Economic development is associated with a process of structural transformation that entails a falling share of agriculture both in terms of output and employment. However, at least in the initial phases, the share of agricultural GDP in total GDP tends to decline much faster than the share of agricultural employment in total employment. Consequently, the difference between these two shares, termed as the GAP in development literature, increases during the initial phase of economic development, whereby the agricultural sector continues to employ the majority of labour force but contributes less and less output to total GDP. This creates a structural imbalance in the economy, resulting in low agricultural productivity, high income inequality and consequent political instability. In this paper, we intend to study this process of structural transformation in the North Eastern States of India. Within the paradigm of agriculture led development, pioneered by John Mellor, our paper attempts to chart out a development path for the North Eastern region centred on agriculture and agricultural productivity. We derive specific policy parameters that would go a long way in correcting the structural imbalances and the resulting economic inequality and political instability by reducing the ‘GAP’ and by augmenting agricultural productivity.