Building a robust India-Bangladesh economic partnership

Northeast Now, September 14, 2022

By Bipul Chatterjee and Mihir Shekhar Bhonsale

The recent visit of Bangladesh Prime Minister, Sheikh Hasina to India from 5-8 September was a stride forward in building a robust Indo-Bangladesh economic partnership with a focus on trade and connectivity with the announcement on cooperation in energy, road infrastructure, and linkages through rail and inland waterways.

Reckoning the significant benefits of bilateral economic and commercial ties, PM Hasina and Prime Minister Narendra Modi decided to kick start discussions on the Comprehensive Economic Partnership Agreement (CEPA). Both countries presently are eyeing to sign bilateral Free Trade Agreements (FTAs) agreements with many of their economic partners.

Since it’s withdrawal from the Regional Comprehensive Economic Partnership (RECP), India has preferred entering into bilateral FTAs. In 2022 itself, India signed FTAs with the United Arab Emirates and Australia. New Delhi is also in discussion for entering in FTAs with the United Kingdom and the European Union.

Similarly, Bangladesh is eyeing for FTAs with its major trading partners such as China, India, Japan, South Korea, Singapore, Canada and Malaysia.

Time for a CEPA

The proposed Indo-Bangladesh agreement is aimed at strengthening bilateral trade and investment relations, and covers goods, services and investment. The agreement seeks to help Bangladesh to address the latter’s socio-economic and developmental challenges while graduating out of the Least Development Country (LDC) status in 2026.

On its part, Bangladesh will seek to address its negative trade balance with India through attracting more Indian investments. Several Indian companies have shown interest to invest in Bangladesh’s Special Economic Zones, specially made for investors from India in sectors such as pharmaceuticals, fast moving consumer goods, and automobiles.

On the other hand, India’s vast consumer market presents enormous opportunities for food products from Bangladesh. For instance, Pran, a Bangladeshi conglomerate which exports food products to India, are a household name in the Eastern and North-eastern regions of the country and they have made investment in Tripura, a north-eastern state. Through the signing of this CEPA Bangladesh could hope to invest more in India’s Northeast.

In this context, it is important to note that while India enjoys trade surplus with Bangladesh, it is the opposite in case of India’s Northeast. One of the reasons is restrictions on market access imposed by Bangladesh on Indian exports. For example, India cannot export more than 40 commodities from the Agartala-Akhaura border in Tripura state and out of these 40 items, only dry fish and plastic items are majorly exported.

During the Bangladesh Prime Minister’s visit India reiterated its request for designating at least one major land port in the Northeast region without trade restrictions, starting with the one at Agartala-Akhaura border.

The proposed CEPA is expected to address many of these granular issues so as to make this relation more balanced by narrowing Bangladesh’s trade deficit with India, while reducing restrictions on exports from India’s Northeast.

Connectivity is the key

While the proposed CEPA is expected to double their bilateral trade from the current level of $18 billion within a few years, the realisation of this potential will depend on optimal use of existing and proposed connectivity between the two countries. It encompasses upgrading of road, railway and port infrastructure, and exploration of multimodal connectivity options with the dual-use (road and rail) Padma Bridge and coastal shipping as pivots.

Therefore, connectivity should be an important pillar of this proposed CEPA. Fortunately, Prime Minister Hasina’s visit was a stride forward in underscoring the importance of implementing rail, road, water and other connectivity initiatives. As part of making incremental progress in this regard, the leaders of the two countries inaugurated a railway bridge built under India’s Line of Credit on the Rupsha River linking Khulna and Mongla port.

Also, they decided to explore riverine services under the Protocol on Inland Water Transit and Trade (PIWTT) routes 5 and 6 (Dhulian to Rajshahi, with an extension to Aricha) and 9 and 10 (Daudkandi to Sonamura).

These initiatives show that naturally endowed trans-boundary rivers present economically competitive and environment-friendly alternative modes of cross-border movement of people and goods. Earlier, local trade was primarily undertaken through the water routes and once effectively revived, small haul waterways can be used to increase trade in local products.

However, challenges such as minimal infrastructure at terminal, unavailability of night navigation facilities, one way cargo and multiple customs checks need to be addressed for making them viable. For instance, in the Daudkandi-Sonamura route there are 23 low lying bridges on the Bangladesh side which restricts the movement of even small cargo vessels in the rainy season.
Moreover, they have to be complemented with on-going and proposed rail connectivity projects. While there are six operational rail links between India and Bangladesh, viz. Petrapole-Benapole, Gede-Darshana, Singhabad-Rohanpur, Radhikapur-Birol, Haldibari-Chilahati and New Jalpaiguri-Dhaka, it is an imperative to further develop soft and hard infrastructure along these routes to make better use of them. Along with dedicated warehouse facilities, appropriate security provisions at the border stations will incentivise exporters in using railways, especially in case of high-value items.

Enjoy Successes

A simple yet powerful indicator of bilateral relationship is enjoyment of each other’s successes. For instance, the Padma Bridge is a success story of Bangladesh and it is to be seen how the people of India enjoys that success.

In short, while challenges will be there as in all relationships, they must not obliterate the larger picture of Indo-Bangla partnership that completed its 50th anniversary last year. As Prime Minister Modi said in his Press Statement during the Prime Minister Hasina’s visit, India-Bangladesh Friendship will touch new heights in the ‘Amrit Kaal’ of next 25 years. A Comprehensive Economic Partnership Agreement can and should be a jewel in that crown.

Executive Director and Assistant Policy Analyst, CUTS International, a global public policy think- and action-tank on trade, regulation and governance

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