Export basket expansion to India

Fraternal ties between Bangladesh and India are currently stronger than ever. As a natural consequence of the friendly relations between the regional powerhouse India and the fast-moving Bangladesh, trade relations are improving fast. Bilateral trade grew at an unprecedented 14 per cent in the last couple of years from $9.46 billion in 2019 to $10.78 billion in 2021.

The balance of bilateral trade, however, is skewed in India’s favour. This is, to an extent, only to be expected as the Indian economy in terms of volume, is much larger. However, experts believe that the gap should be narrowed down and for that to happen, Bangladesh must concentrate on expanding its export basket.

This view was reflected by the apex trade organisation of the country FBCCI as it has sought access to export 12 new products in the Indian market.

According to a report published by The Business Post on Thursday, Indian businesses have shown keen interest to import ceramics and jute products from Bangladesh. . As Bangladesh graduates from the UN’s list of Least Developed Countries (LDCs), the need for it to diversify its export basket becomes pressing. Many of the benefits it used to receive as an LDC will become redundant or unavailable after graduation. To make up for some of the potential losses, Bangladesh needs to formulate long-term plans on how to enhance its export basket, particularly to friendly countries like India.

Bangladesh is one of India’s largest trade partners, as indicated earlier. Bangladesh mainly exports to India readymade garments, jute and jute-processed products, leather-processed products, plastic products, fish, soft drinks, copper and edible oil. It imports rice, raw cotton, onion, motor vehicles, boilers, machinery, milk, dairy products, electronic products and iron. Experts believe that there is huge potential to further increase the trade volume.

There are stumbling blocks on the way though. Bangladesh has not been able to take advantage of India’s growing import market. India is importing many items from the global market but not from Bangladesh. Bangladesh is exporting the same goods to the global market but not to India. Policymakers must remove the obstacles that impede higher bilateral trade flows through appropriate policies.

About 50 per cent of the bilateral trade between Bangladesh and India takes place through land ports. The border points are not crossing points — they are control and checkpoints. Goods need to be unloaded and reloaded in ‘no man’s land’ leading to delays and cost-escalation. In the absence of mutual recognition agreements, goods wait for several days until inspection results come from laboratory facilities in distant testing centres.

The costs of transporting goods from Dhaka to Delhi are significantly higher than those from Dhaka to European and US ports. The efficiency of trade connectivity depends on how effective transport, investment and logistics connectivity are. As part of the South Asia Free Trade Area (SAFTA) agreement, India has offered duty-free and quota-free (DF-QF) market access to Bangladesh. But Bangladesh has not been able to take full advantage of this.

Several new initiatives are being implemented to improve trade facilitation at the border. Infrastructure at land customs stations and the two customs authorities is being improved and documentation reduced. The Bangladesh, Bhutan, India and Nepal Motor Vehicle Agreement (BBIN-MVA) signed in 2015 is expected to allow cargo-carrying vehicles to move across the borders and lead to a significant reduction in costs. Bangladesh has also allowed India to move goods between its western and north-eastern states through Bangladeshi territory. The two countries now should concentrate on people-to-people contact, trade, business and connectivity as the issues became increasingly important for the two sides.

Overall, the Bangladesh–India bilateral relationship is showing signs of developing positively over the long term. But there is still some way to go if Dhaka wants to fully reap the potential benefits of deeper Bangladesh–India bilateral ties.