Economic aspects of Bangladesh-India relations

The ties have reached such an extra-ordinary height that many international analysts termed it as a role model for the rest of the world in terms of bilateral ties between two neighbours. Both the countries have not only improved their diplomatic ties but also deepened their bond on all fronts including security and border management, trade, commerce and investment, connectivity, energy and power, space, developmental projects, culture and people-to-people contacts.

Economic engagement is one of the pillars of Bangladesh-India relationship. Both the countries are trying to engage in various sub-regional connectivity projects through road, rail and sea routes. These connectivity projects create trade opportunities for Bangladesh with the North-East Indian states. On the part of India, the country is interested in road and railway transit through Bangladesh as doing so would lower the cost and time to transport goods to its north-eastern states.

Transit facility to North East India and sub-regional connectivity with Bhutan, Nepal and India under Bangladesh, Bhutan, India and Nepal (BBIN), a group of sub-regional countries in eastern south Asia, are important initiatives undertaken by Bangladesh and India.

The Protocol on Inland Water Transit and Trade (PIWTT) initiated the Kolkata-Assam water route via Bangladesh territory for transportation of goods and providing infrastructure facilities. Initially Bangladesh allowed transshipment of food grains to Tripura on humanitarian grounds. The arrival of a ship at Ashuganj, Bangladesh in 2006 from Kolkata carrying food grains for Agartala marked the first official transit to India’s North east via Bangladesh territory. A simultaneous maritime and land transits are being offered to India. Bangladesh charges Tk 192.22 per ton as transshipment charge.

Second connectivity project is the Bangladesh, Bhutan, India and Nepal Motor Vehicles Agreement (BBIN-MVA) signed in 2015. The MVA aims to connect Bhutan, Nepal and North East India with Chittagong and Kolkata ports. Bangladesh and Nepal have launched a trial bus service between their capitals through India on April 24, 2018 under BBIN-MVA. MVA is awaiting ratification by Bhutan parliament. After completion of the ratification process, seamless movement of passengers and products among these countries is expected. Kolkata-Agartala-Dhaka bus service and Dhaka-Guwahati-Shillong bus service was started in 2015 under this agreement. Both Bangladesh and India agreed to consider introducing new bus service linking Khulna-Kolkata and Jessore-Kolkata route.

Bangladesh and India are taking initiatives to revive the traditional rail routes to enhance travel of passengers and transportation of goods. There are eight interchange points between Bangladesh and India, namely Darshana-Gede, Benepole-Petrapole, Rohonpur-Singabad, Birol-Radhikapur, Shahbazpur-Mahishasan (closed in 2002), Chilahati-Haldibari (closed since 1965), Burimari-Chengrabanda (closed in 1971) and Mogolhat-Gitaldah (closed in 1976).

In September 2018 works of three projects, namely Kulaura-Shahbazpur section rehabilitation of Bangladesh Railway, Akhaura-Agartala duel gauge rail connectivity and Chilahati-Haldibari rail connectivity have been jointly inaugurated by the Prime Ministers of Bangladesh and India. A 43 km rail line is being set up from Khulna to Mongla port with India’s soft loan. This will establish rail connectivity between Mongla and adjoining countries Nepal and Bhutan alongside local routes. The Maitree Express and Bandhan Express are passenger train services connecting Bangladesh and India.

Based on Bangladesh-India Coastal Shipping Agreement, 40 per cent concession will be made on vessel-related and cargo-related charges applicable in Indian ports. Bangladesh has agreed to allow India to use the Chittagong port. A new route for cargo transportation between Bangladesh and India has started which shortens the journey time to 5 days instead of 20-25 days by road. Petrapole-Benapole is a key and busy gateway for bilateral trade and business. This agreement will reduce pressure on the land route.

Bilateral trade between Bangladesh and India has grown steadily over the last 10 years. Between the year 2015-16 and 2017-18 India’s export to Bangladesh grew 28.5 per cent from $ 7 billion to $ 9 billion. Bilateral trade stood at $ 9.14 billion in 2017-18. India’s export to Bangladesh in 2017-18 stood at $ 8.46 billion and import from Bangladesh during 2017-18 stood at 0.68 billion. Total Indian investment proposals registered with Bangladesh Investment Authority exceed $ 3 billion and are on an upward trajectory. In the last three years Indian FDI flow to Bangladesh was doubled from $ 243.91 million in 2014 to $ 516.71 million in 2017. Sectors in which Indian companies have invested include telecommunications (Airtel), pharmaceuticals (Sun Pharma), FMCG (Marico), automobiles (TATA, Hero Motors) and so on.

The two countries are also developing cooperation in areas of power and energy sharing. 

Though trade deficit is a persistent problem in economic relations of the two countries, bilateral trade has increased significantly in recent years.  Huge trade deficit had been an issue of discontent in Bangladesh-India bilateral trade. Indian leaders have indicated that New Delhi would strive to reduce the imbalance and India has taken steps to address this issue.

India has removed 47 Bangladeshi products from the negative list of imports in order to allow duty-free access of these products in Indian market. India has also provided duty-free access to Bangladesh on all tariff lines except tobacco and alcohol under South Asian Free Trade Area (SAFTA) since 2011. In 2017-18 total import of Bangladesh from India was US $ 861.84 billion and export to India was US $ 87.33 billion. (Bangladesh Bureau of Statistics)

Removal of various tariff and non-tariff barriers on exports from Bangladesh by India is the key to reduce the huge trade gap. India has extended three Lines of Credit (LoC) to Bangladesh in the last 8 years amounting to US $ 8 billion. This makes Bangladesh the largest recipient of LoC from India. Bangladesh has offered three Special Economic Zones (SEZs) for Indian investors and seeks substantial investment from Indian investors in these three SEZs located at Mongla, Mirersarai and Bheramara to broaden its exportable base.

The two countries are also developing cooperation in areas of power and energy sharing which is another hallmark in Bangladesh-India ties. In 2016, export of power from Tripura to Bangladesh and export of internet bandwidth from Tripura started. Bangladesh is currently importing about 660 MW power from India. The 1320 MW coal-fired Maitree Thermal Power Plant, a Bangladesh-India joint venture, is being developed at Rampal.

Recently, 550 MW power transfer from West Bengal’s Berhampur to Kusthia’s Bheramara started via video conferencing by Prime Ministers of the two countries. The two Prime Ministers also inaugurated construction of Bangladesh-India Friendship Pipeline between Siliguri in West Bengal and Parbatipur in Dinajpur to supply diesel to Bangladesh. Diesel is currently supplied to Bangladesh through a cross-border train from Numaligarh refinery in Assam.

Bangladesh-India economic relation has achieved major goal during the era of Sheikh Hasina’s government. Strong economic ties between neighbours are much needed for development of both countries in this era of globalization.