Business Opportunities in North-East India and the challenges
Business Opportunities in North-East India The region comprises eight states-Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Assam. Occupying 8% of India’s geographical spread, the states are home to only 4% of the country’s population, while Assam accounts for 68% of the population.
The region stands way below in comparison with the rest of India in socio-economic indicators. As per the 2001 census, the annual per capita income of NER is 6,625 INR against the rest of India average of 10,254 INR. Nearly 34.28% of the population is below the poverty line as compared to the national average of 26.1%. However, the NER is a highly literate region. Except for Arunachal Pradesh, all the other states have literacy rates about or above the national average of 64.8% which provides a good pool of educated human resources in the region.
Poor Infrastructure: Infrastructure is one of the most important components of the warehousing sector. An efficient warehousing operation hinges critically on high-quality supporting infrastructure that includes a good national highway network, interstate roads and congestion-free city roads. The total share of organised warehousing space is less than eight percent of the total warehousing space in India.
Railways are the best mode of mass transportation in the country. However, in the hilly terrains of the North East Region is difficult and expensive to setup rail networks. This accounts for the absence or nominal presence of railway lines in hilly states like Arunachal Pradesh, Manipur, Meghalaya and Mizoram. Even in Nagaland and Tripura the railway route has been set up in the plain areas of the region.
The Ministry of Civil Aviation has also planned to operationalise airports at Daporijo and Tezu in Arunachal. Nagaland has one the operational airport at Dimapur.
A second airport is being planned for Kohima. Under the ‘Look-East Policy’, improved links with international neighbours is a priority. Bangladesh, Bhutan, Myanmar and TAR should be connected to Guwahati in addition to Bangkok. Another international airport for the southern part of North East Region in Agartala can be prioritised.
Road is the important mode of travel in North East Region as another mode of travel is either too expensive or difficult. The road infrastructure is relatively deficient in the North East Region although the region’s road density per capita is significantly higher as compared to the rest of the country. Given the low density of population and the hilly terrain of the region, this is an expected outcome. The Cost of transporting goods in the region is much higher than the rest of the country due to its difficult terrains and bad road connectivity.
To overcome these challenges in the region North West Carrying Company LLP (NWCC) has built a wide distribution network with well-equipped IT enabled infrastructure to track the goods movements and has deployed high power customised vehicles to overpower the transportation challenges in the region. To bring down the transportation cost in the region NWCC has built multiple location warehousing stores in each state to facilitate short distance goods movement to save time and to reduce the transportation cost by allocating appropriate vehicles for speedy delivery in hilly regions.
The another big boom is expected in the North East Region with the introduction of GST which will result in the manufacturing sector being globally competitive and will promote entrepreneurial initiatives and economic activity, on the whole in the region. Most of the manufacturers have constructed regional warehouses of their own to avoid interstate taxes. But under GST, One can streamline their operations and outsource their operations to 3PLs to save up to 20%.
This is also expected to encourage the construction of centralised warehouses at key strategic locations that can operate on
The hub-and-spoke model, in turn outsourcing the logistics activity to the organised segment. However, tax rates and structure is yet to be decided.
If you have been facing challenges in warehousing and distribution in North east India please do give us a call to explore innovate and cost effective solutions from us.