Starting a New Business in the North East of India

chillibreeze writer — Teiborlang T. Kharsyntiew

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The North Eastern region of India constitutes an area of 2.62 lakh sq.km, i.e., 7.9 per cent of the total geographical area of the country is home to a population of 39 million people (2001 census) with a literacy rate of 68.5 percent (2001 census).(1) Despite its immense potential in terms of natural resources, the region continues to remain the most backward in India. The area represents a huge opportunity for investment, both by private industries as well as entrepreneurs. The sheer vibrancy of its topography that ranges from 55 to 3400 meters above sea level, flora and fauna, arts and culture is what defines it as the most diverse region in India with a great potential for tourism.

Tourism and its allied small-scale industries will be the backbone of the future economy of North East India. The distance of the region from the main commercial centers and the difficulties in transportation will inevitably lead to a greater focus on the small scale and cottage industries like agro-industries and handicrafts. Compared to the large-scale industries these are ecologically friendly, easy to set up and invest in and easy to transport. Therefore for entrepreneurs it is the small scale and cottage industries, which will prove to be a lucrative area for investment. More importantly, focusing on items that are tourist oriented or export oriented will be of great advantage.

Entrepreneurs who want to start a new business in North East India should take note of the memorandum of the Ministry of Industry, Department of Industrial Policy & Promotion of 24th December, 1997, which envisaged the development of small scale industries in North East India. According to the memorandum:

1. Expenditure on Growth Centers, up to Rs. 15 crores, would be met through Central assistance.
2. Funding pattern for Integrated Infrastructure Development Centres (IIDCS) changed from 2:3 between the Government of India and SIDBI to 4-1. The Government of India funds would be in the nature of a grant.
3. Transport subsidy scheme has been extended by 7 years up to 31.3-2007 and the amount will be disbursed through the North Eastern Development Finance Corporation.
4. Industries located in the Growth Centers would be given capital investment subsidy at the rate of 15% on Plant & Machinery, subject to a ceiling of Rs. 30 lakhs.
5. Growth Centers & IIDCs become tax-free zones for income tax and excise duty for a period of 10 years. Certain high growth potential industries have also been given the tax-free status irrespective of their location in the North-East.
6. An interest subsidy of 3% on the working capital loans would be provided for a period of ten years after the commencement of production.
7. Comprehensive Insurance Scheme for new industrial units has been put in place.(2)

It is therefore imperative that the small scale and cottage industries provide a boost to the much-needed development of the region. This becomes more significant when one takes into account the future operation of India’s “Look East Policy” where the economy of North East India will be integrated with that of the South East Asian Economy. It can thus be aptly described as the “Gateway to the East” where the movement of goods and people across the border will be the main economic development indicators in the future of the region.

In such a scenario the North Eastern Finance Development Corporation Ltd (NEFDC), a nodal agency in promoting investment in the North Eastern region, has noted that in the area of small scale industries, food and processing has a promising future. According to NEFDC, “The North Eastern region by virtue of its diverse agro-climatic conditions, varied soil type and abundant rainfall has the promise of becoming an excellent sourcing point for high value horticultural produce and value added products unique to the region for onward marketing both within the country and abroad”. (3)

Likewise in the area of arts and handicrafts a readymade market can be expected both within the region, with the increasing number of tourists visiting on one hand, and a great value of export outside the region, within India and abroad, on the other. There is a variety of tribal jewelry, costumes, paintings and carved sculptures, which can greatly enhance the small scale and cottage industries of the region.

In conclusion, starting a new business in Northeast India can be successful only when one takes into account the topography, unique culture and traditions of the local population where the mode of production and distribution is closely interlinked with each other.

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—About our writer: Teiborlang, About me - Research Scholar in the School of International Studies, JNU. Specialised in - European Union Studies (politics, foreign policy, security, environment) Interested - In areas of environment (with special interest in i) environmental conflict in North east India and ii)issues of Climate change), foreign policy and security. Hobbies - travelling, reading.

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