Foreign Trade and Northeast India

By SRIPARNA PATHAK RAIMEDHI   

 

The discourse on foreign trade and exports promotion was brought to the forefront again recently as the Government of India reiterated the essentiality of setting up a trade facilitation council to address India’s growing trade deficit. The background to this discussion on exports promotion is the trade data released on July 13 on India’s growing trade deficit with China. According to the data, India’s exports to China declined by over 24 per cent to USD 6.89 billion in the first half of 2015, while Chinese exports to India surged 10.8 per cent to USD 27.29 per cent billion, pushing the bilateral trade to over USD 34 billion. Trade deficit for India is not something new. In the financial year of 2014-15, India’s total trade deficit with the world stood at USD 13472.18 millions. A major component of Indian exports is agricultural commodities. Additionally agriculture accounts for about 55 per cent of employment of the labour force.  The northeastern region for India performs well in the cultivation and production of horticulture, which are components of exports. However, challenges to the produce finally turning into exports remain unaddressed for long.

Photo courtesy Zee News
Photo courtesy Zee News

 

The Prime Minister’s announcement for the development of exports from the northeastern region in January 2000 led to the setting up of an Export Development Fund (EDF), the primary objective of which was promoting exports from the region. 47 projects have been sanctioned under the EDF so far. The proposals for funding through the EDF that have been approved include passion fruit in Mizoram and Nagaland, Safed Musli in Assam, Ginger in Manipur and Nagaland, cluster development of farms for organic farming in Nagaland and Tripura etc. Additionally agri export zones (AEZs) have been set up for the region at Tripura for pineapples, Sikkim for floriculture, orchids, ginger and cherry, Assam for fresh and processed ginger.

 

However, despite the efforts, the northeastern states have not been able to achieve much growth in the sector due to inherent weaknesses that include poor marketing linkages, lack of infrastructure and lack of awareness. The markets in these eight states are largely unorganised and controlled by small private traders. Facilities such as storage, warehousing and transportation are largely missing which affect the mobilisation of the goods. Despite the availability of large surpluses in the region, the development of the processing industry has been negligible in the region, which adversely affects the goods produced. This however does not mean that none of the horticulture goods have been traded with other countries at all. The exports of horticulture produce from the region to the adjoining countries- primarily Bangladesh, Myanmar and China have been through land custom stations on the border with these countries. Nevertheless, trade from the region in not just horticulture but otherwise as well has not been worthy of jubilations. In fact it has been dismal.

 

In contrast, Chinese goods hold sway in most of the markets of the states of the region, and Indian products are practically extinct. The Union Commerce Ministry in India is currently working on measures such as state wise dis-segragation of exports data. Currently it is not possible to find out accurate statistics on how much of Assam’s produce for example or of Tripura for that matter finally reaches India’s export basket, or what proportion of the total imports from China are floating around in the markets of northeast India. However, as is easily discernable from visits to markets of the eight states, every major town of the region has its thriving Hong Kong Bazaar. According to reports, the Dimapur Hong Kong Bazaar alone earns about Rs. two millions per day, while the Moreh market earns much more.  This definitely aids India’s burgeoning trade deficit with China. In contrast, In markets surveyed in Beijing over a span of two years, Indian exports were miniscule, and most of the imported agricultural commodities in the markets were from Western countries. Given these circumstances, it is not difficult to imagine why India has had a sustained trade deficit with China.

 

The Centre in its attempt to address the issue, seeks setting up of a trade facilitation council. What needs to be done in addition, is speeding up exports from the Northeastern region, which has a lot of potential to aid India’s foreign trade if tapped properly. 98 per cent of the region borders form India’s international boundaries. The region could aid in providing a competitive advantage in international trade in the coming years. In the case of horticulture for example, better options for diversification exist due to higher returns available from them. It also helps in improving the productivity of land, generating employment, improving the economic conditions of entrepreneurs and farmers, enhancing exports and foreign exchange earnings. The example of horticulture is just one. Other agricultural commodities’ produce from the region could also immensely help in addressing the negative trade balance. Merely setting up institutions and not ensuring that they bring about positive results defeat the entire purpose of planning at the level of the States and the Center and are actually a drain on resources. While import substitution with respect to China cannot be resorted to immediately, an identification and promotion of the goods the Northeastern region produces could be more of one of the immediate solutions.

 

(Dr Sriparna Pathak Raimedhi is Associate Fellow at Observer Research Foundation, Kolkata, West Bengal)

 

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