and utilization of incentives incorporated under NEIIPP. While Assam emerged with a diversified manufacturing sector in the post-policy phase, owing to its resource base and geographic advantages, other states remained mired in industrial backwardness. Fast forward to the present scenario. The urgent need for intervention is underscored by the grim statistics from the Annual Survey of Industries 2021-22: A mere 2.9 per cent of India’s total factories are situated in the NER states, highlighting the pressing need for revitalization.

Within the NER, Assam dominates with 75.5 per cent of factories, while the remaining seven states share the rest. Sikkim, notably, accounts for a mere 84 factories. Moreover, the NER states collectively employ only 1.89 per cent of India’s factory workers, contrasting starkly with industrial powerhouses like Tamil Nadu, Gujarat and Maharashtra, which cumulatively command 38.3 per cent of factories and 39.5 per cent of factory workers. It is crucial to analyze the reasons behind the limited success of previous initiatives. Apart from infrastructural bottlenecks and skill gaps, one potential factor could be the standardized, one-size-fits-all approach adopted by these policies. The NER comprises eight diverse states with varying resource endowments, cultural contexts, and developmental priorities. A more tailored, state-specific approach that considers these unique local factors may be more effective in driving industrialization. UNNATI-2024 presents a renewed opportunity to rectify this entrenched industrial backwardness and unbalanced regional growth.

The scheme’s multifaceted incentive structure, encompassing capital investment incentives, interest subvention, and manufacturing/services-linked incentives, is a well-designed strategy to spur investment and job creation. By categorizing districts into industrially advanced (Zone A) and backward (Zone B) zones, the scheme aims to address intraregional disparities that plagued previous policies. Furthermore, the scheme’s emphasis on fostering export-oriented industries aligns with India’s broader economic aspirations, positioning the NER as a potential export hub for sectors like bamboo, tea, and agro-based industries.

Notably, UNNATI-24 also incorporates a holistic approach to sustainable industrial development, striking a delicate balance between economic growth and environmental preservation. The scheme delineates a positive list of industries deemed conducive to the region’s sustainable development, such as renewable energy and electric vehicle (EV) charging stations. Conversely, sectors with potential adverse environmental impacts, like cement and plastic, are excluded from the incentive framework, underscoring the commitment to safeguarding the NER’s ecological integrity. Crucially, UNNATI-24 incorporates key lessons from previous policies by adopting a decentralized approach, empowering state governments to formulate state-specific strategies to address localized challenges more effectively. The scheme’s implementation strategy involves collaboration between the Department for Promotion of Industry and Internal Trade (DPIIT) and respective states, facilitated through various committees at national and state levels, promoting transparency and operational efficiency.

However, the scheme’s success hinges on resolving deep-rooted systemic bottlenecks that have long deterred industrialization in the NER. Inadequate infrastructure, unreliable power supply, and limited access to skilled labour have historically impeded private investment. Prioritizing infrastructure upgrades, streamlining cross-border trade facilitation, and leveraging the NER’s strategic location as a gateway to ASEAN markets are critical imperatives. The uneven impact of previous policies underscores the need for a nuanced, datadriven approach in designing and implementing industrial promotion schemes. Rigorous monitoring and evaluation mechanisms are therefore essential to identify implementation bottlenecks and to assess the efficacy of incentive structures.

Additionally, fostering a skilled workforce through vocational training and skill development programs is crucial to meet the projected demand for 83,000 direct jobs and associated indirect employment opportunities. According to the 2022-23 Periodic Labour Force Survey (PLFS), the WorkerPopulation Ratio (WPR) for persons aged 15 and above in NER states ranges from 48.7 per cent in Manipur to 74 per cent in Sikkim, highlighting the need for capacity-building initiatives.

From a macroeconomic perspective, the industrialization of the NER aligns with India’s ambition of achieving a $10 trillion economy by 2030. Unlocking the NER’s economic potential through UNNATI-24 could catalyze a virtuous cycle of investment, job creation, and inclusive growth, reinforcing India’s economic growth and regional integration with East and Southeast Asia.

(The writers are faculty members in the Economics Area at the Indian Institute of Management (IIM) Ranchi. Views are personal)