India plans to enhance trade with Bangladesh

NEW DELHI, Jul 10, 2020, The Economic Times. India is adopting a multi-pronged strategy to enhance trade and business partnership with Bangladesh amid Beijing’s recent efforts to woo Dhaka with duty-free access to its products, The Economic Times reported.

While Chinese trade concessions can push Bangladesh into a “dual deficit and debt trap”, India is activating various connectivity initiatives for seamless movement of Bangladeshi products to the landlocked northeastern states and other parts of India, ET has learnt.

There is a major push to connectivity initiatives via sea ports, inland water transport, rail and highways that will enable Bangladesh to connect with Bhutan and Nepal markets too along with India, according to experts who focus on cross-border trade and connectivity issues. Both India and Bangladesh are undertaking various measures to restore the pre-1965 rail and other connectivity links.

Last week’s decision to resume border trade via West Bengal despite opposition from the Mamata Banerjee government will help increase Bangladeshi exports to India after a hiatus, said sources. Foreign minister S Jaishankar on Wednesday wrote to his Bangladeshi counterpart reinforcing special ties.

India had offered duty-free access to several Bangladeshi products a decade before the Chinese decision and that step helped reduce deficit in Dhaka’s trade with New Delhi, said a source while stating that India’s terms and conditions from trade concessions to loans are more favourable. Beijing has mulled over years before giving trade concessions to Dhaka and the step can push it towards a debt trap, said the above mentioned source.

Bangladesh should ideally tap into south and southeast Asia markets for favourable return.

Bangladesh is India’s biggest trade partner in South Asia. Bilateral trade between India and Bangladesh has grown steadily over the last decade. India’s exports to Bangladesh in FY 2018-19 stood at $9.21 billion and imports during the same period was at $1.04 billion. In comparison, Bangladesh’s trade deficit with China is hugely tilted in Beijing’s favour. China exported goods worth $1, 3638 million to Bangladesh in 2018-19 but Bangladesh’s exports stood at $568 million. One-fourth of Bangladesh’s total import basket comprises Chinese goods and the bilateral trade deficit has seen a 16-fold increase over the last two decades, ET has gathered.

According to experts, India has a diametrically opposite approach. It has extended three Lines of Credits (LOC) to Bangladesh in the last eight years amounting to $8 billion for the development of infrastructure in various sectors including roads, railways, shipping and ports. Bangladesh is the biggest recipient of India’s concessional LOC. India has also been providing grant assistance to Bangladesh for various infrastructure projects including the construction of Akhaura-Agartala rail link, dredging of inland waterways and construction of India-Bangladesh Friendship Pipeline.

Besides, Small Development Projects (SDPs) constitute an active pillar of India’s development assistance to Dhaka. India has funded 55 SDPs, including construction of student hostels, academic buildings, cultural centres and orphanages, in Bangladesh and another 26 SDPs are being implemented.