Developmental Setbacks in North-East India: The Role of Bank Credit

Abstract

While looking at social and economic indicators of growth, this study shows that a majority of the North-Eastern States (NES), comprising eight states, have been lagging behind the all-India average, even though historically this was not the case. Assam, till 1970–1973, had achieved higher agricultural productivity and lower levels of poverty when compared to the national average. Currently though, lower agricultural productivity and a negligible share of manufacturing in the gross domestic product (GDP) of the North-East can be considered as the main reasons for the decline in the development of the region. On examination, the slow rate in the inflow of capital investment in the traditional factors of production appears to be responsible for the lack of establishment of industries and for discouraging the spirit of entrepreunership. To form private capital, bank credit plays a pivotal role and the article shows that the NES as a whole trails far behind in availing bank credit when compared with the rest of the country. The unstable law and order situation in the NES, along with restrictions on entry, issue of trade licenses and ownership of land has negated the theory which stipulates that ‘higher rates of profit attracts further investment’. All these factors have impacted the growth of profit and affected investment decisions in North-East India.