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The given paragraph describes a state in India that has huge potential in carbon trading due to its vast forest reserve. It further mentions that this state has the highest coverage of forest area in the North-East region, with 88% of its total area covered by forests, compared to the national average of 33%. Additionally, it states that this state is the first in the North-East region to take initiative in carbon trading.
Option 1: Manipur - This option is not correct as the paragraph does not mention Manipur at all.
Option 2: Arunachal Pradesh - This is the correct answer. The paragraph`s description matches the state of Arunachal Pradesh, which is known for its extensive forest cover and is the first state in the North-East region to participate in carbon trading.
Option 3: Mizoram - This option is not correct as the paragraph does not mention Mizoram.
Option 4: Nagaland - This option is not correct as the paragraph does not mention Nagaland.
Therefore, the correct answer is option 2: Arunachal Pradesh.