Hilly north-eastern state of ArunachalPradesh is not only a late starter but also a lowperformer in schooling and educational achievement.Its journey towards literacy and education is mainlya post-independence phenomenon. Despite the goodprogress in educational performance it is among theleast educationally developed state. Multipledisadvantages like, ? hilly and steep terrain, lowroad connectivity and isolation, infrastructuralbottlenecks, subsistence economy and the low income ?together cause low enrolment and attendance amongchildren. While research works on Economics ofeducation in Arunachal Pradesh are scarce, this workwould fill up the gap and would be very much usefulto students, teachers, researchers interested in thisarea and the policy makers. It discusses theeducational progress of this state from a historicalperspective; makes a cross section analysis of itsliteracy and examine the different alternatives forachieving the MDG and universal enrolment. It alsoanalyses the enrolment, stagnation and dropout amongthe primary school children; and finds out thedifferent school specific and household specificfactors of dropout.