Stakeholders meet may give a desired push to India-Bangladesh economic ties

Assam can export about 821 products to Bangladesh that it is currently exporting to other countries

India-Bangladesh economic relationship is at a crossroad, where India is poised to become a $5 trillion economy in 2024 as enunciated by Prime Minister Narendra Modi, and the process has started for Bangladesh to project the country as a middle-income developing economy by 2024. 

It is in this respect that India’s Act East Policy holds the key for the success of this proposed growth convergence. The initiative by Assam to hold a stakeholders meeting in Guwahati on 22-23 October is expected to give the desired push to strengthening India-Bangladesh economic relationship.

Bangladesh has registered rapid growth in its external sector performance since the beginning of the present century, and its total trade increased by nearly six times during 2003-18. External sector grew sharply along with widening of its overall trade gap. Its total trade stood at $89.1 billion in 2018, where exports were at $33.8 billion and imports $553 billion. During the period of global buoyancy (2003-07), Bangladesh’s overall trade expanded at the rate of 18.3 per cent per annum but acceleration of the trade momentum diminished with the onset of recession in the world economy in 2008. However, exports, imports and total trade registered double-digit growth since the beginning of the present century.

Historically, India has been one of the largest trading partners of Bangladesh. Until 2005, India continued to be the largest supplier to Bangladesh and later relegated to the second rank. The European Union became an important importer and exporter for the country, considering the monolithic nature of the export basket of Bangladesh. As export destination of Bangladesh, India slipped to the 8th position and China to 15th in 2018.

Composition of Bangladesh’s export basket had been highly lopsided, where garment shared more than 89 per cent of total exports. To support the export sector, largest import sector of Bangladesh was the textile sector, covering almost one quarter of the total imports in 2018. While export of the sector was $28.3 billion, import was $11.9 billion in 2018. Other important sectoral imports of the country were base metal, machineries, mineral products, chemicals, vegetables, among others. Since China and India are major suppliers to Bangladesh, the former had been the lead exporter of textiles, machinery and chemicals, whereas the latter is confined to minerals, vegetables and base metals. However, in recent years, China has taken the lead in the export of minerals, and base metals, pushing India to the second position.

India has been an important export destination of Bangladesh for both primary and non-primary sectors. While primary sector covers categories like fruit and vegetables, fats and oil, prepared food products and minerals, non-primary sector includes broad categories like chemicals, plastics, articles of wood, base metal and machinery. In several of these sectors, Bangladesh registered double-digit bilateral export growth with India during 2008-15.

In several lines of exports, India has price competitiveness and large export potential, but is unable to translate those potentials to actual exports. At least in 421 products that Bangladesh imports from China, India enjoys price competitiveness over China. Such products at a disaggregated level are scattered over several broad product categories, including agriculture and minerals. However, maximum concentration of these products are observed in the manufacturing sector, particularly in categories like machinery, electrical equipment, footwear, plastics, among others.

The group of states in the north-eastern region (NER) exported $54.5 million worth of exports to Bangladesh. Meghalaya was the largest exporter, followed by Assam in 2018. While Assam exported 56 products at the national lines, Meghalaya, Tripura and Mizoram exported 15, 15 and six products, respectively. 

There are several products that India is currently exporting to Bangladesh, but not from the NER states. When NER states are exporting these products to rest of the world, they can also do so effectively to Bangladesh. Taking into account the bilateral import pattern of Bangladesh with India, Assam can export about 821 products to Bangladesh with more efficiency. The present consultation meeting of the stakeholders to be held in the background of path-breaking agreements signed between India and Bangladesh can pave the way for a fresh dialogue to promote bilateral trade and investment in a comprehensive manner.

The writer is professor at Research & Information System for Developing Countries