Economics of Underdevelopment
Reading the North East

By Dr Thingnam Kishan Singh *

History of economic development is as old as the history of human society. As human existence progressed, development has remained a central concern. What necessarily constitute development or the parameters of development or how do we understand development contextually has perhaps been one of the most enigmatic issues in the domain of human and social sciences. As human beings organize themselves into communities and societies with characteristic features of production based on surrounding environment development inherently deposits the centrality of production that sustains human life. Modes of production therefore are necessarily correlates of modes of development. Change in the mode of production inevitably conditions the nature, scope and impact of development.

Development debates vis-�-vis the North East generate polarized positions. What has perhaps been postulated as complex as far as development debates of the region are concerned conspicuously underlines the marginality of the debates themselves. Purported complexity of the issue has been an overarching articulation amongst the policy makers in New Delhi. At the outset, it is important to note that conceptualizing the region as a compact entity is not without problems. However, location, history and culture have contributed to the region's characteristic distinctiveness where difference with mainland India is at once immediate and striking. Given the historical evolution of the region as an entity in terms of the geographic, political, economic and social space in occupies, modern understanding of the region apart from its historico-cultural configurations is intertwined with colonial geography and historiography. Even since British colonialism took roots in Bengal in mid eighteenth century a systematic attempt to explore the 'frontier' of Bengal remained an obsessive concern for the colonial administration. As it used to be known during those days the 'frontier region' of Bengal was loaded with things important for the 'empire' (Mackenzie 1884) (Reid 1942).

Rivalry among European colonial powers over colonial expansion led the British to concentrate initially on mainland India with the coastal regions perceived as strategic both in terms of economics and politics in line with its maritime framework. However as colonial expansion proliferated across the length and bread of the Asian continent, increased and intensified competition between the English, French and Dutch in Southeast Asia had repercussions in this otherwise 'wild' region marked by 'inhospitable terrain' with mountains, deep gorges, ridges, hills and villages. Consolidation of colonial domination in mainland India alongwith expansionist threat posed by the French in Indo-China led the British transform their exploration of the region to the perpetration of the colonizing process (Thingnam 2006). As the nineteenth century progressed the British colonial authorities in mainland India grew extremely conscious of the strategic importance of the region (Mackenzie 1884)(Reid 1942). Since the outbreak of the Anglo-Burmese war in 1626, the British raj made a conspicuous attempt to expand eastwards. Ahom (Assam) was the first casualty as the British soon overran the fertile Brahmaputra and Surma valleys. With the signing of the Treaty of Yandaboo in 1826 Manipur also became an important entity for the British. This moment of colonial impact triggered a series of events leading to drastic changes in the region. It was crucial for the colonial regime to incorporate this region in its colonial domain so as to open the vital transit route to Burma and Thailand, which eventually became part of the British overseas empire.

With the extension of colonial domination to the kingdom of Ahom in the first half of the nineteenth century, a gradual process went hand in hand with the subjugation of the 'wild tribes' in the mountains of the region --- Lhota Nagas in 1875, Angami Nagas in Angami Hill in 1878-80, Ao Nagas in 1889 and Lushais in 1871. Colonial geography replete with colonial cartography systematically organized administration of the region to facilitate economic exploitation. Territoriality of the empire inscribed in colonial geography was thereby responsible for constructing the dynamics of a political economy marked in terms of an idea articulated as a region. Transformation of the whole region into a frontier apparatus of the colonial possession in India led the British to extend their influence and domination over the entire region. Inscribed in this colonial geography was the visualization of the region as a frontier area for their prized possession known as 'the jewel in the British crown' (Reid 1942).

It soon dawned upon the colonial apparatus to explore the necessity of exploiting the immense resources of the region. Plundering of the resources in the Brahmaputra and Surma valleys got underway as the British realized that it could add substantially to their coffer. In the process, Ahom witnessed a kind of colonial domination more intense than other parts of the region (Guha 1991). Even since the first half of the nineteenth century the Lakhimpur district in Assam witnessed frantic settlement programmes undertaken by the British to exploit the tea potential. Tea bushes were discovered in the area, which was then sparsely populated. As a cash crop tea was responsible for systematic and organized expansion of the plantation economy whereby immense British capital could find profitable investment. Vast tracts of uninhabited land throughout the Brahmaputra valley were soon reclaimed and acquired through meticulously crafted land reform policies meant to sub serve the interests of the colonial power. 'Tea mania' led to unchecked expansion of tea plantations with easy access to land dexterously dispossessed from the indigenous population. Speculative aspect associated with this mad rush for land for tea plantations undermined and affected productivity in the region. Massive surplus thus extracted from the plantations were exported outside the region to different parts of mainland India and elsewhere in Europe (Ahmad & Biswas 2004). Colonial economies thereby created foundations for underdevelopment in the region.

The neighbouring areas were marked as the North East Frontier Agency (NEFA) with substantially lesser interest taken by the colonial authority (Elwin 1964). Leaving the extremely difficult upper ridges of the mountains the adjoining areas known as NEFA witnessed the introduction of a monetized economy hitherto unseen before. Traditional trade carried on under an equitable exchange system suffered immediate rupture as a system of unequal exchange based on cheap manufactured consumer items flooded the hill areas. A penchant for these otherwise frivolous items grew alongside the rapid strides made by cultural imperialism as the tribes become increasingly dependent on imported commodities. In the meantime, a merchant class of Marwaris and Bengalis from mainland India sub-serving the interest of the colonizers were introduced to facilitate monetization of tribal economy in the region. This merchant class introduced opium and carried on a brisk trade with far reaching consequences for the people in the hills as they were made to trade natural products like timbers and rubber for opium. Dependency thus grew amongst the tribes for manufactured commodities from outside and along with consumption of opium destroyed the traditional economy and depleted traditional resource base (Ahmad & Biswas 2004:52). Integration of the economy of the region into the world capitalist system through the mechanics of colonial imperialism led to its transformation into a peripheral underdeveloped economy.

Even as India started to embark on the process of industrialization during the later half of the colonial period due to concomitant and corollary efforts of the British and the emerging Indian capitalist class transformed from its feudal base --- there was a conspicuous absence of similar developments in the North East. British colonial policy of visualizing the region as a frontier periphery largely contributed to the undermining of any productive based effort in the North East. Colonial interests in the region were served incredibly well by the merchant Marwari class who exported the surplus of the region. The smooth running colonial economy through the facilitating role played by these Marwaris who extracted and exported surplus could not afford jeopardisation as far as any substantive attempts to develop the industrial potential of the region was concerned. Mention may be made of the surreptitious role played by the Marwaris who in their extraction and export dynamics created artificial scarcity of rice in Manipur in 1939 ---the year in which production level was highest --- which is turn led to the Second Women's War (Nupilan) (Karam 2006). Surplus export had touched new levels whereby artificial scarcity was created. Close survey of the economic undercurrents in the region since the British colonial intrusion reveals the steady emergence of the region's economy as a peripheral capitalist economy vis-�-vis its integration into the world capitalist system during the colonial period. It was essentially during this period that the economy of the North East underwent a transition from its various pre capitalist social formations to a quasi-capitalist organization of productive forces. It can therefore be argued that such a transition was not a result of strictly chronological features. The region's historical development and progress of its mode of production have not yet had the necessary material base nor the time required to transform itself successfully into a capitalist system. What happened was the thwarting of the regions potential to transform its productive forces in order to evolve a truly meaningful development framework of its own. Instead, it witnessed the introduction of an economics that benefited the colonizers and the mercantile class of outsiders comprising of Marwaris and Bengalis. Traditional resource base and economic modes in the tribal areas were ravaged with their integration into the colonial economy. Destruction of the fragile tribal economy and subsequent emergence of a new base for creation of a modern economy based on colonial exploitation characterized the hill areas in the North East. In the area marked as NEFA traditional economic arrangements like the posha through which the tribal people levied taxes on material goods of the plains' people rapidly eroded as a result of the introduction of a monetized economy. The tribal in the hills were soon deprived of the right to levy and collect taxes. Market relations introduced by the colonial authorities along with the steady implantation of a trading class comprising of Marwaris and Bengalis ruptured the traditional network in the region. Distribution, circulation and exchange of products between the hills and plains differed immensely (Mishra 1983). These transformations were instrumental in converting the region into a peripheral economy replete with the system of uneven trade devised by the British policy of opening up of local barriers. Obliteration of the traditional barriers that gradually led to the influx of immigrations introduced as a part of the colonial class to facilitate the transformations through an intermediary class discouraged local entrepreneurship (Ahmad & Biswas 2004:53). Enjoying patronage of the colonial authorities and superior financial and material resources and networking relations these absentee interests soon controlled the entire economic landscape of the region. Meticulously crafted colonial policies surreptitiously made rapid inroads to increase dependency of the tribes on unequal trade with the emerging commercial class to sub serve the interest of exerting pressure to extract concessions for colonial expansion (Sikdar 1982). End of British colonial domination in the subcontinent in the post Second World War era did not produce any path breaking changes as the region continued to reel under similar conditions in the face of an external market, now in the form of the mainland India market and its dominant capitalist class (Mohapatra 2002:24). Integration of the North East with the successor Indian state in the post British period - starting with the 'merger' of Assam, Manipur and Tripura in 1949 - failed to produce the dynamics of a successful transformation in terms of economic development. Mere semblance of a socialist pattern through indicative centralized planning over the last five and a half decades miserably failed to generate development and transform the region's backward and underdeveloped economy. Reasons are not far to seek. As decolonization dawned in the post war years it remained imperative for the newly decolonized to choose between two modes of development - the capitalist and the socialist. India's capitalist logic of development - evident in its indicative planning and mixed economy with massive deficit financing of the private sector by the state - concentrated and confined development in certain industrialized metropolitan pockets. It has been widely argued that the Indian state perpetuated the legacy of colonial economy with the capitalist mode of production in the post British period as a result of the alliance and collaboration between western metropolitan capital and the indigenous capitalist class (Patnaik 1999). The Indian indigenous capitalist class located in the industrialized locations in the mainland had already made significant inroads in the colonial economy during British rule. It is pertinent to note that British departure did not entail a similar picture as far as Western capital was concerned. Indian economy was still under impact at capital investment from Britain and other Western capitalist powers. Western capital still had immensely high stakes in India. Significantly, it was the successor Indian state that became instrumental in propelling capitalist development by evolving complex strategies for achieving growth of capitalism in India (Bhambri 1988:6). Mobilization of resources on a large scale for investment and the resultant high capital-output ratio reveal the logic of capitalist contradictions. Capital driven development was concentrated in certain specific locations in mainland India while the North East as a region continued to suffer from a perpetuation of the logic of underdevelopment. Development issues per se in the North East continue to reflect the structural inequalities of patterns of economic relationship with both the global capitalist system and the newly emerged Indian capitalist system. State intervention in the post integration period has been directed from the top. It is an explicit super structural intervention without a firm base transformation. The super structural excrescence resulting in stark disparities in terms of economic development can be seen clearly.

Development debates on the North East in mainstream Indian intellectual discourse - which ironically exudes a journalistic and bureaucratic slant reflective of the work done by journalists and bureaucrats posted in the region - have conspicuously ignored the inextricably intertwined relationship between modes of development and modes of production. In a characteristic mould, economic backwardness in the region has been seen and analysed through the lens of an a priori integrationist model over zealously and fervently working towards the creation of a monolithic discourse. Insularity has been a characteristic hallmark of these analyses on the region's economic standing as the basic issue of production was conspicuously overlooked. Beyond the stereotyped premises of 'neglect' or massive allocation of funds through central assistance, serious study of the region's productive management is yet to be seen. The core issue of production engaging different aspects of production sectors and potential has largely remained on the margins of development debates. Economic development sans production issue can only generate haphazard polices which in turn will eventually render multi million economic packages and central assistance lopsided and meaningless. Underdevelopment of productive forces in the region is something that needs a detailed analysis to understand the failures behind the much hyped economic policies and packages designed in the power corridors of New Delhi.

Failure of economic policies and packages in the North East can be perceived strikingly clear from a cursory glance at some of the basic indices commonly used to measure the state of economic and social development. The per capita net state domestic product of the constituent states of the region indicates a dismal picture of disparity in comparison with the all India average. Massive underdevelopment formed the matrix of the fact that when India's gross domestic product was growing at an average over six percent in real terms, economies of the region were growing at a lesser rate during 1992-99. NSDP of the seven states of the region has shown a marked decline aver the years. Decline in the annual average growth rate of NSDP has been ascribed to the increase in dependent accumulation in the region (Ahmad & Biswas 2004:63). Even as GDP is known to hide many things, a low NSDP is not considered congenial for improving the living conditions of the people. With a primarily agrarian based economy that still caters to subsistence production rooted in obsolete methods of farming, the unmechanized and uncommercial nature of agriculture in the region is a sector on which more than seventy percent of the population depends upon. Population engaged in agricultural activities for livelihood constitutes the majority showing intense disparity with the all India average. High dependence on an otherwise primitive agriculture based on subsistence level of production indicates the nature of the underdeveloped economy of the region. Increasing pressure on land as a result of population growth compounded by the quantum leap through massive influx of immigrants from Bihar, Bengal, Orissa, Rajasthan, Punjab, Bangladesh and Nepal and recent trends in the wake of globalisation triggered liberalization transforming cultivation configurations from food crops to cash crops contribute to significant increase in dependency. Increasing trends of displacement of rural cultivators as a result of haphazard urbanization without concomitant creation of productive base have been widely noticed. Dependency is aggravated and exacerbated in the face of decreasing production levels in agriculture, which ironically constitute the mainstay of the region's economy. Dwindling productivity in the primary sector in turn increases dependency. Studies conducted on production in the primary sector have shown how a traditionally surplus exporting economy like Manipur --- even during and after British colonial occupation --- has been transformed into a net importer. Rice as the staple food grain cultivated in Manipur always reached surplus production levels with subsequent export of the surplus. However, ever since Manipur's 'integration' into India in the post British period, alarming decrease in production levels has been noticed with its subsequent transformation into a rice importing state where twenty percent of its requirement is imported from mainland India (Chongtham 2005).

Despite the polemics surrounding the use of per capita income as an important indicator in assessing poverty and economic backwardness - its limitations not withstanding - it is however generally true that people in areas with low per capita do not live well. The per capita picture in India reveals striking disparities with the states in the North East displaying pathetic levels. Generally speaking, a cursory glance at basic statistics speaks volumes for increasing dependency of the region. Per capita income in Assam in 1950-51 was found to be 4 percent above the all India average marking it as one of the most prosperous state in the entire eastern belt. However, decades of centralized planning have led to a drastic fall showing it at 41 percent below the all India average in 1998-99 at current prices and 45 percent below the all India average at 1980-81 prices. While per capita income at 1980 prices grew by 40 percent for all India during 1980-90, Assam's grew by only 20 percent. When all India growth rate of per capita was 37 percent during1980-1998 in Assam it grew by just 10 percent (Assam Development Report, 2002). Similar picture avails in the other states of the region.

Majority of the population in the region still live below the poverty line. Mass poverty as an acute problem is complementary to income inequalities. Estimate based on the study by a Planning Commission Group headed by Lakdawala gives a figure of 36.5% of the total population of the region living below the poverty line. Using an important index of human poverty Index (HPI) --- ���a composite index frame on the basis of deprivation in economic, educational and health sectors all equally and proportionally given due weight age, the North East region represents a dismal picture in both the urban and rural areas. Drawing the comparable data of 1981 and 1991, there is an in significant or marginal improvement in Assam, Arunachal Pradesh and Mizoram while the other states have significantly declined rapidly (source: Compiled National Human Development Report 2001).

Massive underdevelopment in the region is compounded by the increasing trend of deindustrialization. In states like Manipur all the districts fall under the category of 'No Industry district' by all India standards (Hanjabam 2006). Virtual absence of industrial infrastructure, compelling the region to depend only on the primary sector of production, even after five decades of centralized Indian economic planning conspicuously narrates the saga of underdevelopment (Agarwal 2005:116). Starting with the second Five Year Plan more widely known as the Mahalanobis Plan for intense industrialization in India, economic planning has never relegated the importance of creating industrial base to modernize the economy. However, in the North East increasing deindustrialization presents a different story altogether (Chongtham 2005). Sheer absence of industrial development and production units in the secondary sector indicate the persisting peripheral status of the region's economy. Increasing dependency marks the economy of the region with heavy imports of consumer and non-consumer commodities from the mainland which in turn virtually make it impossible for the region to carve a path for economic self-reliance. It has been estimated by the Shukla Commission that over 2,500 crore rupees worth of consumer items are imported from mainland India annually. Glaring instances of dependency are provided when Assam, the most 'industrialised' state in the region, imports seventy four percent of its milk product, ninety eight percent of its meat requirements and 94 percent of its eggs from outside the region. Inspite of heavy rainfall and natural abundance of water resources, the state imports half of its fish requirements from outside (Ahmad and Biswas 2004: 56). Manipur, traditionally self sufficient in fish production with a large variety (Brown 1873) today imports more than three fourths of its requirement from outside, the bulk coming all the way from Andhra Pradesh. It is indeed a bizarre sight to see that a predominantly rural Manipur has to import nearly all its egg and poultry requirements from a distant Andhra Pradesh. The fledging poultry sector in the state catering mostly to meat production in also filled with incongruous terms of trade where one to seven days old chick are flown in by air, supplemented by all the feed items right from the initial to the consumption stage coming from states like Orissa and West Bengal. This anomaly renders it impossible for local entrepreneurs to successfully develop a self-reliant poultry. It has also been noticed that the low credit-deposit ratio in the region leads to the transfer of 5000 core rupees annually to other regions for investment by the banking sector. Lopsided and haphazard development policies rafted in the ivory towers of New Delhi detach the issue of production from development. Thwarting of local productive forces and failure to develop productive base tend to increase dependency on the mainland. Transformation of the region into a market for manufactured goods from mainland India went hand and hand with increasing underdevelopment in spite of sheer abundance of prime resources like oil, timber, tea, gas, limestone and other forest resources (Ahmad and Biswas 2004:55).

The predominant feature of underdevelopment, evident in the conspicuous absence of industrial and production base in the region, has been conveniently ignored in mainstream development debates. Uneven and unequal regimes of exchanges seen so far ironically subserves the interests of capital elsewhere representing the legacy of underdevelopment of a region considered a frontier in so any ways. Even since the British colonial period, the oil-bearing area in Assam has seen a meticulous exploitation of this precious resource (Edney 1997). The British knew of the existence of oil in the hills of upper Assam as early as 1825 and identified the oil bearing belt which runs from extreme northeast of Assam to the eastern border of the Brahmaputra and Surma valley. Drilling of oil commenced in 1866 and 1865. The British company Mc Kellop Steward and Company drilled many shallows wells near Makum during 1866-68. Soon it led to the discovery of Digboi oilfields, the biggest oilfield in the subcontinent. Annually it raises about four lakh tones of crude oil. Situated 30 kms away from Digboi is the Naharkatiya oilfield discovered by Assam Oil Company, an Indian Government undertaking, in 1955. Naharkatiya is the second largest oilfield in India with oil reserves estimated to be about five million tones. Bappapung, Hansan pung, Hugirijan and Moran, located about 40 kms southwest of Digboi, are also important oilfields. Mention may be made of the fact that quest for oil formed an important part of the colonial enterprise in the region.

Post British oil industry never witnessed any radical departure, as Indian state monopoly was the only significant replacement that never really percolated to the basic foundation of the region's underdeveloped economy. It remains a sector existing to meet demands elsewhere on unequal terms of exchange. Set up in 1901, the Digboi refinery has not grown in terms of installed capacity even as it continues to be the main and the most important supplier of crude refined elsewhere. Its installed capacity is a mere 5.20 lakh tones. The Noonmati refinery near Guahati under the Indian state owned Indian oil Corporation (IOC) with an installed capacity of just 8.8 lakh tones and the Bongaigan refinery set up in 1978 west of Guahati with a capacity of 10 lakh tones stand in marked contrast with the Baruni refining in Bihar, a non oil producing area, set up in collaboration with USSR. Production in the refinery began in 1964 with a refining capacity of 33 lakh tones, the rider being its total crude receipt from the oilfields in Assam.

The logic of ruthless plundering of the resources without proportionate returns to the people of the region can be substantiated by the sheer discriminatory rates of revenues between the centre and state. A cursory glance at the revenue sharing rates speaks volumes for the nature of resource plundering. The royalty Assam got for its oil during the mid eighties witnessed a marginal increase from Rs. 325 per tone to its current rate at Rs. 632 per tone in comparison to the center's earning at an average dividend of Rs. 2623 per tone. It is equally distressing to learn that two

third of Assam's crude oil is transported outside the region for refining. In the midst of widespread demand for an optimum capacity refinery to refine its crude Assam got a toy refinery at Numaligarh (Biswas 2006:235).

The tea industry in Assam also experienced similar patterns of extraction and exploitation. Even since discovery of tea by the British, a mod rush for plantation culture proliferated with tremendous growth of tea estates. Departure of the British eventually saw the exit of European companies with subsequent increase in the number of estates. Statistics reveal the rise of tea estates from 785 with an acreage of 155,674 hectares producing 15,03,70,000 kgs in 1951 to more than 848 tea estates with an acreage of 2,36,811 hectares producing 40,29,47,000 kgs in 1993 (Nag 2006:130). Drain of profit in the tea industry is also colossal. Figures indicate that Assam produced an average of 250 million kgs annually during 1962-1999 at international price estimate of 2.5 US dollars. However, it is distressing to learn that the tea companies --- almost all of them owned by outsiders --- have invested almost nothing in the state from this staggering amount. These are ample evidence of the ways in which the resources of the North East are drained out and transformed into sources of profit in elsewhere whole simultaneously unleashing a chain of exploitations networks shifting the development outputs from the region (Biswas 2006:235)

Forest resources - found in abundance in the region - have been similarly plundered and exploited ruthlessly. Assam, Arunachal Pradesh, Nagaland, Meghalaya and Manipur have suffered the consequences of mindless and ruthless logging and lumbering business catering commercial interests of outsiders. With the erosion of traditional indigenous modes of replenishment and aforestation in these traditionally forest based economies along with the displacement of tribal population as a result of forest laws enacted in the distant power corridors of New Delhi, the region has witnessed an upheaval in the face of the state exercising absolute monopoly of control. The nature of ruthless plundering and exploitation can be comprehended by the virtual absence of any substantial forest based industry in the region except for the odd miniscule saw mills and a few paper mills in Assam. Timber from the region feed the plywood industries in West Bengal, Delhi, Uttar Pradesh, and Haryana etc. The finished products find their way in the domestic and international markets. In typical peripheralisation fashion, the region still performs the role of a supplier of primary products to feed the industries located elsewhere in different parts of mainland India. Paper, plywood and other forest based products like, paper gum; resin, lac and all rubber items have to be imported thereby displaying the classic modus operandi of transforming the region into a monocultural economy. Diversification, that can be brought about only with substantial industrialization, is nowhere on the horizon. The nature of development policies therefore has not all addressed the basic and fundamental issue of production in the region. If production and modes of production in the region remain confined to the monoculture level --- where the region only acts as a supplier of primary products in these three sectors, oil, timber and tea --- development discourse will remain lopsided and haphazard. Development therefore should necessarily address production and generation of productive base in the region. Only when the region emerges as a strong producing base rooted in using the resources available for the benefit of its people, development semantics will assume a holistic nature. It will enable the region to utilize its resources meaningfully and erase dependency.

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