UNNATI: A Targeted Approach to Industrial Development in the North-East

Policy Update

Shruti Chandra

Background: 

The North Eastern Region (NER) lies at the heart of India’s growth story. Endowed with abundant natural resources, rich biodiversity and a strategic location. Sharing over 5,484 km of international borders with Bangladesh, Bhutan, China, Myanmar and Nepal. It is also central to India’s Act East Policy. Recognising its immense potential, Prime Minister Narendra Modi has referred to the eight North Eastern states as “Ashtalakshmi, symbolising prosperity and abundance.

Despite these advantages, the region’s industrial potential has remained largely untapped due to inadequate infrastructure, high logistics costs, limited private investment and a narrow industrial base. 

While the North East Industrial Development Scheme (NEIDS), 2017 provided fiscal incentives to promote industrialisation, its effectiveness was constrained by its highly centralised implementation framework and delays in the grant of registration to eligible industrial units, which affected the timely disbursement of incentives. These challenges paved the way for a more streamlined and well-structured policy framework in the form of the Uttar Poorva Transformative Industrialization Scheme (UNNATI), 2024.

It is a Central Sector Scheme implemented by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry. With a total outlay of ₹10,037 crore, the scheme seeks to catalyse industrial investment, generate employment, enhance manufacturing competitiveness, and promote balanced and sustainable economic development across the North Eastern Region over a 10-year implementation period, with an additional 8 years for the disbursement of committed liabilities.

Functioning:

UNNATI adopts a Negative List and a Positive List to define the sectors eligible and ineligible for incentives under the scheme 

Note: Updated as per the amendment notified by the Department for Promotion of Industry and Internal Trade (DPIIT) in the Gazette of India on 1 April 2026.

The Scheme does Spatial targeting through Zone Classification :Districts of North Eastern Region are classified into: 

Zone A : Industrially advanced districts.                  

Zone B: Industrially backward districts 

The scheme provides higher financial incentives to Zone B districts encouraging industries to invest in relatively underdeveloped areas. 

It follows a structured fund allocation mechanism to ensure equitable regional distribution of resources. Out of the Part A outlay, 60% of the allocation is earmarked for the eight North Eastern States, while the remaining 40% is allocated on a First-In-First-Out (FIFO) basis among eligible proposals. This approach aims to balance state-specific development priorities with demand-driven allocation of industrial incentives.

Components of Scheme 

1. Capital Investment Incentive (CII)

The Capital Investment Incentive (CII) is a capital subsidy mechanism designed to support both new industrial units and existing units undertaking expansion by reducing the initial fixed capital investment burden. 

Eligible units must meet the prescribed investment thresholds:

• ₹1 crore for manufacturing units and ₹50 lakh for service sector units in eligible buildings and other durable physical assets. For micro enterprises, the minimum investment requirement is ₹50 lakh for both manufacturing and service activities. An existing unit qualifies as an expansion unit only when the investment in new plant and machinery (P&M) is at least 25% of the unit’s total existing investment.

The incentive is differentiated according to the two zones  

• Units located in Zone A districts are eligible for a subsidy of 30% of eligible investment in plant and machinery (manufacturing) or buildings and durable physical assets (services) subject to a maximum ceiling of ₹5 crore. For sectors where GST is not applicable, the maximum limit is ₹10 crore. 
• Units located in Zone B districts receive a higher subsidy of 50% of eligible investment with a maximum ceiling of ₹7.5 crore (₹10 crore for non-GST sectors). 

The incentive can be availed only once during the scheme period and newly registered units receiving benefits under the scheme cannot claim additional incentives under the substantial expansion category, ensuring efficient allocation of fiscal support. 

2. Capital Interest Subvention : 

This provides financial support on interest payments to reduce the cost of borrowing for eligible industrial units.

Eligibility Criteria

• The incentive is available for investments in new plant and machinery (manufacturing sector) or new buildings and other durable physical assets (service sector)
• Interest subvention is admissible only on the loan amount actually disbursed, and not on the total sanctioned amount.

Coverage and Incentive Structure

• The scheme provides interest subvention on term loans up to a principal amount of ₹250 crore. Interest payable on the loan amount exceeding ₹250 crore is not eligible for reimbursement.

The rate of interest subvention varies according to the location of the industrial unit : 

• Units located in Zone A districts are eligible for an annual interest subvention of 3%
• Units located in Zone B districts receive an annual interest subvention of 5%

Conditions:

• The benefit is available for a maximum period of seven consecutive years from any date after registration under the scheme.
•  Disbursement of the incentive commences only after the unit starts commercial production or operations.

3. Manufacturing & Services Linked Incentive (MSLI)

The Manufacturing and Services Linked Incentive (MSLI) is a performance-based fiscal incentive that links government support with the actual economic activity of industrial units through reimbursement of Net GST paid. 

Eligibility Criteria

• The incentive is available only to new industrial units. 
• To claim benefits, an eligible unit must obtain a new GST registration number under the scheme. Existing GST registrations of other units within the same state cannot be used. 
• Further, GST paid on exported goods and services is excluded while computing the eligible incentive.

Incentive Structure: 

• Eligible units receive an incentive equivalent to 100% of Net GST paid (GST paid minus Input Tax Credit) for a maximum period of 10 years from the commencement of commercial production/operation or until the validity of the scheme, whichever is earlier.

The overall incentive is capped at:

• Zone A: 75% of the eligible investment determined under the Capital Investment Incentive (CII)
• Zone B: 100% of the eligible investment determined under the Capital Investment Incentive (CII)

Disbursement and Carry-forward Provisions

• The annual incentive is limited to one-tenth of the total eligible incentive. Any unclaimed eligible amount may be carried forward to subsequent financial years, but only within the 10-year eligibility period or the validity of the scheme, whichever is earlier. 

Performance: 

• Registration Applications Received (As of 18th July 2026) 

Source: Live Performance Dashboard, Department for Promotion of Industry and Internal Trade (DPIIT) (as on 18 July 2026)

• Progress Against Targets: The UNNATI Scheme envisages approximately 2,180 eligible applications over its implementation period, with the potential to generate around 83,000 direct employment opportunities. As of 18 July 2026, the scheme has received 1,484 applications of which 573 have been approved (DPIIT).

• State-wise Investment Response

Source: UNNATI Live Dashboard, DPIIT (as on 18 July 2026)

• Investor Outreach and Awareness: To strengthen stakeholder engagement, DPIIT in partnership with state governments has conducted SAMVAD investor outreach programmes across Sikkim, Nagaland and Meghalaya complemented by state and district level sensitisation initiatives to improve awareness and facilitate industrial investment under UNNATI

Impact: 

• Regional Industrial Deepening: UNNATI promotes industrial diversification by expanding the manufacturing and services base. 
• Capital Formation and Investment Multipliers: Fiscal incentives encourage private capital formation, crowd in complementary investments, and generate positive multiplier effects across the regional economy.
• Correction of Regional Market Failures: Differential incentives for Zone A and Zone B seek to address spatial market failures, reducing investment asymmetries and improving allocative efficiency across the North East.
• Employment Generation: Potential to stimulate direct and indirect employment. 
• Strengthening the Act East Vision:Supports industrialisation in a strategically important region and enhances the region’s role as a gateway for trade with neighbouring countries under the Act East Policy.
• Improving Ease of Doing Business: The integration of a digital portal, time-bound incentive delivery, and SAMVAD outreach programmes reduces procedural bottlenecks and facilitates a more investor-friendly business environment. 

Emerging Issues:

• Persistent inter-state disparities in investment attractiveness: The distribution of applications under UNNATI remains highly uneven across the North Eastern Region. Assam alone accounts for 777 out of 1,484 applications, significantly outperforming all other states while states such as Tripura (54) and Nagaland (55) have attracted comparatively fewer proposals (DPIIT) 
• Slow Pace of Application Approvals: The gap between applications received and approvals granted suggests procedural delays in project evaluation and sanction. 
• Limited Focus on Traditional Industries: The North Eastern Region contributes 92.9% of India’s shawls, mekhla chaddor, loi, stole, scarf, muffler and nearly 78.5% of traditional garments. However Unnati lacks a sector specific interventions for these handloom and handicraft industries. 
• Infrastructure Deficit: Persistent gaps in transport connectivity, logistics, power supply and industrial infrastructure may make private investors cautious because of perceived market size limitations, logistical challenges and high operational costs in the region. 
• Environmental Trade-offs: Accelerated industrialisation in an ecologically sensitive region could intensify pressure on forests, biodiversity and natural resources. 

Way Forward:

• Strengthen Industrial Infrastructure: Convergence with PM Gati Shakti and Bharatmala Pariyojana can be explored to enhance multimodal connectivity and logistics efficiency.  
• Align Skill Development with Industrial Demand: Integrate Skill India Mission to create a region-specific skilled workforce capable of meeting the demands of emerging manufacturing and service sectors.
• Promote Agri-Entrepreneurship: Encourage investment in agro-processing, bamboo, horticulture, spices and food processing industries to leverage the North East’s resource base and strengthen local value chains under UNNATI.
• Targeted MSME Support: With the North Eastern Region accounting for only around 3% of India’s total MSMEs, UNNATI should place greater emphasis on strengthening the MSME base. 
• Enhance State-Level Investment Facilitation: Establish dedicated Investment Facilitation Cells in each North Eastern state to provide project handholding, grievance redressal and post-approval support.
• Strengthen Outcome-Based Monitoring: Employment generation and investment mobilisation indicators can be incorporated to periodically evaluate the scheme’s effectiveness.
• Environmental Sustainability:  Integrate green manufacturing standards, circular economy practices and clean technologies into industrial projects supported by institutionalised stakeholder consultations to minimise ecological footprints.

References:

Ministry of Development of North Eastern Region. (2022, April 4). Efficacy of NEIDS in North East. Press Information Bureau, Government of India https://share.google/IMLrV3CcSRteKXTTD

Department for Promotion of Industry and Internal Trade (DPIIT). UNNATI Portal. 2024. https://unnati.dpiit.gov.in/

Department for Promotion of Industry and Internal Trade. (2025, December 2). 15th DPIIT Meeting – UNNATI 2024 [PDF] https://share.google/DenlCIYFk1bGtcMR2

Press Information Bureau. (2024, March 7). Cabinet approves Uttar Poorva Transformative Industrialization Scheme (UNNATI), 2024. Government of India. https://share.google/lIjhs9SvhzRbmSnC7

Press Information Bureau. (2025, March 26). Schemes to increase investment in the North Eastern Region. Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2115292&reg=48&lang=2

Ministry of Development of North Eastern Region. (2025). Textile, Handloom & Handicraft Sector Profile of North East Region [PDF].  https://share.google/vJ4YHL9Y1mYQa2pEG

Mint. (2025, January 8). PMO bats for the industrialization of North-Eastern states https://www.livemint.com/economy/economy-manufacturing-north-south-divide-pmo-industrialization-micro-small-medium-industries-msmes-smes-11736309632428.html

Team MyGov. (2024, July 9). Uttar Poorva Transformative Industrialization Scheme (UNNATI), 2024. Manipur MyGov Blog. MyGov Blog⁠ https://blog.mygov.in/uttar-poorva-transformative-industrialization-scheme-unnati-2024/

Department for Promotion of Industry and Internal Trade. (2026, April 1). UNNATI, 2024 Amendment Scheme (F. No. P-44015/1/2023-DBA-II) https://share.google/2MV4iJvPskWqRYrme

About The Contributor

Shruti Chandra is a Research & Editorial Intern at IMPRI. She holds a B.A (Hons) degree in Sociology from Delhi University and is currently pursuing a Master’s in Sociology. Her academic areas of interest include social and environmental justice, rural and urban development and public policy.

Acknowledgement

Sincere gratitude is extended to the IMPRI team for their guidance and support and to the reviewers, Vinita Sharma and Nayanshi Jain, for their feedback 

Disclaimer:

All views expressed in the article belong solely to the author and not necessarily to the organization.

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