Arunachal Pradesh is the largest among the seven states located in the Northeast of India, with an area of 83,743 sq km. It shares its borders with the neighbouring countries of Bhutan in the west, China (Tibet) in the north and northeast, Myanmar in the east and southeast and the Indian states of Assam and Nagaland in the south. The geographic location of the state provides immense opportunities for international trade with South Asian countries such as Myanmar, Bhutan and China.
The land is mostly mountainous with the Himalayan ranges running north-south. The state is divided into five river valleys - the Kameng, the Subansiri, the Siang, the Lohit and the Tirap. These river valleys have immense hydropower potential, currently estimated at 60,000 MW, or approximately 22 per cent of India's current power generating capacity. As of June 2016, the installed hydropower capacity in Arunachal Pradesh is 97.57 megawatt (MW).
The state's economy is largely agrarian, based on the terraced farming of rice and the cultivation of crops such as maize, millet, wheat, pulses, sugarcane, ginger, oilseeds, cereals, potato, and pineapple. In 2015-16, total production of horticulture crops in the state was recorded at 481.76 thousand metric tonnes, while the total production of fruits and production of vegetables in the state stood at around 9,964.03 thousand metric tonnes and 5,124.26 thousand metric tonnes in 2015-16, respectively. Some of the other key industries of the state include art and crafts, weaving, cane and bamboo, horticulture, power and mineral based industry. At current prices, Arunachal Pradesh’s gross state domestic product (GSDP) was about US$ 2.98 billion in 2015-16. Average annual gross state domestic product (GSDP) growth rate from 2004-05 to 2015-16 was about 12.98 per cent.
Due to its topography, the state has varied agro-climatic conditions suitable for horticulture of flowers and aromatic and medicinal plants. Arunachal Pradesh is home to 601 species of orchids, or 52 per cent of the species of orchids known in India, indicating a huge potential for attracting tourists, especially foreign ones.
The state and central governments have both offered huge fiscal and policy incentives for the development of thrust sectors in the state. Some of these policies include Public Private Partnership Policy 2011, the State Industrial Policy 2008 and the Hydro Power Policy 2008. In October 2014, the Union Railway Ministry approved the proposal to connect New Delhi with Naharlagun, 15 km away from Itanagar, with a bi-weekly Rajdhani Express. The project is expected to be operational by April 2018.
According to the Department of Industrial Policy & Promotion (DIPP), FDI inflows to the Northeast states totalled to US$ 94 million from April 2000 to March 2016