Playing to Strengths Playing to Playing to Strengths A Policy Framework for Mainstreaming Northeast India Kathuria and Mathur Sanjay Kathuria and Priya Mathur, Editors INTERNATIONAL DEVELOPMENT IN FOCUS INTERNATIONAL INTERNATIONAL DEVELOPMENT IN FOCUS Playing to Strengths A Policy Framework for Mainstreaming Northeast India SANJAY KATHURIA AND PRIYA MATHUR, EDITORS © 2020 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 22 21 20 19 Books in this series are published to communicate the results of Bank research, analysis, and operational experience with the least possible delay. The extent of language editing varies from book to book. This work is a product of the staff of The World Bank with external contributions. 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ISBN: 978-1-4648-1505-8 DOI: 10.1596/978-1-4648-1505-8 Cover photo: © Pranjal Protim Bora / Shutterstock.com. Used with the permission; further permission required for reuse. Cover design: Debra Naylor / Naylor Design Inc. Contents Foreword vii Acknowledgments ix About the Contributors xi Abbreviations xiii CHAPTER 1 A Policy Framework to Build on Northeast India’s Strengths 1 Sanjay Kathuria and Priya Mathur Favorable dynamics 1 Approach of the analysis 2 Toward a policy framework 3 Maximizing the impact of connectivity investments 3 Adopting a demand-based approach to product standards 8 Creating and leveraging “Brand North East” 9 Conclusion 10 Annex 1A: High-impact value chains in selected sectors in the North Eastern Region of India 10 Annex 1B: Value chain interventions and farmer empowerment for greater returns—Example from a World Bank project in Haiti 13 Notes 15 References 16 CHAPTER 2 The Promise of Northeast India 17 Thirumalai G. Srinivasan Introduction 17 Development outcomes and potential causes 17 Welfare consequences of geographic isolation 23 Leveraging NER’s strengths for higher growth and more inclusion 28 Annex 2A: Tables 34 Annex 2B: Structure of gross state domestic product 36 Notes 38 References 39 iii iv | Playing TO Strengths CHAPTER 3 Connectivity Assessment 41 Prabir De and Charles Kunaka Strategic context 41 The connectivity of NER 42 Economic links between NER and neighboring economies 48 Physical connectivity between NER and neighboring economies 52 Conclusions and policy options 55 Annex 3 A: NER’s trade with Bangladesh, 2015–16 60 Notes 61 References 62 CHAPTER 4 Quality Standards and Procedures 65 Michael Friis Jensen Introduction 65 Model for discussing evolving safety and quality standards 66 Production and trading structures in NER 68 Standards and related procedures 69 Value chain interventions 78 Conclusions and policy options 80 Notes 83 References 84 Boxes 1.1 Cross-border value chains create win-win opportunities for NER and Bangladesh 6 4.1 Example of an import program involving additional testing: EU border control for okra and curry leaves from India 78 Figures 2.1 Per capita real gross value added, 2000–15 18 2.2 Median travel time to the nearest city 21 2.3 Travel time to the nearest port, 2015 22 2.4 Net population density 23 2.5 Share of internal barriers to agricultural exports by state, 2011–12 24 2.6 Differences in trade barriers between Assam, Tripura, Mizoram, and West Bengal 25 2.7 It is costlier to be poor in NER states, especially in rural areas 26 2.8 Reasons for out-migration of females, 2007–08 28 2.9 Share of sectors in real gross state domestic product and employment 30 2.10 Labor force participation rates, 2011 31 4.1 Evolution of safety and quality standards 66 Tables B1.1.1 Bangladesh’s food trade, 2015 6 2.1 Percentage of poor, using Tendulkar poverty lines 19 2.2 Human Development Index Rank 19 2.3 Burden of hard borders for NER states 20 2.4 NER’s net interstate migration 27 2.5 Revealed comparative advantage in horticultural crops, 2013–14 29 2.6 Class X examination achievement in English, rank among states and national territories, 2015 31 2.7 Share of women employed, 2015–16 32 2A.1 Percentage of the poor: Tendulkar poverty lines 34 2A.2 Human Development Index Rank 34 2A.3 Share of gross state domestic product, 2014–15 35 2A.4 Share of employment, 2015–16 35 Contents | v 2A.5 Literate population and youth who completed secondary school among all main workers, 2011 36 2A.6 Labor force participation rate for working-age adults and youth 36 2B.1 Share of gross state domestic product, by economic activity, 2014–15 37 3.1 Distribution of national highways in NER by state 43 3.2 Railway route length in NER by state 44 3.3 Cargo transportation through NW-2 47 3.4 Trends in NER’s trade with Myanmar 50 3.5 NER’s trade with Myanmar, 2015–16 50 3.6 Trading with Bangladesh: Number of LCSs 51 3.7 Trends in NER’s trade with Bangladesh 51 3.8 Gross vehicle weight limits in Bangladesh and India 56 3.9 Common problems and possible solutions at Land Customs Stations in NER 57 4.1 Food products for which BSTI has set mandatory standards 75 Note: The findings of this study are not binding on the countries covered by the study. Foreword The North Eastern Region (NER), with its human capital, abundant natural resources, favorable climate, and diverse agroclimatic zones, has significant eco- nomic growth potential. India’s Act East policy, and its aim to strengthen economic prosperity in NER, offers the opportunity to unlock the region’s comparative advantage. Increased engagement between India and Bangladesh and among Bangladesh, Bhutan, India, and Nepal can strengthen connectivity and lower transportation costs between NER and the rest of India and neighboring countries. Improved connectivity can yield easier access to inputs and markets, allowing value chains to scale up. The price of goods and services can be held in check with lower transport costs, enhancing consumer welfare and reducing poverty. Improvements in regional connectivity open up Bangladesh to economic oppor- tunities for investment in NER, and create new markets for NER products in Bangladesh that benefit firms and households. This report can be commended on many grounds. It provides guidance on policies to unleash the economic potential of NER and leverage growth opportunities. Together with a companion volume, “Strengthening Cross- Border Value Chains: Opportunities for India and Bangladesh,” it will encourage informed policy debate and provide policymakers in India and Bangladesh with a foundation to enable shared prosperity. Junaid Ahmad Zoubida Kherous Allaoua Country Director, India Regional Director Equitable Growth, Finance and Institutions South Asia vii Acknowledgments This report was prepared as part of a larger study on strengthening cross-border value chains in Northeast India, which was carried out by a core team led by Sanjay Kathuria and Priya Mathur and which included Emiliano Duch, Prabir De, Charles Kunaka, Michael Friis Jensen, Thirumalai G.