A parochial but mistaken perception treats the North East region as a homogeneous entity. However, Northeast India is a kaleidoscope of geographic, ethnic, and economic heterogeneity. Even though the seven Northeast states have observed economic growth in recent years, there is still a regional disparity between and within these states. Though there are historical accounts of economic growth and development in the Northeast, still many prejudices and fallacies remain. Policymakers have been consistently trying to understand and highlight some of the limitations and impediments of Northeast India. The economic development position in northeast India is characterised by trends prevailing in the country as a whole, as well as some features which are unique to this region. To a large extent, colonial interests dictated the development of the economy of the northeast. Economic development of the region followed a specific pattern. Economic activities got concentrated in select pockets. Together with the perpetuation of traditional practices, select and focussed development impeded the efficacy of modernisation in the region. Despite efforts at policy formulation to cater to the developmental needs of the northeastern states, nothing significant has yet come out during the last several years. It is as such unwise to approach the problem in the northeast as merely a law and order problem. Neither can it be handled as a purely political one. The roots lie deep in the fundamental economic dynamics of the insurgency movements. Any solution to the crisis in the northeast has to begin with an effort to draw the counter-elite, that is the insurgent leadership, into the political mainstream. Only by giving them an opportunity to participate in the political process can one hope to put a lid on the current disaster. It is a tall order, but since the government has started expressing its readiness to have open talks with the insurgents, the journey in the right direction might well have begun. In spite of the offer of several autonomy packages, adoption of a policy of political accommodation and doling out of economic concessions, violence has been endemic in the area.
The government of India brought about several developmental packages for the region but these policies and programmes were not evaluated at appropriate times.This widened the gap between the region and rest of India. Thus all the socio-economic and political problems of these states were put under one unit, i.e., “north-east region” and a North Eastern council (NER) was created to address these as a whole , thereby ignoring the inter-state disparities. The bigger challenge lies in harnessing private investment and catalysing home-grown entrepreneurship. The credit-deposit ratio of scheduled commercial banks in the NER is the lowest in the country. This is partly attributable to the complex land laws of the region, which are an overlay of customary rights (of clans and communities) over modern laws (conferring individual rights). As a result, a land titling exercise is yet to be undertaken in most states. In the absence of a clear land title as collateral, banks hesitate to lend and credible investors remain wary. Liberalisation of the regulatory framework around land holdings would help monetise the biggest resource of this region. Inner line regulations, based on a British-era law applicable in some hill states, also need to be simplified to make access easier for tourists and investors. Winds of change are sweeping the Northeast, yet it will be a while before the states can shed their “special” tag. A competition-based resource allocation framework may help incentivise improvements in outcomes.