The Second Administrative Reform Commission, headed by the senior Congress leader Veerappa Moily has recommended for dissolution of DoNER Ministry that has creatred political turmoil in the region. Before arriving at a final decision on this subject various issues and prevailing conditions need to be analysed to find the most beneficial alternative development approach for the North East. The North East constitutes the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura. Geophysically apart from the Brahmaputra, the Barak (Assam) and Imphal (Manipur valleys and some flat land in between the hills of Meghalaya and Tripura, the remaining two-third areas of the region consists of hilly terrain. Available medieval and modern records indicate interdependence and interaction between the hills and the plains. The economy of North East has got its definite identity due to its peculiar physical economic and socio-cultural characteristics. The region covers as area of 2.62 lakh sq km and accounts for 7.9 per cent of total geographical area of the country with a total population of 39.04 million (2001), that reckons 3.8 per cent of total population of India. There is plenty of races, tribes and their sub-groups in the region and the majority of those living in the plains are Hindus and Muslims, while a substantial proportion of hill tribes in Meghalaya, Mizoram and Nagaland are Christians and closely hold their respective cultures and traditions. However, the socio-economic and political landscape of each of these States is different to a large extent. They have different social customs and systems of living. The tribal structure of various tribes of the region vary considerably. In geo-political and economic terms, the impact of border countries in each of the States is different. While Arunachal Pradesh and Sikkim are peaceful, Manipur and Nagaland have been ravaged by insurgencies. Assam has been in turmoil for long six years during 1979-85 on foreign national issue which remained the bone of contentions over the last more than two decades leading to creation of several other socio-economic problems like insurgency and terrorism, impairing investable environment, producing unemployment and under-employment. Ironically, the development strategy followed by the Centre and the State governments created a totally unbalanced economy in the North East. There are differences among the States of the region with respect to their resource endowments, level of industrialisation as well as infrastructure facilities. On the whole, all these economies are underdeveloped agrarian societies with very weak agro-industrial sectors and an inflated service sector. The industrial sector has mainly developed around tea, oil and timber in Assam and mining, saw mills and plywood factories in other parts of the region. Because of its relatively peaceful environment and favourable geo-physical conditions, tourism has developed to a great extent in Sikkim in the recent post. State sponsored industrialisation whether sugar mills, jute mills, textiles industry have not been successful in the region. Small scale industries have also not been viable and there is large scale industrial sickness in this sector. The economy of the region thus remains primarily agricultural. Primitive farm practices of slash and burn (Jhum) or shifting cultivation in many of the hills and mainly single crop traditional farming in the plains continue. As a result, the region is not even able to produce adequate food grain to feed its population and is required to import food items worth about Rs 2000-2500 crore annually from other parts of the country. Resultantly, the majority o fthe population who are dependent on agricultural activity increasingly need to rely on non-farm sources of income diversifying towards activities like handloom and handicrafts, fishery food processing and other agro-based rural industries for a better living. However with virtual non-existence of industrial activities and lack of an entrepreneurial class, the majority of people entering self employment in the region need consultancy support of training tying up of finance and marketing as well as the crucial function of technology searching, evaluation, selection, pricing procurement and installation. A close look at the infrastructure situation in the region would reveal that the region has a mixed level of infrastructure. Barring Assam, rail network is almost non-existent in other parts of the region. The north eastern States also. The north eastern States also continue to have negligible network of roads which is the main stay of her transport system and the road density in NE region is among the lowest in the country. The government of India made several efforts to ensure integration of the north-eastern States. Special strategies have been formulated for removal of bottlenecks and creation of development friendly environment in the region. The Centre has recognised the special rights of the tribal communities living in NE by according the region a special status in the Constitution. The tribals are fiercely proud of their traditions, customs and identity and therefore fearful of being swamped by outside influences. As such, it was considered necessary for providing them some insulation to assuage their fears of losing their identity. Hence, the inclusion of this region in the Sixth Schedule. The Centre provided a range of incentives for setting up of industries in the North East led by the establishment of Public Sector Units. Types of assistance include projects and plans such as the Hill Area Development Projects, Tribal Area sub-plan, Tribal Development Agency as also policies of industrial licensing, Concessional finance, investment subsidy, and freight equalisation etc were provided to encourage investment in the region. The Government declared States of the NER as special category States outside the Gadgil Formula and according 90 per cent of their plan allocations are treated as grant and 10 per cent as loan of the Central government. In order to remove the regional imbalances and bring the NE region at par with the rest of the country, the Union Government established in the year 1972 a Regional Planning Body in the form of North Eastern Council (NEC) under the Ministry of Home Affairs, which has a separate additional budget and through which the projects of inter-State nature in the region are funded by the Union government. It also constituted Non-Lapsable Central Pool of Resources (NLCPR) with unspent balance of stipulated 10 per cent of the budgetary allocation of the Central Ministries for the development of the NE region and created a corpus fund and formed a new Ministry for the Development of North Eastern Region (DoNER). Since 1998 to the end of March, 2008 Ministry of DoNER so far sanctioned projects valued at more than Rs 6000 crore of different types for north eastern States allocation of NLCPR funds to different constituent States by the DoNER Ministry without any specific norms has created a fuss in some of the hilly States in the region. In order to bring improvement in the credit & deposit ratio and fulfil the credit needs of the region, the Central Government also set up North East Development Finance Corporation Ltd during the year 1995-96. Paradoxically, the subsidy led development model coupled with unbalanced regional development has played an active role in turning the States dependable on the Centre, breeding political turmoil and vitiating investment climate in the region. It may be seen that while the Government of India has been pumping funds for integrating the local people socially and economically, the local people seem to be having issues and are concerned with respect to Centre's administrative control and appeasement policy. The adoption of a soft and easy going course, by taking a shift from the stringent policy of the former Prime Minister Indira Gandhi, in tackling the law and order problem has given rise to hostility and terrorism and turned it into an industry, the result of which are being seen in Manipur, Nagaland, Tripura, Assam and other parts of the region. The growing sense of stepmotherly treatment to the region by the Centre and the local people's growing concern for this part of the land have been uniting the people of the region socially and politically. The unspent balance of the earmarked 10 per cent of different Central Ministries can judiciously be utilised by the NEC if it is authorised to utilise this non-lapsable central pool of resources. However, some effective steps need to be taken for adequately strengthening NEC to cope up with the increased responsibility in terms of professional manpower both from public and private sector. Thus the dissolution of the DoNER Ministry and strengthening NEC may be a boon for the development of the region.