Arunachal Pradesh is well endowed with an abundant forest cover, mineral, and hydel power resources. The principal crops are rice. Maize, millet, wheat, pulses (edible seeds gathered from pea and bean crops), potatoes, sugarcane, fruit, and oilseeds are also important.

Many areas depend on shifting cultivation (also known as slash-and-burn agriculture), in which trees and grasses are burned from an area so a crop may be planted for several seasons and then shifted to a new area. Industry is small scale and includes timber, rice, and oil mills; soap and candle making; sericulture (raising silkworms for the production of raw silk); and handicrafts. The economic potential of Arunachal Pradesh's forests and rivers, and of its coal, oil, and other mineral deposits has yet to be exploited, partly because rough terrain makes transportation difficult.Coal reserves of the state comprising of the Namchik-Namphuk coal mine in Tirap district, are estimated at 90 million tonnes and the crude oil reserves are estimated to be 1.5 million tonnes. Deposits of dolomite, limestone, graphite, quartzite, kyanite, mica, iron and copper are also reported to be found here.

The state's rugged terrain makes transport and communications extremely difficult. With few surfaced roads and no railways in Arunachal Pradesh, links with the rest of India are limited.