ASSAM ECONOMY: Challenges and Outlook

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ASSAM ECONOMY: Challenges and Outlook

Main Economic Growth Challenges in Assam and the reasons responsible for these problems: the efforts to improve Assam’s economy have numerous problems. While each state has its own share of unique problems, Assam may be considered a major “dispute state” with its geographical isolation, natural hazard prone, susceptible boundaries, troubled conditions of law and order and other factors. Economic and non-economic factors can be identified as the factors that prevent economic development in Assam.


Economic Factors: The economic factors which cause economic development problems in Assam are as follows:

  1. Rapid population growth: Asam has seen rapid population growth. The growing number of individuals is not a property but a responsibility. This is a worrying aspect. The census statistics suggest that Assam is one of the country’s fastest population growth rates; in the period 1961-71, the growth rate for India was 34.95% compared with 24.80%. The population increase in Assam was 53.26% in the last two decades of 1971-91. The migration of people from outside is a big part of the rise. As the population growth in Assam is strong and causes unemployment, poverty and income gap in the country, the growth rate in occupation and weakness cannot keep track.

  2. Natural Calamities: Assam is, sadly, one of the few States where natural disasters including flood and drought are frequented every now and then. True experience and an inquiry into the issues of the Brahmaputra and its affluents indicate that the flood problems are properly resolved long before they are addressed. The cumulative losses to crops, cattle, houses and public establishments in Assam have risen annually, from Rs. 13.2 to Rs. 24.6 in 1972, from Rs. 11.98 to Rs. 39.80 in 1976 and from Rs. 306.6 crores in 1980, each year the development and revenue of the State have been reversed by massive Brahmaputra erosion and its tributaries. The income generated by it is redirected every year to the relief of floods. The overall diversion of the taxes for the relief of floods has been rising, from rs. 104,74 lakh of 1962-63 to rs. 286,32 lakh of 1974-75, which accounts for 2.6 percent and 1.8 percent respectively , of the total income of the State. Because of such a burden on government finances, construction plans are being reversed, so natural disasters at Assam find it impossible to execute plans swiftly.

  3. Geographical separation from the State and its rough terrain: geographical isolation is a characteristic of the State that appears to be counter to its plan for growth. Assam was a neglected state from the very early years, partially because of its geographical isolation, which limited the influx of capital into state economics for state industrialisation. Increased unit cost entails spatial separation of the State. Moreover, the consequence of the geographical separation of the State is the lack of touch, treatment and oversight by the Center. The rugged geography of Assam surrounded by hills, rivers and thick forests leads to increased administrative spending for development projects, which makes it especially difficult to mobilise capital.

  4. Structure with high cost: Assam has an outstanding cost structure. That is because in comparison with other states there is a higher price level in the region. K.K. will better clarify it. The traditional Basket System of Bhatia, which showed approximate estimated comparative costline indices of selected Indian centres with Delhi as its basis. The findings suggest that the Digboi (Assam) index is 18 % higher than the Delhi index. The Digboi index is again the country’s second largest, led by Bombay. In this index (standard basket method), if Digboi represents Assam and the average of 16 centres that represent India, it is 21% above that .In general terms, the Consumer Price Level in Assam can be considered roughly 20 percent higher than the average in all India, taking all these into account. The cost structure in Assam is also very high and the cost of all schemes under various proposals has been increased. The funding of infrastructure projects in Assam was added to this further responsibility. Moreover, the odds of raising the tax rates and the saving amount of the funding of construction plans have been narrow due to the high cost structure and the administration expenses have also risen. This cost-structure thus still runs contrary to the growth of the Assam economy.

  5. Low transport and facilities for communication: Assam lacks a sound transportation and communication system Geographic isolation, difficult terrain and carelessness are some of the basic reasons for poor transportation and communication growth. In comparison with its needs, the Assam railway and highway services are very sparse. Assam constituted 3.9 percent of the country ‘s overall railway route length by March 1993; but 0.35 percent of the country ‘s total wide gauge routes were served by wide gauge lines. In the absence of such facilities an area could not progress industrially, the expansion work such as planning new railways, upgrading metro gauge line to big gauge lines, extension of the national highways, constructing new bridges across the Brahmaputra, creating good transport data and a sound communications system etc. Steps have been taken in recent years in order to strengthen the state’s transportation and communication infrastructure, without which the economy can not expand.

  6. Capital deficiency: Capital deficiency is a feature of underdeveloped countries There is nothing special to Assam where a capital deficiency is present in the world. The topic of financing plays a major position both because the economy is dominated by agriculture and small businesses as well as because the government and the private sector may not save enough resources to cover the expenses of their own investments programmes. But the dilemma is a severe handicap. Assam has a very low volume and savings rate. The savings depend on the per capita amount of tax. The savings potential is limited, as Assam’s per capita income level is very poor. Unfortunately, Assam people’s marginal tendency to consume is very high because of the poor living standards of a majority of the population So the government ‘s economy can not grow due to lack of capital accumulation despite its immense capacity for growth. Furthermore, the migratory character of a large section of the population who are living in Assam. For being wired into the Assam market, a significant proportion of these savings of seasonal migrants are not available as they are delivered outside. Likewise, corporation and trade are mostly regulated from outside and remit income outside Assam. A recent report by an expert team funded by I.D.B.I. was made on the basis of available rail and road-borne trade statistics. The study reveals that while goods flow in and out of Assam are more or less balanced with Rs . 200 crores per annum, Assam ‘s monetary income regularly flows to the amount of the Rs. 63 crores per annum. In addition to slowering growth, this high volume of capital outflows produces a strong burden on the financial position of the state.

  7. Wastage of natural capital: The State economy is relatively under-developed, despite a massive volume of natural resources. As a result, there is an immense volume of natural wealth being destroyed instead of maintained. The Assam investment is channelled primarily to tap rich resources such as tea, jute and oil. This is a reflection of the continuity of the old colonial investment trend No substantial usage has taken place of the resources without the establishment of a fertiliser factory and three refineries. Assam has 28 percent of the country ‘s overall underutilised hydropower capacity. Despite a range of possibilities of use as fuel for oil generation, for the production of coke and as a basis for many chemical industries, massive coal supplies were not used (except for conventional railways). Forest resources in Assam, particularly in the non-standard species, are also underutilised. Through the slow economic growth of the State, inadequate utilisation of the natural resources at Assam is responsible.

  8. Lack of skilled workers: Assam has an extreme lack of skilled jobs as well. Many employees have no credentials. Assam must depend on other countries and foreign countries for higher skills. As a result, the salaries of qualified workers have to be paid higher than in many other nations. Furthermore, Assam has competitive rates of pay to import technicians from outside the state for the construction of the capital goods industry, thus raising costs for growth projects as well as expanding the gestation time of these projects.

  9. Lack of entrepreneurial and managerial skills: The picture is very negative with respect to the supply of entrepreneurial and managerial expertise. Local talent does not take the lead in initiating new sectors that have ample growth potential.

  10. Weak lending facilities: the credit facility, which forms part of the construction infrastructure requirements, is very limited. The bank per capita loans in Assam were Rs15.6 in 1970, compared with Rs. 83.9 in the entire India. In 1970, Assam obtained a credit deposit ratio of 23.5 compared to 55.9 for the whole of India. Credit deposit rates even in recent years were low in the Assam business banks at 44.49.5, 45. 5 and 43.4 respectively in 1975, 1976, 1977 and 1978 (June). Once more, the deposit rate in Assam stood at 55.9 percent in December 1994, up from 59.4 percent in all of India. So the commercial banks ‘ lending policy to this poor country in Assam is very far from generous. The private sector industries in Assam can not develop satisfactorily in the absence of large-scale credit facilities.

  11. Primitive technology: The origin of economic growth is technical advancement. But Assam is suffering from the lack of technical advancement due to inadequate science education. Assam still follows the basic technology of agriculture and hence agricultural production stagnates while the use of advanced technologies has allowed other States such as Punjab , Haryana, Gujrat and Uttar Pradesh to make ample headway in agriculture. Small and cottage factories in Assam continue to follow or adapt the old orthodox innovations, and are unable to compete The state economy remains quite backwards because of the lack of modern technology.As a result, Assam lacks much of the desirable factors that contribute to sound economic development. Instead, many adverse aspects stand as a barrier to the state’s economic growth.

Non-Economic Factors

  1. Sensitive frontiers: Assam is restricted on all sides by sensitive boundaries. Since its Independence, the frontier has become too vulnerable, in particular with Bangladesh (ex-East Pakistan) on the west, and with China on the north. This negative aspect still undermines the state’s economic interest by blocking simple industrial capital movements in both public and private sectors. The Assam investment remained amid its massive natural resources.Due to their fragile boundaries makes it a precarious one. But at a sluggish pace, public sector investment continued to flow in the state economy with the shift of time. But there is still slow flow of private investment in the market.

  2. Disturbed Law and Order Situation: Protection of law and order is a crucial concern because Assam is a vulnerable border State Assam must invest a large portion of the resources in policing in order to maintain law and order Per capita policing costs on Assam were the second highest in the world at 8.25 a.m. in 1972. Owing to the insurgency in the province, spending has dramatically increased in recent years. This unduly high spending on the maintenance of laws and the order has put a serious burden on the state government’s already slender finances, and has hindered the potential of government support for growth plans. Moreover, this disturbed rule of law and order would limit the influx of private capital into the economy of the State.

  3. Failure to function efficiently: Ensuring an reliable , clean management is highly necessary in order to achieve successful growth. However, Assam administrative machinery is neither clean nor effective. The diversion of funds is very common in numerous construction programmes leading to the bad performance of different plans and non-program projects and misuse of the State’s financial resources. The frequency of red-tapism have often slowed the running of numerous projects in the development plan and makes it difficult to use plan funds, which also force the central government to hand over scarce plan funds

  4. Social structure: The social structure in Assam is not conducive to economic development. The caste system limits labour mobility. The regulation of heritage leads to a minute subdivision and dissolution of holdings. Religion promotes austerity and renunciation, which has always discouraged people from their material advance. The plurality of castes and religions has stopped the more cohesive acts of the people of the State on the economic front.


We have however seen many obstacles facing the State on the road to economic growth. This low State rate of growth has also been attained through both economic and non-economic influences.


Assam Economy Prospects


Assam is the North-East region’s main economy. It is India’s gateway both to the northeast and neighbouring countries of Myanmar, China, Bangladesh , Nepal and Bhutan and a crucial connection for trade with the countries of Southeast Asia. Because of its similarities and the availability of resources, it is the most industrially advanced state in North-eastern India. The sustainable growth opportunities are as follows:


Natural resources: Assam is rich in natural resources like natural oil and gas, rubber, tea and minerals like granite, limestone’s and other natural resources. Assam tea is a worldwide well-known commodity.


Sectors with Investment Potential

The state is rich in water resources. Other potential areas of investment include power and energy, mineral based industries, tourism and crude oil refining.


Tourist destination: Assam is a favourite tourist destination with its nice climate and scenic scenery. The state provides tourists with a range of options for temples and landmarks from the world heritage sites.

Human Resource: Assam has many educational institutes. Computer literacy is a significant proportion of the urban population aged between 15 and 25 years.

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