Fiscal Constraints and Economic Challenges
Assam is endowed with abundant natural resources. In spite of that, the state faces significant economic challenges that hinder its development. The Government of Assam has been grappling with fiscal challenges, with a significant financial crisis characterized by escalating debt levels, burgeoning deficits, and constrained capital expenditure. Over the past five years, Assam's outstanding debt has surged by 107.34%, escalating from ₹66,069.20 crore in the fiscal year 2018-19 to ₹1,37,494.80 crore in 2022-23. This sharp increase in borrowing has raised concerns about the state's fiscal sustainability and its capacity to manage debt obligations effectively. The state's revenue deficit has witnessed a substantial increase, soaring more than fourfold from ₹2,732.77 crore in 2021-22 to ₹12,072.35 crore in 2022-23. This widening deficit indicates that the state's revenue expenditures are significantly outpacing its revenue receipts, necessitating increased borrowing to bridge the gap. Capital expenditure which is essential for infrastructure development and long-term economic growth, has experienced a notable decline. In 2022-23, capital expenditure decreased by 20.5%, falling from ₹20,125.83 crore in the previous fiscal year to ₹15,999.71 crore. Although, in 2023-24, there was a notable surge in capital expenditure by 32%, the state seems to be facing constrained fiscal capacity to invest in critical infrastructure projects. In 2023-24, the fiscal deficit is estimated at 5.2% of the Gross State Domestic Product (GSDP), exceeding both the state's Fiscal Responsibility and Budget Management (FRBM) Act limit of 3.5% and the central government's enhanced limit of 4.0% for that period. For the fiscal year 2024-25, the state aims to reduce the fiscal deficit to 3.5% of GSDP, aligning with the central government's stipulated norms. a critical issue Similarly, unemployment remains, particularly among the educated youth, with job seekers increasing sevenfold in 2022 due to a mismatch between education and job availability. These financial and employment challenges highlight the urgency for economic reforms and strategic investment initiatives like Advantage Assam 2.0.
The Role of Investment Summits in Economic Growth
The investment summit like Advantage Assam 2.0 can play the role of catalyst to serve as formidable instrument in augmenting capital inflows by providing a structured and transparent medium for investment promotion. The Government of Assam can provide a blend of tax incentives, regulatory ease, and infrastructure development to allure MNCs and domestic corporate houses as well as institutional investors in the summit. These summits are providing a crucial platform in the global economic landscape to attract capital inflows, stimulate industrial growth, and forge strategic partnerships between governments and private enterprises across the world.
The Global Investors Meet (GIM) in Tamil Nadu has led to the creation of over 1 million jobs, largely driven by manufacturing giants such as Hyundai, Foxconn and Dell, which have established extensive production units in the state. Gujarat’s Vibrant Gujarat Summit, Tamil Nadu’s Global Investors Meet, and Karnataka’s Invest Karnataka exemplify success through clear policy frameworks, robust infrastructure, skilled workforce availability, and efficient bureaucratic execution.
While investment summits frequently yield bombastic declarations of investment pledges, their realisation often remains subject to bureaucratic inertia, political volatility, and infrastructural inadequacies. States like Uttar Pradesh, West Bengal, Bihar and Jharkhand have struggled with land acquisition issues, bureaucratic inefficiencies, policy instability and weak infrastructure, resulting in low investment conversion rates.
Advantage Assam 2.0
The first Advantage Assam summit held in 2018 saw investment commitments of upwards of Rs.1 lakh crores, though the conversion rate to actual investment was little over fifty percent, with a substantial portion of investment coming through PSUs. With the second edition of Advantage Assam 2.0 slated for 25-26 February, 2025, the state may aim to create a more business-friendly environment to position Assam as a premier destination for domestic and foreign direct investment (FDI). With the initiative of the Chief Minister of Assam, delegations from the state have held road shows in major cities of the country to attract domestic investments, while he has personally visited countries like Singapore, Japan and South Korea inviting business tycoons from these countries to invest in Assam. With a focus on strategic sectors such as agriculture, manufacturing, tourism, IT and renewable energy, the summit may aim to leverage Assam’s geographical advantage as it is the gateway to Southeast Asian countries under the Act East Policy.
Lessons from Advantage Assam 1.0
Many of the investment commitments in Advantage Assam 2018 could not translate into significant industrial projects due to bureaucratic inefficiencies, inadequate policy clarity, infrastructural constraints and weak investor follow-ups. This includes delays in land acquisition, regulatory uncertainties, lack of a streamlined single-window clearance system, and limited sector-specific incentives, leading to investor reluctance. Additionally, weak industrial diversification, skill gaps, and limited ease of doing business measures further hindered project execution. The World Bank’s Ease of Doing Business report (2020) ranked Assam lower compared to industrial hubs like Maharashtra and Karnataka, primarily due to infrastructure-related concerns. A report by the Ministry of Commerce and Industry (2022) indicated that approximately 40% of committed investments in Northeast India remain stuck due to land-related disputes. A similar fate happened at the Bengal Global Business Summit, where merely 25% of pledged investments (₹3 lakh crore out of ₹12.35 lakh crore) were actualised, owing to inconsistent industrial policies and local resistance.
To ensure Advantage Assam 2.0 achieves its objectives, the state must adopt proven strategies from successful summits like Gujarat, Tamil Nadu and Karnataka. There is a need for clear policy frameworks, proactive investor handholding, infrastructural development and a robust post-summit implementation mechanism for its success. Alongside, the state must eliminate bureaucratic roadblocks, strengthen governance, and create a business-friendly ecosystem that fosters real investment realization. It also requires transparent and stable policies, enhanced investor confidence through single-window clearance systems, investments in infrastructure and skill development. Assam, aiming for success with Advantage Assam 2.0, must integrate these best practices to transform commitments into real economic growth.
The proactive initiatives of the Government of Assam to propel the state on a high growth trajectory and put it among the top five states of the country in terms of economic development inspires confidence about the success of the ensuing Advantage Assam 2.0.
(The authors, both from a university based in Guwahati, can be reached at ssarkar@gauhati.ac.in and pkjain@gauhati.ac.in. All views and opinions expressed are author's own)