[Prabir Banerjea]
If you spoke to a business owner in one of India’s sprawling cities any time in the last 15 years, it is likely that a certain crop of employees was mentioned with a touch of gratitude, even affection. Young men and women from the Northeast have earned a reputation for being efficient and efficacious, with an unwavering commitment to being and looking professional at all times. Their mere presence seems to make the establishment look like a well-oiled machine. One consequence of the year of the plague is that these industrious people are returning in tens of thousands to their home states.
Mostly they are returning to places that still have what made the workers leave them in the first place – low levels of industrialization and few jobs outside of a limited set of sectors such as tea, timber, and crude. But in 2021, there is much potential upside. Two things will be different this time. First, in a region marked by low road connectivity and impossible terrains, one kind of connectivity has grown rapidly – the internet. As the migrants go home, they will be carrying their low cost Android smartphones with them. Second, the central government’s push towards cross-border trade has increased exports to the countries that the Northeast shares a border with, namely, Nepal, Bangladesh, Myanmar, Bhutan, and China.
Smartphones, internet connectivity, and Amazon have opened up a nationwide market for Northeasterners. Those returning bring back knowledge acquired over years and decades about consumer preferences across the country. Those in the hospitality sector know intimately the food habits of Indians everywhere from Delhi to far off Kochi. Many have worked in retail and have deep experience in merchandise across a broad range of categories, from fashion to sportswear. Simultaneously, the large Northeastern diaspora has elevated the region’s presence in the minds of those in the other 22 states to the west of the region. There is awareness of, and demand for, the cultural artifacts of the seven states. This opens up opportunities.
Naturally, the statement above comes with certain qualifiers and caveats. This isn’t a region that has seen much in the way of capital investments. Banking penetration is low, loan disbursement rates are some of the lowest in the country. There is no culture of risk capital. Large-scale manufacturing is therefore ruled out in the short term. Small-scale industry, of which there is a strong tradition in the Northeast already, is the way to go. There were multiple attempts at boosting small-scale industry in the region between 1997 and 2017. These failed largely due to insufficient investments and the lack of market linkages. A break with the past was made in 2018 with the announcement of the North East Industrial Development Scheme (NEIDS), which had a funding of Rs 3,000 crores. The NEIDS needs to specifically target those returning with valuable knowledge of the market elsewhere. This group can lead the charge, and businesses started by them can have knock-on effects on the rest of the region. This combined with the Look East and Act East policy could bolster small- and medium-sized industry in the region.
Again, to the above one must add that the main thrust of trade must be high-value, small-batch, high price-to-weight ratio goods. The region’s age-old problems of low capital accumulation, terrain unsuitable for heavy engineering and large-scale industry, and the logistics of moving bulk raw materials and produced goods will not recede in a hurry.
Horticulture and handicrafts are good examples of what could work with the diaspora resettling. These are already important features of commerce in the region. Manipur, Meghalaya, Sikkim, and Arunachal Pradesh have over 30 percent of area under horticulture. Besides the standard set of sub-continental fruits and vegetables, the Northeastern states are known for medicinal plants, essential oils, dyes, and phytochemicals. When this rich culture combines with the deep knowledge of the market elsewhere and a facility with technology (and therefore direct access to consumers), good things can happen with the right kind of government assistance and a targeted loan disbursal mechanism.
Connectivity opens up several other possibilities of outsourcing and linkages with the global talent and services marketplace. In the pre-pandemic days of outsourcing, there was some skepticism in the West about small outfits and freelancers. IT security and data confidentiality norms favoured large outsourcing vendors in known hubs such as Bangalore and Hyderabad. With technology evolving to a point where secure computing environments can be assured even in unmanaged, distributed environments, the rise of the global gig economy, and work-from-home becoming the norm, there is now much higher acceptance of smaller outfits. The Northeast has a deep tradition of fashion and music, with widespread awareness of the repertoire of the US and Europe, and more broadly the western zeitgeist. The global fashion industry is increasingly digitized and the importance of AI is growing in terms of training algorithms to better recognize fashion categories and styles. Training AI algorithms requires human input. Such algorithms thus trained power use cases such as ecommerce search, recommendation engines, and merchandising decisions. In addition, the demand for fashion curation – remote, low-cost stylists – is rising. Someone from Mizoram could curate an ensemble for a fashionista in Minnesota, all digitally and at the fraction of the cost of a local stylist. There is no other part of India (which does US $180 billion annually in IT and ITES revenues) that can take up the mantle of fashion AI and outsourced styling better. Similar opportunities exist in outsourced commercial music production as well.
Lastly, the Northeast has immense untapped hydroelectric power. The eight states (counting Sikkim) account for 40 percent of the country’s hydropower potential. The primary impediments to development have been the capital costs (estimated at Rs 10 crores per megawatt), clearances, seismic activity, and adverse weather events. What the hydropower ecosystem lacks is a strong demand pull. With low industrialization, the bulk of proceeds came naturally from retail, and therefore the state electricity board, and the consequent revenue risks, combined with production risks, become untenable for private enterprise. If one looks to the burgeoning field of cryptocurrency mining, there appears more than a glimmer of hope for a better demand vector.
Cryptocurrency mining requires power to be cheap, and marginal cost of production to approach zero. It requires renewable energy ideally, and with the soaring price of Bitcoin (despite a crash at the time of writing, BTC is still in the neighborhood of US $40,000) can be the pull function that acts as a catalyst, fixing supply side constraints. China offers a case study on how cryptocurrency mining can revive the fortunes of remote areas.
The return of a highly productive and motivated workforce could mark the beginning of a new era in the Northeast, if policy is carefully calibrated and directed to opportunities with potential for scaling. Typically, it is the natural risk-seeking buccaneers of a society who emigrate, and when the emigree returns with a wealth of knowledge of the wider world, it behooves society to provide the risk seeker with the best tools for full articulation of their ambition. (Prabir Banerjea is Group CEO, Globally Managed Services and Balipara Foundation.)
