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Presentation on:Bilateral Trade Between India & Bangladesh

Presented by:Arpita Deb

Sem: 4 th Roll no: 23

Paper: 3203International Marketing

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India:

It is the seventh-largest country by geographical area,the second-most populous country with over 1.2 billionpeople.The Indian economy is the world's eleventh largest

economy by nominal GDP and the fourthlargest by purchasing power parity.It is the world's sixth de facto recognized nuclear weaponsstate and has the third-largest standing armed force in theworld, while its military expenditure ranks tenth in the world.

According to the International Monetary Fund, India'snominal GDP stood at US$1.43 trillion, which makes itthe eleventh largest economy in the world.

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Bangladesh:Bangladesh is a country in South Asia.Bangladesh is the eighth most populous country and is

among the most densely populated countries in the world.It is bordered by India on all sides except for a small borderwith Burma (Myanmar) to the far southeast and by the Bay ofBengal to the south.Bangladesh's economy is the 44 th largest in the world at

US$257 billion according to the IMF.

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The trading relationship between India and Bangladesh iscurrently of special interest in both countries for a number ofreasons..

Firstly, there are urgent and longstanding concerns inBangladesh arising from the large bilateral trade deficit withIndia, and from the large volumes of informal imports fromIndia across the land border which avoid Bangladesh importduties.

Secondly, closer economic integration with Bangladesh is

nevertheless seen as a very important way of reducing theeconomic and political isolation of the seven Indian easternand north eastern states from the rest of the country.

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Finally, both countries have long shared common objectivesfor closer economic integration within the South Asia region,and these have been reemphasized by signing on toSAFTA4, which took effect from January 2006.

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According to FICCI, India's trade with Bangladesh increased from$1 billion in 2001-02 to $3.17 billion in 2007-08, more than threefolds, mainly on the back of a 79.4 percent increase in India'sexports.

The FICCI has identified certain key sectors for enhancing tradeties between the two countries. They are textiles, leather, frozenfoods and fisheries, jute, agro based industries, FMCG,engineering, chemicals and petro chemicals, ceramic,pharmaceuticals, steel and infrastructure.

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Since 1996/97 Indian exports to Bangladesh (in nominal USdollars) have been growing at 9.1% annually, just slightly above thegeneral rate of growth of its total merchandise exports (8.4%), butIndia’s imports from Bangladesh over the same period have grownon average at only 3% annually, compared to average growth of its

total imports of 9.2%.

Consequently Bangladesh’s bilateral trade deficit with India hasbeen increasing rapidly, on average at about 9.5 % annually.

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In Bangladesh it is often argued that the deficit is aggravatedby India’s protectionist policies that have hobbled Bangladeshexports to India.

Many of the imports have been coming in over considerably

higher tariffs than the tariffs faced by Bangladesh exporters,owing to the extensive tariff preferences given to Bangladeshby India under SAPTA.

This suggests that the low level and slow growth ofBangladesh’s exports to India reflect fundamental comparativeadvantage factors, not discriminatory import policies.

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For India, trade with Bangladesh is a very small part of its totaltrade-just over one percent since the mid-1990s, and currentlyabout 3 percent of its total exports and a miniscule share

(0.01%) of its total imports (Fig 2.2). For Bangladesh (Fig 2.3)however, India has now become the largest single source ofits imports (about 16% of the total, ahead of China andSingapore) and accounts for about a tenth of its total trade,despite exports to India which have declined to only slightlyabove 1 % of total exports.

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0.00

200,000.00

400,000.00

600,000.00

800,000.00

1,000,000.00

1,200,000.00

2005-06 2006-07 2007-08 2008-09 2009-10Values in ` Lacs

Trade between India & Bangladesh

Export

Import

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0

0.5

1

1.5

2

2.5

3

2005-062006-072007-082008-092009-10

Share of trade with Bangladesh in India'stotal trade

Share of total tradeShare of importsShare of exports

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Bangladesh & India signed a series of new agreements in January 2010to address some of the barriers to bilateral trade through new trade &transit provisions:

Greater market access for Bangladesh.

Promotion of transit links between Bangladesh & India.

Promotion of transit links between Bangladesh & India.

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In recent times..

Meghalaya and Bangladesh have agreed to set up a taskforce to further trade and commerce with 10 border haats inthe pipeline. This is in accordance of a memorandum ofunderstanding (MoU) signed by India & Bangladesh for thereopening of border haats on October 24 in New Delhi.

Bangladesh and India have opened two land ports along theinternational border to boost bilateral trade and facilitatetrading activity of neighbours Nepal and Bhutan.

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ConclusionBangladesh & India have a long history of agreements to facilitatetrade & economic cooperation.

India’s trade with Bangladesh is rather small relative to its totaltrade such that the economic welfare gains from an FTA aremodest, largely stemming from gains in producer surplus due toexpanded exports. India stands to gain from the continuation of itspolicies of unilateral liberalization paying special attention to theremoval of non-tariff barriers, specific duties on textiles andgarments, and prohibitive tariffs on agricultural products.

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