Bangladesh-India trade triples in a decade to $16b

In the last decade, Bangladesh-India bilateral trade has expanded threefold to almost reach the $16 billion milestone. Both export to and import from India has increased, and so the trade deficit has gone up significantly as well.

According to data from the Bangladesh Bank (BB) and the Export Promotion Bureau (EPB), Bangladesh and India recorded $5.3 billion in bilateral trade in FY 2012-13. In the last FY 2021-22, it reached $15.93 billion. There has been a 200 per cent expansion in bilateral trade between the two countries.

When asked, the officials concerned said that due to the progress of the industrial sector in Bangladesh, the import of raw materials from India has also increased. Exports have improved as well, so bilateral trade has expanded.

Prof Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), told The Business Post, “We generally import three types of products from India – consumer goods, industrial raw materials, and intermediate goods. Except for consumer goods, the rest are used in our export-oriented industries and domestic production.”

“India is one of the major sources of raw materials for the industrial sector. Bangladesh imports a large amount of cotton, especially for the export-oriented garment industry,” India-Bangladesh Chamber of Commerce and Industry (IBCCI) President Abdul Matlub Ahmad said.

Bangladesh imported cotton worth almost $2 billion in the last fiscal year from India. Other than cotton, other notable imports from the country include onion, fruits, chilli, car, chemicals, coffee, iron, and steel.

Trade deficit widens

While trade has expanded, the trade deficit has also widened with India. The reason behind this is that Bangladesh imports from India more than it exports to the country. As a result, the trade deficit has increased 186 per cent over the last decade.

According to BB and EPB data, the trade deficit between Bangladesh and India was $4.18 billion in FY 2012-13. It had gone up to $11.95 billion by FY 2021-22.

However, as Bangladesh imports fewer goods from India which are used in non-productive sectors, there is not a lot to worry about this trade deficit, Matlub Ahmad thinks.

“We import more intermediate goods from India. It helps us to increase our export and domestic production. Therefore, I don’t think the trade deficit is a big deal,” he said.

Mustafizur said, “We are not very worried about the trade deficit as imports from India are helping to increase our exports. But we need to increase our capacity to reduce this deficit.”

He added, “India imports goods worth about $500 billion annually, but even as a neighbour, we are unable to capture this market because we have no supply side capacity. Also, we have low competitiveness and low trade facilitation. But we have zero tariff facilities for exports to the country and if we boost our exports, trade gap will reduce.”

Mustafizur said to increase supply side capacity, foreign investment can be attracted to build industries in Bangladesh to make products that are in demand in India. He mentioned that the Indian special economic zone is a good example.  

“Despite being a neighbour, our transportation cost is high due to less trade facilitation. Trade facilitation should be improved to increase competitiveness. For this, the infrastructure of ports should be developed.”

Export shows signs of improvement

After China, Bangladesh imports the largest amount from India. However, export from Bangladesh to India has also been improving lately, with export earnings reaching a respectable amount in recent years.

According to the data, Bangladesh’s export income from India has increased by 253 per cent in the last decade. Bangladesh’s export earnings were $534 million in FY 2012-13, which went up to nearly $2 billion in the last FY.

In FY 2018-19, Bangladesh reached the milestone of $1 billion in export earnings for the first time. Exports in that financial year were $1.25 billion. After just four years, in the last FY, this amount has reached $1.99 billion.

Currently, one of the major export products to India is ready-made garments. Bangladesh exported $715 million worth of ready-made garments to the country in the last financial year.

IBCCI President Abdul Matlub Ahmad does not see any major impediment to exporting to India.

“The biggest obstacle to exporting to India is the mindset of our country’s exporters. They always look to Europe and America as export destinations. This attitude should be changed and attention should be paid to neighbouring markets,” he said.

However, exporters blame not mindset but infrastructural issues as impediments behind exporting to India.

Classic Fashion Concept Ltd Managing Director and BGMEA Vice President Shahidullah Azim told The Business Post that due to congestion at Benapole port, shipment of export goods gets delayed.

However, to speed up exports, initiatives have been taken to modernise the two land ports at Bhomra in Satkhira and Sonamsjid in Rajshahi, he added.

Jute and jute goods can be a good source of increasing export earnings from India. However, India’s anti-dumping duty stands in the way.

India imposed the anti-dumping duty on Bangladesh’s jute yarn, hessian and bags, ranging between $19 and $352 per tonne, in January 2017, resulting in further widening of the trade gap between the two neighbours.

The regulatory duty on grounds of checking the “dumping” of the product had an immediate impact on Bangladesh’s jute and jute goods exports to India and the trade declined in the following year.

Since then, Bangladesh had requested India to withdraw the anti-dumping duty as it seriously undercuts jute and jute goods exports to the Indian market. However, the repeated requests on various occasions at different levels of the governments didn’t yield any outcome.

Businessmen have demanded that this problem be resolved during Prime Minister Sheikh Hasina’s upcoming visit to India.

Mentioning that the anti-dumping duty is the main pain point, Matlub Ahmad hopes that the issue would be resolved during the PM’s India visit.

“As there remains a good relationship between the two countries, we hope this issue will be addressed during the visit of our PM. Once the problem is resolved, I am hopeful that jute export will increase to $1-2 billion,” he said.

Problems and possibilities

As most of the trade with India involves the land ports Benapole of Jashore, Bhomra of Satkhira, and Hilli of Dinajpur, officials concerned are hopeful that Padma Bridge will be more useful in increasing bilateral trade between the two countries in the future.

Among these three land ports, Benapole is given the most importance. Traders have urged to improve the quality of Benapole and the other land ports. They’re optimistic that if the stay time of Indian trucks in Bangladesh can be reduced, import costs will go down as well.

“Ports should be brought up to international standards to reduce trade costs. In order to get the benefits of Padma Bridge, the rundown inter-district roads from Benapole to Faridpur should be upgraded to six lanes,” Matlub Ahmad said.

After the inauguration of the Padma Bridge, 300 trucks from India are bringing goods to the Benapole port every day. Previously this number was 200. Traders have demanded the establishment of Inland Container Depots (ICDs) at Benapole Port by private enterprises like the ones in Chattogram Port.

IBCCI Director Matiar Rahman said that if ICDs can be established by private initiatives, the congestion in the land port will be reduced. Dubai Port Authority is interested in providing technical assistance in setting up ICD, he added.

IBCCI leaders recently held a meeting with Dubai Port Authority in Dhaka. The company offered this assistance in the meeting.