The Narendra Modi government wants the North-east to have a separate NITI Aayog, called the NITI Forum for North-east, for better delivery. Tripura was chosen as the destination for the first meeting of this newly-constituted body perhaps because the state has given a bigger thumbs up to the BJP than Meghalaya and Nagaland that went to the polls at the same time.

NITI Aayog vice-chairperson, Dr Rajiv Kumar has correctly pointed out that the North-eastern states suffer from reverse outflow of resources such as in tourism and human and private investment. The credit-deposit ratio hovers around 30 per cent and much of the credit availed by companies set up in the North-east are invested outside the region.

That is not surprising since the North-east has a low manufacturing capacity. Value addition for natural resources such as tea, petroleum and minerals like coal and limestone, and niche products such as turmeric and ginger all happen outside the region. This is one of the reasons for the high unemployment rate with Tripura leading the pack.

Communication, as pointed out by nearly all the chief ministers present at the meeting, is a huge bottleneck and prevents the outflow of products from the region such as flowers, fruits and vegetables. Hence inter-state connectivity and also connecting the seven states with the metros of the country would help enhance trade and movement of goods and people, and facilitate better tourism.

But the moot point is whether the creation of yet another institution for the region is the answer to the problems of under-development that plagues it. When the delivery system is weak and lacks clear objectives and timelines; when those implementing projects know that they will not be held accountable for their lapses and for cost and time overruns, then no amount of institutions can help the region.

This is precisely what is hindering development in the North-east. Having one meeting of the NITI Forum is fine as far as scoring political points is concerned but how does this new platform tie in with the existing North Eastern Council and Ministry for the Development of the North Eastern Region? Who is going to sit and sort out the deliverables from each of these institutions? This will require a think tank that will first go into details of why past interventions have only resulted in the North-east playing catch-up and never reaching the desired goals? Or is it a case of key achievements not being highlighted, resulting in people constantly living with a victimhood syndrome and blaming the Centre for the failures of state politicians?

Universities ought to be doing this audit of our development institutions. For instance we need to know by now what the competitive edge of the NEC is and why DoNER was created. There are other central institutions too that are created to uplift the intellectual capital of the region. It’s time to look at the investments and outcomes of these centrally-funded institutions; else they will quickly turn into employment agencies with no measurable outcomes.

The human resources of the North-east are today adding value to the hospitality industry across India. While this is a good portend, the region too needs skilled human resource to scale up its economy. It is good to learn that the NITI Forum for North-east will focus on three key areas — education, health and skill development. These are important pivots for growth and have long been neglected as sectors of human development. When speaking about infrastructure there is a tendency to focus on hard infrastructure such as roads, bridges, airports, railways et al, while neglecting soft infrastructures such as institutions for healthcare or education, those that nurture culture and history and also the financial systems and forums that provide justice and maintain law and order. When there is a mismatch between the hard and soft infrastructure, there can be no growth. A nation-state requires both in equal proportions.

Since financial institutions also form part of infrastructure, let us look at the banking penetration in the region. As of 2010, the region has 2,342 bank branches. Assam has the largest number of bank branches with 1,477, followed by Tripura at 229 and Meghalaya at 213. Other states have less than 100 branches each. But it must be mentioned that most banks are located in urban hubs and district headquarters.

In Manipur, for instance, the people of Ukhrul or Mao did not have banking services in their districts until a few years ago. The reasons given are lack of security for bank staff since those areas were wracked by militancy until the late 1990s. When I visited Ukhrul in early 2000 to study the women’s self help groups there, I found that they kept their savings with themselves since there were no banks nearby; not even in the district headquarter of Ukhrul. Now there are four banks in the district. So this is some development.

But Manipur apart, there are many villages in Nagaland, Meghalaya, Arunachal Pradesh and Mizoram where the banking system has not reached the last mile. This is where the focus should be put because entrepreneurship cannot happen in isolation without bank finances.

The other financial institutions such as the North Eastern Finance and Development Corporation Ltd, created at the time when former Prime Minister Manmohan Singh was finance minister, don’t have a big enough corpus to meet the financial needs of the region although NEDFI is reaching out to as many clients as possible within their limited capacities.

Hence banking penetration is still very low in the North-east and this is a matter of concern but within that low penetration too, the credit-deposit ratio is quite low and is in the range of 35 per cent only. This means that while banks mobilise deposits from the eight states, the credit they extend for every Rs 100 collected as deposit is only Rs 35.

And even when that credit is extended, the companies that avail them invest the money in manufacturing units away from the region. They only have an outlet within one of the states with minimum infrastructure and workers, to justify their borrowings.

The Reserve Bank of India has stated that the low CD ratio is due to lack of entrepreneurship and suggests alternate banking models. But is that the solution? And what alternate banking models is the RBI suggesting other than micro-finance institutions and non-banking financial institutions? While MFIs and NBFCs are doing their part in extending credit to the last mile, they can never replace banks. In fact banks should increase the number of business correspondents if they cannot set up shop everywhere. For RBI to say that entrepreneurship in the region is lacking is a complete cop out. There are entrepreneurs but they need both financial assistance and hand holding.

Coming back to DoNER, the minister in charge, Dr Jitendra Singh, has given assurance that all projects in the region will henceforth receive 100 per cent funding, as opposed to the 90:10 funding model of the past. This should help boost the development trajectory of the region. Earlier, states could not even cough up the 10 per cent matching grant, hence projects could not take off. Now that handicap has been removed.

But as stated above, what is needed for the region to take off is a system of accountability. Without that no amount of funding will help. Corruption is rampant and visible in the mansions that dot the state capitals. There is not even a semblance of denial about where the bulk of the government funds are parked. In fact, one of the points for discussion at the NITI Forum should have been how to address this large-scale diversion of public funds to private pockets. Where did the money thrown around during the elections in Nagaland, Meghalaya and Tripura come, if not from the public treasury?

That is the bigger concern in the North-east since it impinges on development and had led to huge inequities and inequalities in tribal societies. However, one hopes the NITI Forum will turn the region’s economy around.

 

The writer is Editor of the ShillongTimes and can be contacted at [email protected]