AKM Asaduzzaman Patwary, Executive Secretary (R&D), DCCI
Bangladesh and India, located in the South Asia, occupy strategic and geographic locations with important economic implications for the Asia and beyond. Bangladesh, largely surrounded by India to the west, north, east and with a coastline along the Bay of Bengal, serves as a vital gateway for maritime trade between South Asia and Southeast Asia. Bangladesh, positioned at the junction between South Asia and South East Asia, finds a strategic position geographically. This position can leverage us to connect with regionally. India’s central position in South Asia, with its extensive coastline along the Indian Ocean, enhances its roles in regional trade and economic activities in many manners. Apparently, both countries benefit from their geographic proximities to important sea routes facilitating regional integration. The geographical proximity and concerted effort towards increasing trade facilitation fostered substantial growth in bilateral trade. Over the last five decades, their relationship has been marked by consistent diplomatic ties based on common cooperation and values despite many challenges. India, the world’s 5th largest economy, shares a 4,096-kilometer border with Bangladesh, making it the fifth-longest land border globally. Trade of two nations has grown significantly and Bangladesh evolved as the India’s largest trading partner in the subcontinent. The bilateral trade reached $17 billion with a growing imbalance for Bangladesh. Since Bangladesh imports more this is termed as unilateral trade relation and Bangladesh exports around $2 billion to India. Trade has grown manifold times as local traders preferred it because of cost, time and transport advantages. India aimed to enhance the bilateral trade over $20 billion against the growing trade relation. However, it is often said that the aggregate formal and informal trade reached $20. India’s export to Bangladesh constitutes a mere 1% of its total trade compared to lower trade share of Bangladesh’s with India. Though the trade relation hit an upward trajectory, there has been some sensitive issues remained overshadowed, unaddressed like brutal killing of innocent people in border, smuggling and territorial issues, political interference and undue market dominance with disguised favour for India which have enraged mass people with lower confidence on India. These injustice and bad events remained always unattended. Bangladesh and India along with 5 other member countries in South Asia are geographically integrated but they are least integrated in economic matters while Sub-Saharan economies are more integrated in trade. India has territorial unrest with Pakistan, Bangladesh, China and other neighbors. People of major economies in SAARC like Pakistan, Nepal and Maldives have expressed extreme frustration against Indian influence. During the last decades, Indian businesses of mainland has been given much privilege of multimodal transport connectivity for easy access to their northeastern states and Bangladesh. India enjoys both transit and transshipment facilities to NES through Bangladesh. In return, we failed to access to third countries using Indian ports and land routes though agreed by premiers of two countries in 2022. The much-talked BBIN MVA cross-border surface route connectivity has never implemented due to disguised non-cooperation by Nepal, Bhutan and India though it was a game-changing connectivity move. In the mutual connectivity, the benefits are not evident win-win. Bangladesh had the comparative cost and time advantage to export like cement, FMCG, medicines and electronic and other items to most of the seven sisters’ states but we were deprived from the access. This unilateral relationship has become a concern for Bangladesh over the last decades as India has benefited unilaterally ignoring our interests. The weak negotiations have cost much to our economy. The longest serving regime in Bangladesh failed to ensure balanced interests in trade, infrastructure and connectivity advantages. As soon as the interim Government stepped in power, the uncertainties have mounted with Indian side for maintaining the conventional India-Bangladesh bilateral ties.
Mutual trade benefits between Bangladesh and India are crucial for fostering economic growth and regional stability. However, the ongoing unsettled issues and unilateral trade preferences have been sources of contention, necessitating further negotiations to amend these imbalances. As a result of long-term practice, Bangladesh has developed some sourcing dependence on this easy destination. Due to contemporary world economic setbacks, our economy has experienced some unexpected business crisis, inflationary, investment and foreign exchange stress. Immediate after the regime change, almost all major ports, travel, transport and airlines operations with India have been restricted resulting into slump in economic operations with multiplier effects in both countries. The quick turnaround of economic activities has become immediate needs in the given situation. Keeping aside the discrimination and unrest issues, Bangladesh needs to maintain and prioritise the economic revival and all traditional economic relations since breach of any functional relation in this given state would not be wise for us. Building new economic relation with any economy requires time and effort to get the result. Interim Government usually does not take major policy decision but they are to act routine administrative tasks. The prevalent issues and deals like Comprehensive Economic Partnership Agreement (CEPA), water-sharing, connectivity and border safety require this Government to look into to defend our interests. India may be cautious about the long-term deals with this government. Our approach to India has to be flexible and strategic for a balanced relation. Our hardline stance could strain diplomatic ties while continuity of normal relation might be useful and better.
For the investment and trade interests in Bangladesh, Indian businesses seem open and eager to continue the existing tie desiring the political stability. The unrest has also negatively impacted Indian exports, small businesses and large consumer bases on both sides. The current unrest is not only affecting our economy but also weakening its negotiating position in regional matters. It also increases doing business cost and hampers the local trade operation. Usually, Bangladesh imports many essential commodities at lower price and this broken supply chain may impact our uninterrupted supply and inflationary state.
The ongoing negotiations on the Comprehensive Economic Partnership Agreement (CEPA) hold the promise of enhancing trade, investment and industrialization between the two countries. The terms of this Agreement need to be revisited with a feasibility to identify the potential loss and benefit prior to the finalisation to reap the maximum economic benefits. If the agreement is successfully implemented, it could increase bilateral trade from $5 to $7 billion in its first year alone, generate investment and employment. In addition, the 10 Memoranda of Understanding (MoUs) including the blue economy, maritime cooperation, rail connectivity to northeastern states and disaster management signed need to be critically revisited for their rationale. Both countries initiated the currency swap through trade transactions which has given little relief of sigh but this should be continued in Taka and Rupee to alleviate foreign currency reserve shortage.
The effectiveness of bilateral agreements between India and Bangladesh largely depends on the political stability and equality treatment. The contentious issue of joint river water sharing of the Teesta River is a significant challenge and must be taken into account as lack of proper water sharing caused manifold concerns for livelihoods, ecological imbalance, flash floods and damage. Disputed joint river commission severely affects our live, livelihoods. For the greater interests of people and economy, the political interests and disagreement reality should be kept aside and focusing on complex bilateral issues and continue our trade and economic operations. In this regard, we can follow the precedent of relentless trading relation of Bangladesh and Myanmar despite having hostile attitude by Myanmar and unhumanitarian Rohingya infiltration causing manifold adversities in Bangladesh. Out of the political sentiment, the current economic relation should not be avoided otherwise it may hurt all stakeholders. We need to be more careful to minimise our potential loss from the bilateral trade eliminating non-tariff barriers. Since all members of this bloc belong to South Asia, they need an integrated, strong cross-border transport connection system for greater regional economic inclusion for all countries. And, the multilateral platform SAARC and SAFTA may be meaningfully effective backed by a equal and active participation of all members.
In the long run, the economic relationship between Bangladesh and India has to remain smooth as political history of two nations is deep-rooted and inseparable. If political relations remain frail, Bangladesh has to diversify its trade partnerships cutting over-reliance on India exploring Southeast Asia, Association of Southeast Asian Nations (ASEAN), Africa and GCC and MENA markets to offset the trade loss. Considering the forthcoming economic transformation, Bangladesh has to expand its trade engagement later graduation as a developing country in 2026 beyond traditional markets. In this context, we have to reap benefits from all economic cooperation including from India and Bangladesh.
The economic relationship between India and Bangladesh is deep. Yet the unsettled issues in border, weak trade negotiations may hinder the desired people-to-people connection that are more important for significant relations which could lead to even greater economic benefits. In the changing geoeconomic and political premises, the relationship of two nations can endure if driven by shared interests in connectivity, trade and regional prosperity. Both countries can justifiably reduce disagreements and grievances on peaceful territorial, just water sharing and balanced trade to build a friendly partnership. Bangladesh can aim at a win-win state based on equity, justice and mutual respect. In the integrated world, we must sustain through friendship to all. Thus, the equitable and integrated cross-border economic cooperation can be ensured. And, Bangladesh may redefine the strategic economic agenda with the neighboring economy to steer our relation into a new stature.
