[Assam] International finance and NE region

Rajen Barua barua25 at hotmail.com
Thu Apr 20 12:25:10 PDT 2006

Guwahati, Thursday, April 20, 2006 

International finance and NE region
- Anubhav Dutta
In the matter of economic development, the North East region was always neglected by the various Central governments since the days of independence, resulting in a backward economy in the entire region despite having immense natural resources. The root cause of insurgency in the region lies in the poor economic condition reinforced by a galloping unemployment problem. There was a visible change of attitude of the Centre in the later part of the eighties when the Asom agitation culminated in the formation of a new government under the leadership of the student leaders.

Firstly, the Central government decided to give 90 per cent of its planned fund as grant by reverting the earlier policy of providing loan for plan development. It would be worthmen-tioning in this context that the financial state of the provincial government was in a deplorable condition because of the debt trap the State fell into. At that stage the interest on loan always far exceeded the economic growth rate. The industrially and economically backward region hardly earned enough revenue to meet up its revenue expenditure let alone having any surplus to meet the plan expenditure. Financial power was concentrated in the Centre and the dependence of the Sate on the Centre for plan investment enormously grew. There was always a shortage of fund much more than its requirement to sustain a healthy economic growth. In fact this was one of the basic causes for the growth of regionalism in the entire region which has somehow distorted itself into fissiparous politics, not withstanding the reality that whatever plan flew to the State was hardly well appropriated. The misappropriation of government fund by the politician-bureaucrat-contractor nexus too was a chronic evil associated with governance regardless of the political parties in power.

During the tenure of the Deve Gowda ministry at the Centre, a policy of giving due weightage to the need of the financially-starved region was adopted. Yet, paucity of fund for development still persisted because the financial crisis of the Central government was still continuing and international finance for investment in our country did not have a free flow as of now, may be due to the hesitation of the Central government to agree to all the conditionalities given by the international loan provider for whatever be the reason. Then came the BJP rule, who immediately accepted the conditionalties and all of a sudden the financial position of the Centre improved. The economic policy of the nation underwent a sea change and globalisation with the tenets of liberalisation and privatisation was endorsed by the Centre.

The MoU was signed by the Asom Government with the Centre during the NDA tenure which amounted to accepting the conditionality of the international loan provider. Thus an era of fund availability for public investment set in Asom.

The new economic regime of market economy naturally enhanced the importance of Asom and the NE region not only because of its abundant natural resources but due to its strategic importance as an economic corridor to the South East Asian market also. The long neglected region begot a poor infrastructure as legacy of colonial rule which needed vast improvement to match with the growing need of a market economy. Fund started to flow to the region from the Centre with the condition that the earlier imposed conditionalties are to be to be adhered to. The chronic financial crisis faced by the State Government suddenly disappeared and the government has stepped into a very convenient position to manage its finance. The problem of meeting the salary bills of the government employees were resolved. There was a splurge of fund for investment in the infra structural sector although FDI in the region was yet to follow. Needless to mention that any such plan investment should have contributed to the growth of the local economy of the region in terms of enhancing the purchasing power of the people as well as more revenue collection of the State's exchequer on account of constructional activities. Employment generation should be a thrust area in a backward economy plagued by a long financial crunch, now removed.

Such funds have been secured by the Central government as loan whereas it has been allotted to the NE region as grant. Naturally the matter of repayment of the loan would be a burden on the Centre. Ways and means for repayment has already been given by the loan provider. The State governments have been asked to commercialise the essential services and to corporatise the agencies responsible for imparting essential services. The loan amount has been proposed to be apportioned as share capital of the concerned corporation to enable to exact the same by way of enhanced electricity tariff, enhanced municipality tax or enhanced sales taxes. Similarly the Central government has sufficient scope to repay the soft loans out of levy of Central taxes on the Indian people. That is why, becoming a political executive has become a lucrative proposition for the politicians in the fray for power. He has ample fund to handle without any loan liability. He can swindle such fund with impunity and the people will have to bear the brunt. The politicians of NE India have earned this rare advantage unlike their counterparts elsewhere in the country who have to work hard to extricate themselves from the debt trap into which they have already fallen.

In the meantime, fund has flown to the region under various developmental heads. Yet, the conditionalities given in the concerned tenders have deprived the local entrepreneurs of the region. Moreover, it has failed to strengthen the technological base of the region nor has it generated any durable employment avenues. In fact, the prescribed tender conditions play the role as deterrents for any local entrepreneur to participate in such tenders. Consequently, the fruit of development during the gestation period of such projects has been reaped by the big players from outside the region. Some local middlemen and a few local daily wage earners might have earned a temporary livelihood out of these projects. But, overall, it is insignificant and has little effect on enhancing the revenue earning of the State and has not had boosting effect on the local industrial growth.

Once these projects are executed, for running and maintaining the same some skilled manpower would be necessary. But the authority has not taken any steps to create some durable employment of skilled people. Apparently the authority seems to be bent upon to adopt the new economic policy given dictum of outsourcing in this regard. Therefore, such investment in the sector is unlikely to solve the basic economic problems faced by the region. It is felt that withdrawal of the conditionalties could be something to start with effectively in this context. The conditionalties like allowing big private operators to be involved in forest management and environmental control, on water resource management and electricity are likely to deprive the right of the commoners on habitable/cultivable land, water and essential services. The complicated land problem of the region has further aggravated because of population explosion and perennial flood and erosion. Today, the majority of the population live in forest and government land, who strictly in legal terms could be termed as encroachers and are likely to be evicted by the developmental process in the course of time.
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.assamnet.org/pipermail/assam-assamnet.org/attachments/20060420/148cd7e8/attachment.htm>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: not available
Type: image/gif
Size: 4809 bytes
Desc: not available
URL: <http://lists.assamnet.org/pipermail/assam-assamnet.org/attachments/20060420/148cd7e8/attachment.gif>

More information about the Assam mailing list