Editorial | NE India's Geopolitical Tightrope: An Investor's Nightmare

The Northeastern region of India has always been a geopolitical puzzle. It is nestled between several international borders—Bangladesh, Myanmar (Burma), China, and Bhutan—each with its own set of challenges. But in recent times, this puzzle has grown more complicated, as the region finds itself encircled by instability. The political unrest in Bangladesh, the civil war in Manipur, the military coup in Myanmar, and China's increasing volatility have added layers of risk to the region’s economic and security outlook.

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This convergence of crises poses a major threat to the region's economic development and stability. In 2023, Japan's Official Development Assistance (ODA) to the North East India region was estimated approximately to ¥246 billion (around $1.7 billion), which have reduced significantly to approximately $578 million in 2024, and set to reduce even further in the future.

Central government investments in Northeast India is larger than ever before, but prominent economists fear that these investments, which were always challenging due to the region's geographical isolation and political complexities, but today, the risks to these investments have multiplied due to a tense neighborhood. The region’s fragile development story now stands at the crossroads of internal and external geopolitical turmoil. The stakes are high—not just for India, but for the larger Indo-Pacific region.

Bangladesh, sharing a 4,096-kilometer border with India, has been a significant partner for trade and connectivity for the region. The country has experienced substantial economic growth over the last decade, boasting a GDP growth rate of over 7% annually pre-pandemic. The India-Bangladesh Friendship Pipeline, also known as the Bangladesh NRL (Numaligarh Refinery Limited) pipeline, was a landmark cross-border energy initiative between India and Bangladesh which had the potential to be an economic lifeline for Assam. It was officially inaugurated in March 2023 by Prime Ministers Narendra Modi and Sheikh Hasina, which remains dormant as of now taking in regard the political upheaval in the country.

The government of Sheikh Hasina has been overthrown, amidst authoritarianism, and human rights concerns. Bangladesh is currently under the rule of an interim government led by Professor Muhammad Yunus. The interim government is tasked with overseeing state reforms and preparing for upcoming elections, though no clear timeline for the elections has been set yet.

This internal turmoil directly impacts India’s Northeastern states. From the time of its independence in 1971, Bangladesh has played a pivotal role in providing India with a gateway to the Bay of Bengal through its ports, and allowing for trade routes to cross into the Northeast. Instability in Bangladesh risks disrupting this crucial economic lifeline.

Furthermore, the fear of another refugee crisis from Bangladesh also looms large, with the Rohingya crisis still fresh in memory. A spillover of unrest or refugee migration into the Northeastern states could destabilize already sensitive areas such as Assam and Tripura. The state of Assam, which experienced severe ethnic violence in the late 20th century, remains highly sensitive to demographic changes, and any mass migration could trigger new waves of unrest.

Likewise, the ethnic violence in Manipur, one of India’s northeastern states, has spiraled into a civil war-like situation. Clashes between the Kuki-Zo tribal communities and the Meitei ethnic group have left over 200 people dead (according to official figures) and thousands displaced. This violence is not just an internal matter; it has the potential to spark wider regional unrest which could spill over to Northen Mizoram, parts of north-western Burma and southern Nagaland; given the complex, interconnected ethnic tapestry of the region.

In the past one week, violence in Manipur has taken a turn for the worse, with reports of ‘militants turning to newer technologies such as drones and rockets’ and adding a fresh layer of violence even as the use of rifles and grenade continued unabated. On September 11, the Manipur government imposed a five-day internet suspension and curfews in three districts in response to ongoing clashes in the state.

Manipur shares a border with Myanmar, and the conflict has created a porous situation, with armed groups from both sides of the border exploiting the chaos. Insurgent groups like the United National Liberation Front (UNLF) and the People’s Liberation Army (PLA) have become more active, challenging the stability of the region further. 

The economic consequences of this civil unrest are staggering. Infrastructure development has come to a grinding halt, and investors are wary of pumping money into a conflict zone. Even ongoing projects like the Asian Highway 1, which aims to improve connectivity between India and Southeast Asia, are under threat. Moreover, the violence in Manipur has disrupted trade routes that are crucial for India’s Act East Policy, which envisions the Northeast as a gateway for trade and connectivity with Southeast Asia. 

Myanmar, already mired in poverty and ethnic conflict, took a drastic turn for the worse after the military coup in February 2021, which since has had a domino effect on Northeast India. The junta’s violent crackdown on pro-democracy protesters and armed ethnic groups has plunged the country into civil war. This has had a direct impact on Northeast India, which shares a 1,643-kilometer border with Myanmar.

Historically, the border has been porous, allowing militants, smugglers, and refugees to move freely through the Stilwell Road (Ledo Road) and hill tracts. The coup has only exacerbated this problem. Several militant outfits in Northeast India, including the National Socialist Council of Nagaland (NSCN-K), have used the political chaos in Myanmar to regroup and intensify their operations against the Indian state.

Furthermore, the influx of refugees from Myanmar, particularly the Chin ethnic group, has placed additional strain on states like Mizoram. With a lack of international recognition for their plight, these refugees have become a humanitarian challenge for India, and they add another layer of complexity to the already fragile ethnic situation in the Northeast.

Economically, the coup has derailed India’s plans for regional connectivity. The India-Myanmar-Thailand trilateral highway, which was envisioned as a critical artery for trade, now lies in limbo. Investors are unlikely to risk capital in such an unstable region, further dimming the Northeast’s economic prospects.

To the north, China poses its own set of challenges. While India and China share a long, disputed border, it is the Northeastern states, particularly Arunachal Pradesh, that are at the forefront of this territorial conflict. In late August 2023, China released a new “standard map” that included Arunachal Pradesh and the Aksai Chin region as part of its territory. This sparked immediate protests from India, as Arunachal Pradesh is an integral part of India. China claims large swathes of Arunachal Pradesh as its own, referring to it as "South Tibet." This has led to frequent skirmishes between Indian and Chinese troops in the past, most notably in the 2020 Galwan Valley clash, where soldiers from both sides lost their lives. 

In 2023, China’s construction of new villages and infrastructure near the Line of Actual Control (LAC) has added to the tension. There is a growing concern that China may use its economic clout and military might to destabilize the region further. China's Belt and Road Initiative (BRI) has already increased its influence in Myanmar, Bangladesh, and Bhutan—three of India’s neighbors that directly affect the Northeast.

For investors, this creates a double-edged sword. On one hand, China’s aggressive posture deters foreign investments in the Northeast, as it becomes a potential flashpoint for conflict. On the other hand, Chinese investments in neighboring countries could isolate the region economically, making it harder for India to integrate the Northeast into its broader economic plans.

The Northeast’s economic prospects remain intrinsically tied to regional political stability, and with instability on nearly all of its borders, the region’s future appears precarious. The road ahead requires a focus based approach from the mainland to increase regional understanding, unity and cooperation. 

The Northeast is in the crosshairs of multiple crises, each of which threatens to undermine its economic potential and security. Navigating this complex geopolitical landscape will require a delicate balancing act of diplomacy, security, and economic strategy. Without decisive action, the Northeast risks remaining on the periphery of India’s growth story, with its potential perpetually in jeopardy due to its geographical curse.

(The writer is a Public Relations Officer with Sri Sankaradeva Nethralaya. All thoughts and views are the author's own.)