Hi Umesh.
>Despite being an economist the writer fails to address the demographic issues
I thought he did, in the section on 'Population influx', though he has not specifically talked about Muslim/Hindu or age group affects. But I think, he only very lightly touched on subjects like how insurgency has affected the business climate in Assam, nor about corruption and general lack of accountability has affected industrialization.
In spite of that, I think it was a pretty good article. Assam's problems and issues are best undersood by the people living there. An economist from the area can usually do a much better job of identifying and proposing solutions as opposed to an Amartya Sen, who is really far removed from the Assam scene. Just my opinion, and its no reflection of Dr. Sen's accolades as an well-known economist.
> Sen has been emphatic of the role of education, health and other human related issues as >been prime indicators of economic development of a region.
True, these are crucial factors, but I think Dr. Sarma was concentrating on slightly different factors.
--Ram da
>From: umesh sharma <[EMAIL PROTECTED]>
>To: Ram Sarangapani <[EMAIL PROTECTED]>,
[email protected]
>Subject: Re: [Assam] Why Assam Continues to Decelerate? By Dr. Atul Sarma
>Date: Sat, 23 Apr 2005 18:49:13 +0100 (BST)
>
>Ram-da,
>
>Despite being an economist the writer fails to address the demographic issues. Nobel Laureate Amartya Sen has been emphatic of the role of education, health and other human related issues as been prime indicators of economic development of a region. It is only after his winning the Nobel prize that UNESCO, World Bank and other bodies have made it their life mission to improve these sectors. They prominently quote AK Sen in all their work.
>
>Umesh
>
>Ram Sarangapani <[EMAIL PROTECTED]> wrote:
>
>An interesting and detailed write-up by Dr. Sarma. Its from 2002, but still quite valid. Dr. Atul Sarma is Professor of Economics and the Director (Non-Executive), SAIL, Indian Statistical Institute, Delhi Centre.
>
>http://www.asthabharati.org/Dia_July02/why.htm
>
>If I am not mistaken, this is the same Dr. Sarma who used to be a Prof. of Economics at GU and at DU.
>
>The article appeared in 'Astha Bharati', a Quarterly Journal and NGO, headed by Dr. Jayanta Madhab formerly of the Asian Development Bank. Here is their website. There are some very interesting articles on the NE/India.
>
>http://www.asthabharati.org/index.shtml
>
>Growing up in the GU campus, I had the pleasure of knowing both Dr. Sarma and Dr, Madhab.
>
>And here is another on By H.N. Das on the Need for Fiscal Responsibility in Assam Governance:
>
>http://www.asthabharati.org/Dia_Apr04/das.htm
>
>There are many articles by DN Bezbaruah, MP Bezbaruah,
>
>http://www.asthabharati.org/contributors.htm
>
>Hope you all enjoy them.
>
>--Ram
>
>______________
>
>Dialogue July - September, 2002 , Volume 4 No. 1
>
>Why Assam Continues to Decelerate?
>Atul Sarma
>
>The growth performance of the Assam economy was more or less comparable with all-India during 1951-79. Thereafter it lagged behind the rest of the country except for 1990-92. For example, Assam grew at the rate of 4.2 % and 3.0 % as against 5.4 % and 7.3 % for all- India between 1980-81 to 1990-91 and 1991-92 to 96-97 respectively. With high population growth, the gap in per capita income between Assam and the rest of the country widened sharply with every passing year. Assam�s per capita income of Rs.1173 at 1980-81 prices stood above the national average by four per cent at the base year of economic planning in 1950-51. But it continuously fell behind the national average per capita in the subsequent years: it constituted just 55 per cent of the national average per capita income in 1998-99.
>
>This outcome followed from the fact that Assam�s per capita income rose by 7.0 % as against 12.5 % for all-India between 1970-71 and 1980-81. The differential growth sharpened in subsequent decades particularly in the decade of economic reforms. Between 1990-91 and 1998-99 Assam�s per capita grew by less than one third (12.1%) of the national average (40.1 %). In short, Assam which was the fifth highest in per capita income terms at the beginning of the planning process is now the second lowest after Bihar.
>
>This happened despite the general awareness and interest in development on the part of different segments of Assam�s population. As the Committee on Clause 7 of Assam Accord (1990) observed: " This magnitude of popular awareness and interest in development is a rare social force." Great concerns for Assam�s development can, in fact, be traced back to the 1950s in various charters of demands by the Assam Students Union (ASU) at different times. For example, the Assam Accord (signed on August 15, 1985) contained a Clause (7) for all round development of the state. And the Assam government formed by student leaders constituted a Task Force on Economic Development of Assam (May 20, 1987) to suggest measures for the economic development of the state.
>
>The Central government also on its part took a number of major initiatives particularly in the 1990s. Having recognised the slow progress of the measures for speedy all round development of the state under Clause 7 of the Assam Accord, the Planning Commission constituted a committee (under the chairmanship of L.C.Jain, Member Planning Commission) in February 1990. Further in November 1996, the Planning Commission in pursuance of the Prime Minister�s announcement of �New Initiatives for the North Eastern region� constituted a High Level Commission to critically examine backlog in basic services and gaps in important infrastructures and to suggest policies, programmes and the requirement of funds for their removal. The important point to flag here is that all different state and the Centre level committees in addition to many academic studies clearly brought out the constraints on the development of the North East in general and Assam in particular.
>
>As part of its new initiatives, the Central government took several important steps in the nineties. The state was included among the special category states that get plan assistance on the basis of 90 % grant and 10 % loan. The North Eastern Development Finance Corporation (NEDFi) with authorised share capitol of Rs. 500 crore was set up in 1995. The economic package of Rs. 6100 crore for specific projects in NE states as announced in October 1996 by the then Prime Minister, H.D.Deve Gowda included fourth rail-cum-road bridge over the Brahmaputra at Bogibeel, upgradation of Guwahati airports and a few industrial growth centres in addition to some road projects, drinking water supply schemes and health care programmes. He also introduced North-East sub plans in all Central Ministries for which 10 % of their budgets would be earmarked.
>
>Mr. I.K.Gujaral who followed Mr.Deve Gowda as Prime Minister also assured the implementation of the package in toto. In January 2000 Mr. Atal Behari Bajpai further announced a Rs.10. 271.66 crore package for the region.
>
>On the top of it all, the central plan assistance to Assam is quite high. For example, the per capita assistance to Assam (Rs 3161) was almost three times the all-India average (Rs. 1080) taking the entire Eighth Plan period. Similarly, industrial licensing, concessional finance and investment subsidy, tax holidays, growth centres and freight equalisation of some major industrial inputs have been used as instruments to induce economic development in the region.
>
>All this leads to a very basic question: Why is it that with all the popular awareness and interest in social development as well as special concerns and dispensation of the central government in recent years Assam continues to decelerate? The answer to this question will be clear in the course of making a case that Assam failed to stir growth on a sustained basis essentially for lack of an appropriate policy frame keeping in view its constraints and strengths. The problems impeding the economic development of the state were always fairly well known. I would argue to show that there was no policy frame with a consistent thrust for economic development and that policy interventions even in right directions were grossly inadequate. What an appropriate frame was required to do was to address first the binding constraints on economic development and formulate a perspective for
rapid growth. I discuss below both the constraints as well as flaws in the past development strategy.
>
>What ails Assam Economy?
>
>Disruption of Traditional Trade Links
>
>Partition led to the disruption of the long existing trade links and infrastructure that the northeast was accustomed to. As the Shukla Committee succinctly put it: "Partition further isolated an already isolated geo-politically sequestered region. It was left with over 4500 km of external frontier with Bhutan, China, Myanmar and Bangladesh but no more than a slender 22 km connection with Indian hinterland through the tenuous Siliguri corridor, the Gateway to the Northeast. The very considerable market disruption, socio-economic distancing and retardation that resulted has not been adequately appreciated and compensated."
>
>The alternative trade routes and infrastructures that were developed in the post-partition period have remained for long a makeshift arrangement, as it were. The conversion of the meter gauge to broad gauge took years. A large part of the northeast is yet to have a railhead. The railway network linking the places only to exploit the commercial interests of the colonial power is yet to be restructured for even growth.
>
>Just to give an idea of transport/market disruption, in the pre partition days, boats laden with tea, coal and timber reached Kolkata from Dibrugarh in 8days. But now Calcutta �Guwahati takes more than 25 days for lack of night navigation and customs formalities at various points.
>
>The net effect has been that people pay higher prices for their purchases originating in the rest of the country. Producers do not get right prices for their products such as fruits, potato, ginger or exquisite handicrafts and hand loom products. The income generation that has taken place, even if at a modest rate, drains out to producers elsewhere through consumption linkage for these economies being unable to produce income induced consumption goods. They thus remain heavily dependent on the rest of the country for their most day-to- day requirements.
>
>The geographical isolation coupled with inadequate infrastructures is certainly a major stumbling block to growth. But an appropriate development strategy could use this disadvantage to the maximum advantage. For such disadvantages act, in fact, as barriers to trade and to that extent, provide protection to the local entrepreneurs for undertaking a right mix of activities.
>
>Population influx
>
>The population influx from across borders in the aftermath of partition has huge implications both on polity and economies of the northeastern states in general and Assam in particular. As such, this is a highly emotive issue as has been demonstrated by student uprisings in Assam and other northeastern states. But the inability to effectively deal with this problem by the student leaders when they came to power after a protracted movement against this issue only highlights the extent of complexity that it is associated with.
>
>This problem should be clearly understood, and its realistic solution must be found. Without going into great details of the migrant population from across borders, the following points can be flagged. First, the flow of immigrants, which continued much beyond the aftermath of partition, has presumably been induced by economic considerations. This means that most of these immigrants have moved out of their hearth and home in search of better means of living, which sparsely populated northeastern states, might offer. Second, these immigrants who are uneducated and unskilled, sought to be absorbed in agriculture and related sectors. These sectors being of the informal nature, they were not very visible until the growing mass started having an impact on the polity of the states. The extreme example of this presence was felt in Tripura where migrant population marginalized the
local inhabitants in power sharing. Third, complete uprooting of the vast immigrant population is not feasible
> as the student leaders of Assam realized being saddled in power for almost two terms of five years each.
>
>Having noted the above points, one should seek solution to the problem of population influx in the following perspective. The problem of immigrants should first be bifurcated between the existing stock and the future flow. The existing stock reckoning from a cut-off date should be given the status of economic migrants. This status would entitle them to earn their living but not to property acquisition and political rights.
>
>In order to arrest the future flow, a strategy with a longer time perspective needs to be adopted. This strategy should clearly recognize that fencing the vast border is neither easy nor is foolproof vigilance practicable. Even developed countries found it difficult to stop illegal migrants. It should also recognize that there exists an element of schizophrenic attitude among local inhabitants: In private they prefer cheap and pliant immigrants as farm or household labour while in public they discard them. This makes the problem more complex.
>
>Therefore, a longer-term strategy should aim at altering the objective conditions. There should be well-designed attractive scheme of settling landless local inhabitants along the borders. They would greatly reinforce the existing vigilant force. Such a scheme at the same time would provide a viable means of sustenance to the landless poor. The other part of the strategy should be to upgrade technology in farms and other sectors. Such technology upgradation would necessitate higher skill, which immigrants do not have. Simultaneous effort to impart the required skill at the local level would meet the new demand while at the same time minimizing the opportunities for immigrant labour. With the expansion of the modern organized sector, the scope for absorption of immigrant labour will be shrunk. More so, when the land providing job avenues for immigrants as was the case
before, does not exist any more. Thus a strategy of introducing new technology simultaneous with generating the
> required skill at the local level would provide the longer-term solution to the much-vexed problem of population influx. The success of the Bangladeshi mass literacy and other development programmes with rising employment opportunities at home would further enhance the efficacy of the above strategy.
>
>Infrastructure Lags
>
>As indicated earlier, transport linkage with the rest of the country was the most serious handicap that the partition inflicted on Assam, the gateway to the other Northeast Indian states. It remained so even after a half a century of planning. Even in regard to other basic minimum physical, social and administrative infrastructures for unleashing growth dynamics it is highly deficient. Physical infrastructures such as power, communications, transports, irrigation, market access and so on, are grossly inadequate to generate a dynamic growth process. Inadequacy of all this is reflected in poor market incentives and thus in low productivity and growth in different sectors of the economy.
>
>However, the CMIE infrastructure development index for Assam (with weights given to transport 26 %, energy 24%, irrigation 20 %, banking 12 %, communication 6 %, education 6% and health 6% moved up 4 points above all-India average of 100 in 2000 from 93 in 1992-936 . Greater attention of the central government to the problems of development of the northeast region in the recent past might have contributed to this improvement at least in Assam. No study, however, has been carried out to evaluate the actual implementation of various packages announced in the 1990s.
>
>Given the critical role of Assam in the development of the entire northeast India, the creation of some of the crucial infrastructures has two important dimensions. First, because of the interdependence of the economic systems of the northeast, it is essential to develop a good network of inter-state transport and communication in addition to developing intra-state market and basic service accessibility. The remoteness and hilly terrain involves larger unit cost as well as maintenance cost. Again, for longer run connectivity and effective trade links, it is necessary to develop border road and water transport network in liaison with the neighbouring countries like Myanmar, South East Asia, Bangladesh and South China, which are very close to the region.
>
>Second, the full utilization of the power potentials of the region or effective flood controls in Assam not only requires heavy lumpy investment but also mutual understanding and cooperation of the individual units of the northeast.
>
>As to social infrastructure, it should be noted that several of the major changes in the 1990s- collapse of the socialist world and the emergence of a unipolar world order and globalization-are all essentially technology driven. The thrust on continuous skill upgradation, which would facilitate technology assimilation, absorption and innovation, would, therefore, be the best survival strategy for a developing country like India. This is all the more important for the northeast region with its unique features and problems requiring appropriate technological solution and with rich resources needing their economic utilization.
>
>By now Assam has established many educational and skill generating institutions. At one level, these institutions should be strengthened in terms of equipping them adequately with advanced training facilities and teaching aids. At another level, there should be networking with similar institutions of excellence located elsewhere. Administrative infrastructure will be taken up later with the issue of governance.
>
>Floods
>
>Floods have been another exogenous source of handicap to the development of Assam. Floods in the Brahmaputra and Barak valleys of Assam cause "serious erosion, loss of life and livestock and heavy damage to infrastructure and property retarding agriculural productivity on account of risk avoidance and sandcasting, disrupting communications and education and posing health hazards. Majuli island is threatened��.The floods damage to crops, cattle, houses and utilities in Assam alone between 1953 and 1995 is estimated at Rs 4400 crores with a peak of Rs 664 crores in a single bad year."7 The assessed flood prone area in the state is estimated at 3.15 m ha or 92.6 % of the cultivated land as in 1992-93 almost half of which (1.63 m ha) do not have any flood management structures. Even these limited flood management structures are poorly maintained. The master plan
prepared by the Brahmaputra Board involves Rs 1848 crores at 1995 prices for short time measures and Rs 50.000 crores for long
> term measures up to 2050. In the meantime the state governments continue with fire fighting operations and provide flood/ natural calamity relief causing a heavy drain on their otherwise meagre resources.
>
>Floods impeded the technological transformation of agriculture in Assam. For, farmers do not make farm investment for the fear of its being washed away by impending floods while the rest of the country perceive this reluctance as the manifestation of their indolence. On the other hand, no R&D efforts have been directed to find a high yield variety of crops that suit the agro-climatic conditions of the state.
>
>Unharnessed Resource Endowments
>
>It is widely recognized that Assam is a highly resource -endowed state. No doubt, the state is endowed with mines and minerals, water and forest resources, fertile soil and so on. In fact, crude oil production and its refining as well as tea plantation and ply wood industry are the few resource-based modern industries in the state.
>
>But both oil and tea industries, which have been existing for more than a century and a quarter, have not induced the industries that could have been developed on the basis of their backward and forward linkages. For example, tea plantation requires a wide variety of inputs such as fertilizers, chappals, umbrellas, small tools and so on. None of these backward linkage-based industries, though economically viable, was set up in the state. Instead, the industry depended on supplies from outside the state. This long dependence on trading has given rise to well-entrenched vested interests, which work against the emergence of local entrepreneurship.
>
>Similarly, oil industry had been hesitant for long to develop refineries, and petrochemical complex, which could have led to developing many downstream industries in the region. On the other hand, the surplus that accrued in these industries year after year was siphoned off to investment activities elsewhere.
>
>This has led to an �enclave economy� in which these few modern industries exist without having any linkage with the stagnant traditional activities. For reasons such as these, the resource-based extractive industries have come to be perceived as the symbol of exploitation.
>
>There are several other types of resource potentials, which are yet to be realized. Water resources and natural gas call for a special mention. Hydel power potential of the northeast is estimated at 38,000 MW or 30% of the country�s hydel potential. Natural gas based industries are also feasible.
>
>But harnessing water for irrigation and hydel power generation as also economic utilization of natural gas and other resources involves large lumpy investment, which the state with its stagnant or decelerating economy and revenue tax base cannot provide. The resources available in terms of plan assistance to these states can hardly be earmarked for such projects, as this type of investment cannot be made on incremental basis. Nor are these projects finding place in the Central Plan. As a result, water resources, which could have been the source of a vibrant economy, have remained a source of uncertainty, human suffering and property loss.
>
>Neglected Agriculture
>
>Agriculture and allied activities have overriding importance as a source of livelihood to the people of Assam. It still contributes more than one-third (35.1 % in 1995-96) of its NSDP and supports about 70 % of its population. But the average operational holing size is small at 1.31 ha as compared to 1.57 ha for all-India. On the top of it, 92.6 per cent of the cultivated land is flood prone.
>
>Given the overwhelming importance of agriculture in the Assam, its development should have received a very high priority in the planning process. But at the end of fifty years of planning, the net irrigated area as percentage of the net area sown area was only 20.6 % in 1995-96. The asset creation in agriculture and allied activities stood at only one percent of the total capital outlay of the Assam government in 1998-99 and even less (0.7 %) in1992-93.
>
>Good road net work, in general, and farm to market roads, in particular, as well as marketing infrastructure such as cold storage, which provide market access and remunerative price to farmers and thereby induce them to increase market surplus are grossly inadequate in the state. Only 20 % of the total roads in Assam are paved as against 44 % for all-India and nearly 100 % in Gujarat and Punjab. Even then the state has utilized only Rs.60 crore upto February 2000 out of Rs. 10,000 crore RDIF I-IV fund.
>
>The credit flow to agriculture is also very meagre. As in December 2000 Kisan cards to the entire northeastern states was only 2590 and crop loan was Rs 2.70 crore. It is no wonder, therefore, that only 39.7 % of the cultivated land were brought under high yielding variety in 1994-95. The fertilizer consumption (NPK) per hectare was just 12.8 kg against 74.8 kg for all-India in 1995-96. Only 2.3 % of the total electricity consumption took place in agriculture sector against 28.2 % for rest of the country in 1991-92. In a state of affairs such as this, it can only be expected that the crop productivity in the state was very low. For example, the productivity ( Kg per hectare) of its main crop, rice was only 71.7 % of the all-India average in 1997-98. Similarly, wheat productivity was only 52.6 % of all-India average.
>
>All this clearly brings out the stark neglect of agriculture. Its consequences on an economy with 89 % rural population are overwhelming. This is reflected in a much higher level of the people below the poverty line (36.09 % against 26.10 % for all-India).
>
>Minor Role of Manufacturing
>
>The secondary sector in Assam contributed 11.9 % of its NSDP as against the all-India average of 27.7 % NDP in 1996-97. Within it, the manufacturing sector claimed only 5.4 % in Assam as against 21.8 % for the country as whole. But construction had a much larger share (6.2 %) in that that (4.6 %) for the rest of the country in 1996-97. It is noteworthy that in the nineties the share of the secondary sector in the state�s income was fluctuating around 10-12 %, the manufacturing steadily declined from 6.5 in 1990-91 to 5.4 % in 1997-98. The number of factories also declined to 1514 in 1994-95 from 1548 in 1990-91. The contribution of the registered sector to the income generation fell continuously from 4.8 % in 1990-91 to 3.6 % in 1997-98.
>
>Even in regard to the unregistered manufacturing sector, its share in NSDP (1.6 %) was much lower than the all-India average level (8.2 %) in 1996-97. What is more, in contrast to the rising share of unregistered sector of the country as a whole, its role in Assam tended to decline over 1990-91. The point is that the manufacturing sector, which is already small, further decelerated in the nineties.
>
>The industrial sectors mainly consist of tea manufacturing, petroleum industry, first stage processing industries such as grain mills, wood and wood products based on local resources and demand induced industry like repair services. The few modern industries such as non-metallic mineral products and gas and steam that have come up in the state are also resource-based. What is more, except for the growth of some miscellaneous type of industries, the factory level industrial base had not been significantly altered even in 1997-98.
>
>Distorted Growth of Tertiary Sector
>
>While both agriculture and secondary sectors were losing their relative shares in the state income, the tertiary sector gained in importance overtime. Its contribution to the state NSDP rose to 46.7 % as against 43.6 % for the rest of the country in 1996-97 from 44.4 % (39.3 % for all-India) in 1990-91. But its growth is distortionary. It is reflected in the fact that the components of the tertiary sector that relate to infrastructural services not only claimed smaller share but also their role increased slow. For example, transport, storage & communication rose to 3.2 % of NSDP in 1997-98 from 2.8 % in 1990-91 while public administration did so to 7.0 % from 4.9 % in the corresponding years.
>
>Deeply Entrenched Interests
>
>The availability of various types of infrastructure is a necessary but not a sufficient condition for spurring economic growth. Their utilization depends on the response of the economic agents. For far too long, Assam is dependent for the supply of most of its requirements on the rest of the country. The extent of such dependence is estimated at Rs.2500 crore annually for the northeast as a whole.
>
>This vast requirement is available through a trading and distribution network. The trading network was organized on the basis of monopolistic competition. In many situations, traders collude for price advantage. Trading margin being high, the investment on commodity production is understandably not preferred. It is so, particularly because the risk factor is higher in a perennially disturbed environment as well as in a situation where adequate infrastructure is lacking. What is more, instances are not few to show that such deeply entrenched mercantile capital has militated against the emergence of local entrepreneurship.
>
>All this eventually means that the economies do not stir and fail to meet the growing aspirations of the people, particularly the younger generation. This, in turn, provides a fertile ground for grooming various militant groups or a spurt of popular uprisings. In some sense, lack of growth and disturbed environment feed on each other. This is exactly what is happening in most of the northeastern states.
>
>Unaccountable Governance
>
>While public administration gained in importance, the governance in the state was remarkably poor. Responsive and accountable governance has enormous consequences on the pace and quality of growth in an economy.
>
>This leads us to an important question: Why have some states in India developed faster than the rest? It is certainly not because of resource endowments. Bihar or Assam or Orissa with resource abundance are some of the least developed states. In contrast, Gujarat with no great claim on resources has grown faster than most other states.
>
>Is it then due to closeness to the national market? Why has not then the UP or MP being at the centre of the national market recorded high growth? On the other hand, Karnataka and Tamil Nadu even though away from the national market have grown faster. Haryana, which had poor infrastructure at the time of its creation in 1966, is one of the fastest growing states. The point is that widely recognized factors such as resource endowments, closeness to national market, and so on are by themselves not sufficient to spur growth.
>
>It can be hypothesized that consistent pursuit of clearly defined priorities over a long period percolates down to the economic agents, who start demanding the state machinery to address their problems quick and thus lead to a better delivery system. In the process both the political masters and correspondingly bureaucrats over time become accountable to the economic operators for better delivery, which eventually induces growth To illustrate the point, Punjab and Haryana accorded consistently high priorities to agricultural development. When these priorities got trickled down to the farmers, they created pressures for releasing the operational constraints faced by them. Industrial development in Gujarat and Maharashtra as also the development of the social sector and its efficient delivery in Kerala could perhaps be attributed to a clear and consistent prioritisation and
evolution of a mechanism that ensures powerful feed backs between decision makers and economic agents.
>
>Lack of unaccountable and unresponsive governance has manifested itself in many different ways in Assam. I may indicate a few, just to illustrate the point.
>
>
>Apart from its planning efforts being constrained by a narrow tax base, Assam�s approach to development was perfunctory without a clear set of priorities in an well-articulated perspective. As a result, its development efforts remained diffused without resolving any of its major constraints or achieving success on the basis of the areas of it strength.
>
> A large gap in whatever plan programs formulated and their implementation led to many incomplete projects in several sectors such as irrigation and power.
>
>
>While government expenditure increased leaps and bound with bulging central assistance, the development efforts and the delivery system weakened. As result, the capital development expenditure fell with every passing year: it dipped to 1.5 of its NSDP in 1997-98 from 3.0 % in 1980-81.
>
>
>What is worse, in absence of much job opportunities elsewhere, the Assam government wide opened it coffers for absorbing more and more government employees: more than nine-tenth (90.9 %) of its tax and non-tax revenue inclusive of share in central taxes and non-plan grants went for maintaining the government servant, past an and present i.e. wage and salary and pension bill in 1997-988 .
>
>
>Finally, at one level, wide spread cynicism of the bureaucracy has become both cause and effect of a non-challant approach to development. At another, the widely perceived phenomenon of growing leakage in government funded programmes and corruption has greatly eroded the credibility of the government system.
>
>Understanding the Assam economy
>
>A 64 X 64- sector input-output table with 16 primary sectors, 39 secondary sectors and 9 tertiary sectors constructed for 1982-83 brings out a few important features of the state economy9 .
>
>
>The inter-sectoral interdependence of the Asam economy is low, about 70 % of the cells being empty. Agriculture, petroleum and tea industry, in that order, are the three most dominant sectors in the Assam economy.
>
>
>The inter-sectoral production linkage is very weak, intermediate consumption being only 35% of the gross value of output.
>
>
>Except for 17 commodities/sectors such as other cereals, sugarcane, jute other crops, crude oil, tea, petroleum products, plywood, silk textiles, refractories, and non-metallic mineral products, Assam is heavily dependent on net imports for meeting its internal demand.
>
>
>The fixed capital formation (inclusive of change in stock) in the state as low as 6.5 % of the gross value of output.
>
>
>The prime exports mostly consist of primary resource based products such as tea, plywood and crude oil and petroleum products.
>
>One way of taking a view of the development of an economy could be in terms of its sectoral contributions towards generation of income, output, employment and creation of impulses in other sectors through intersectional linkages. This could be evaluated on the basis of sectoral linkages, output and income multipliers based on input-output table.
>
>An exercise10 made taking the structure of the Assam economy for 1982-83 identified top five sectors on the basis of backward linkages as: non-ferrous metal products, leather and leather products, non-metallic mineral products, electrical equipment and tea machinery and on the basis of forward linkages as iron and steel. Trade, storage and warehousing, crude oil and natural gas, animal husbandry and petroleum refining.
>
>The first five sectors on the basis of output multipliers came out to be: non-ferrous metal products, non-metallic mineral products, electrical equipment, tea machinery and printing and publishing. In aggregate, secondary sector has the highest output multipliers followed by the tertiary sector and then by the primary sector. This suggests that the growth of manufacturing sector drive the gross domestic product.
>
>Similarly, the top five sectors on the basis of high income effect (both direct and indirect) are: grain mill products, edible oil, sugar, non-ferrous metal products and jute textiles. This suggests that agro-based industries in the secondary sector have higher impact on income growth. In aggregate, however, it is the primary sector that has the highest income effect followed by the tertiary sector and then the secondary sector.
>
>The results presented above are undoubtedly based on an exercise that is dated. But the basic insights that it has provided are still relevant partly because the structure of the Assam economy has not drastically altered. It also provides important clues to the basic question that this paper has addressed.
>
>What all the above add up to?
>
>Essentially, exogenous constraints as well as faulty planning priorities or lack of any impeded the growth process in Assam. Snapping of traditional trade and transport links, population influx and geographical and economic isolation, all in the aftermath of partition acted as major binding constraints on Assam�s development. The announcement but indifferent implementation of several packages by four successive PMs-basically recycled the components from one package into another- since mid-eighties has not done much yet to neutralise to any significant extent the handicaps that the partition inflicted on the state economy. The Shukla Commission recommendations on backlogs in infrastructure found but only peripheral place in the package announced subsequently.
>
>Floods that the mighty Brahmaputra and its tributaries cause year after year still act as a severe deterrent to the technological transformation of Assam�s agriculture that support more than two-thirds of its population. Effective flood controls or management involve large lumpy investment that is far beyond the means of the state government.
>
>Harnessing its enormous hydel power or oil and natural gas also involved lumpy investment. Non-availability of investible resources of that order led to huge delay or non-realisation of its potentials. In all fairness, it should also be recognised that the state government�s compulsion to deal with various protracted movements by its different parts for autonomous units/states was a distraction away from economic development in the first quarter century since independence (till 1972.when Meghalaya was curved out of Assam. Even later the movement for Bodo land and insurgency continued to demand engagement of resources and attention.
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>Apart from these exogenous handicaps, The state government failed to formulate a set of priorities in the context of its objective realities. Its planning efforts were faulty and diffused in several ways. For example, given its importance in the state economy, the investment on irrigation, flood control, rural roads, marketing infrastructure etc should have received a major thrust in its investment plan consistently over a long period. Given the potential as also market demand, other allied activities such as horticulture, fisheries and forestry deserved a far larger investment priority.
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>Faulty strategy was also reflected in wrong type of capital investment, declining capital investment, inadequate and low quality infrastructure such as power, roads and other rural infrastructures. On the other hand, the state government failed to create a favourable environment for private investment to supplement its efforts.
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>It is true, however, that low fiscal capacity has always a great handicap to make best use of even available central assistance. For example, the Assam government lost Rs 650 crore central fund meant for rural development during the last four years for failing to pay the �matching share of 25 per cent of the total allocation�.
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>To sum up, Assam�s economic development can be viewed in a more general framework. Many factors facilitate or inhibit economic development of a state. These factors can be classified into two sub-sets: One relates to supply side while the other to demand side. Resource endowment, infrastructure support, evolution of right type of institutions, access to market, availability of human capital in the form of entrepreneurship and skilled labour, credit availability etc are all important determinants affecting supply side. The income level and its distribution are amongst the important factors operating on demand side. Both the sets of factors need not be binding for the development of a state, which is a highly open economy.
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>However, the working of the national economy over the past 50 years has favoured some and differentiated against several other state economies. In the process of evolution of the national economy, product and money/credit market got integrated faster with the national market while labour market integration was hindered by several rigidities emerging especially from labour surplus situations.
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>When supply side factors are not equally conducive to all states, integrated product and credit market unaccompanied by similarly integrated labour market has led to a larger inflow of goods into and outflow of savings from a state- kind of reverse flow of resources from the less developed to the more developed state economies. More important, such asymmetry results in adverse effect on local industries by way of introducing competition from technologically superior counterparts. This process is eminently discernible in the context of the entire northeastern states.
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>It is in this general framework that the slow growth or the deceleration process in Assam has to be understood. As detailed earlier, the state is hugely deficient in administrative, social and economic infrastructure, as also human capital, all supply side factors. This coupled with poor and uncertain law and order situation does not make Assam a favoured destination for private investment even with tax holidays or freight subsidy as has been extended. On the contrary, there are reports of flight of capital from the state to Siliguri.
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>Even the few modern industries that exist in the state operate in an enclave-type of economy with very little or no linkage at all with its traditional industries. What is worse, the investible surplus generated in these industries is not ploughed back in themselves or in those industries that are viable on the strength of their backward and forward linkages.
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>On the demand side, rising income, even if at a slow pace and in favour of a smaller segment population has induced demand effect that is not supported by the state�s production base or lacks any linkage with it. The Jain Committee (1990) estimated an annual outflow of the state at Rs.700 crore in terms of the procurement of foodgrains, fish, edible oils and other food items alone to other states.
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>Thus neither demand nor supply side factors are favourable for higher growth in the state. On the other hand, the state interventions in the planning process failed to make much difference to the situation for the reasons discussed earlier.
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>Reflecting on how to go ahead
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>The development strategy for Assam has to be based on the explicit recognition of the following:
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>First and foremost, development initiatives have to be in many directions all at the same time within a clearly articulated framework. These have to be of such vast coverage though not necessarily in cost terms that people in general and the younger generation in particular perceive an economic stir all around and promises for them. It is important in a state that has witnessed a massive unemployment among the educated youths: they constitute 70% of the total unemployed (10 % of its population).
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>The development strategy should accept some of the existing constraints as given in the short to medium term and aim at maximising the gains within them. IT revolution if properly taken advantage of, could more than neutralise some of the existing disadvantages. It could also contribute towards more responsive and accountable governance as also facilitating upgradation of skill and technology through networking with national/international R&D institutions. Its potential in fact is immense.
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> The seven states that comprise the region are essentially interdependent sub-systems both in terms of historical background and geographical location. This calls for an integrated approach to development for the entire region. North Eastern Council if restructured appropriately and NEDFi can play an important part in this regard.
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>The unique features of most of these economies make it difficult to adopt a development strategy entirely based on the experiences of the rest of the country. It is, therefore, important to evolve an appropriate development strategy taking into account some of the state�s strengths: the tradition of self governance, liberal social outlook, greater women participation in economic activities and popular awareness and interest in economic development, on the one hand and learning from the small successes ( tea growers� association, for example) on the other.
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>Concerted efforts are required to equip adequately the existing educational and technical institutions and build new institutions for generating marketable skills, on the one hand and to build the capability to adopt and absorb new technologies on the other. Equally important is to evolve the existing economic institutions and agents to make them technology friendly.
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>Transfer of all functions and revenue sources with local base to the Panchayats will go a long way in improving delivery system and enlisting local participation.
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>Hydel power potentials, if realised even partially, could be a source of attraction for power intensive but cleaner industries or at least a source of revenue from power export.
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>This region has all the important attractions- hill resorts, pollution free environment, water, natural game sanctuary etc- which, together provide an excellent potential for an important tourist belt. Tourism, if developed linking East Asian countries will contribute to income and employment generation directly in tourism-related sectors and indirectly in the well-developed labour intensive handloom and handicrafts. NEDFi can take the initiative of preparing a master plan for tourism development in the Northeast.
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>The present mercantile capital should be encouraged to invest on linkage-based industries and on those whose products have markets in the neighbouring countries such as Bangladesh, Bhutan and South East Asian countries.
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>Having lagged behind in terms of the level and quality of administrative, social and economic infrastructures, Assam and other NE states will not attract much private investment flows immediately. In the immediate future, therefore, the public sector has to play a much greater role particularly in the infrastructure sector.
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>At the sectoral level, thrust on agriculture, fisheries, animal husbandry, horticulture, bio-diversity, and forestry including farm forestry in the primary sector will be appropriate both on the considerations of excess demand and supply potentials. In the secondary sector, thrust should be generally on environment friendly industries. Industries based on forward and backward linkage of tea and petrochemical industry and processing industry of horticultural products have very good chances to succeed. In the tertiary sector, tourism related activities, road and marketing infrastructure, communication and skill generation and upgradation in general and for IT in particular and R&D, to indicate a few, should be high on agenda.
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>Finally, the need for hydel and coal and gas-based power generation, flood control and irrigation, strengthening road and communication connectivity between the NE states and with the rest of the country and promotion of border trade can hardly be overemphasised.
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