Strengthen Assam’s trade competitiveness to transform NER

Assam must reclaim its position as the global leader in tea by introducing capacity-building initiatives among small tea farmers.

Assam’s vast economic potential and its role as a gateway to neighbouring countries and the ASEAN have not been well-capitalised. Although it is the largest state in the northeastern region (NER), both in terms of area and economy, Assam's current per capita income at Rs 67,661 lags several other states in the NER and the national average of Rs 93,973. Largely agrarian, there is little doubt that Assam’s modest industrial base, concentrated in sectors like tea, petroleum refining, jute, textiles and cement needs a push.

The state’s abysmal exports provide significant headroom for growth. With merchandise exports at $497.1 million in 2022-23, the state’s contribution is less than one percent to India’s exports. Assam’s export basket is highly concentrated, with tea constituting about half of its total exports. There is a need to diversify the export basket, as high dependence on a single item makes it vulnerable to global shocks. Already Assam’s tea exports have declined from $312.5 million in 2019-20 to $245.6 million in 2022-23, with its overall share in total tea exports dropping from 36 percent to 30 percent during the same period.

Infrastructure Underutilised

Though the state shares expansive borders with Bhutan and Bangladesh with several land customs stations (LCSs) and one integrated check post (ICP) functioning to facilitate cross-border trade, only marginal trade was recorded at a few of these LCSs. The ICP at Sutarkandi operates much below potential, indicating the underutilisation of export infrastructure. The inland container depot (ICD) at Amingaon currently caters to mainly tea exports and deals with full container loads, making it inaccessible to small exporters with less than container load shipments. Besides, the trains from the ICD to Kolkata port run on excess capacity with one-way traffic only, leading to dead freight costs.

Its 1,983 km long inland waterway network remains largely underutilised
despite the cost advantage — the usage is limited to the transportation of construction-based materials. It is expected that the 'Assam Inland Water Transport Project' will transform the quality of inland water transport. Assam’s rail connectivity, crucial for the movement of bulk cargo, also remains underutilised. Of six operational airports, only the Guwahati airport serves international destinations, and connectivity with other state capital is very low.

Assam’s geostrategic location places it at the centre of India’s Act East policy and makes it an important node in the various economic and transport cooperation programmes active in the region such as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and the South Asia Subregional Economic Cooperation (SASEC). India Exim Bank research shows that Assam has the potential to target merchandise exports of $710.3 million by 2024-25 if it focuses on building export capabilities in the identified sectors. Products with high export potential include a mix of industrial products like gas turbines and agro-based products like tea extracts and concentrates, hair preparations and sesamum seeds.

Reclaim Tea Market

Assam must reclaim its position as the global leader in tea by introducing capacity-building initiatives among small tea farmers, becoming an aggregator for tea exports from the NER and dedicating resources for premium tea varieties such as oolong, white, green and purple tea, among others. The state also has numerous geographical indicator-tagged products such as Muga silk, Orthodox tea, Judima wine and agricultural products such as Boka chaul, Joha rice and Chouwa rice. While some of these have global demand, albeit, in limited volume, exports of GI-tagged products remain below potential. This can change if the state develops effective branding strategies along with the implementation of robust IP protection and capacity-building initiatives. Similarly, the versatility of bamboo needs to be leveraged by exploring its uses in different sectors along with the potential of converting its waste into a clean and sustainable energy source.

Many of these GI-tagged products such as muga silk and tea and other agricultural and allied products such as chillies, rice, banana, pineapple and fish have also been identified under the District as Export Hub initiative of the government. A dedicated focus on branding, diversification and providing adequate infrastructure such as cold storage and test labs would empower the districts to emerge as export hubs.

The state has the potential to become a services hub, given favourable factors such as a large pool of educated and English-speaking population and moderate climatic conditions, provided it ensures adequate infrastructure, power availability and internet connectivity.

Being a landlocked state, it is important for Assam to strengthen the multimodal connectivity to enable smoother movement of goods in a cost-effective manner. The Karimganj district which shares border with Bangladesh enjoys the advantage of being connected via multi-modal transportation. Setting up of industries such as auto parts, cement and food processing in the vicinity can help transform the region. Karimganj can be developed as an export hub by providing incentives such as tax rebates and infrastructural services such as common warehousing and cold storage. To ensure better utilisation of ICD Amingaon, the central and state governments may explore value-chain linkages between Assam and Kolkata for generating two-way traffic and the possibilities of starting cross-border freight and transhipment services with Bangladesh from the ICD. The operationalisation of the Jogighopa multi-modal logistic park also needs to be expedited.

There exists incredible export opportunities in Assam. Enhancing the trade competitiveness of the state would facilitate greater socio-economic development of the entire NER and contribute to the growth of India.

Rahul Mazumdar & Sakshi Garg are economists with India Exim Bank. Views are personal, and do not represent the stand of this publication.