How dependency rises

Shipping costs started to rise at the beginning of 2021 when the businesses were reopened after over a year of restrictions inflicted by the Covid-19 pandemic. The increased shipping costs changed the shape of import business in Bangladesh.

The import of wheat from Russia and Ukraine became costlier, prompting traders to bring the food grain from neighboring India. The situation went downhill after the commencement of Russian invasion of Ukraine and Bangladesh’s dependency on India increased further for importing wheat.

The Indian commerce ministry said the import of wheat from India increased three-fold within a year. The food grain has now gone up by three notches from fifth to second on the list of import items from India. Cotton secured the first place on the list.

In the last fiscal, around 63 per cent of imported wheat was sourced from India. Bangladesh used to import the majority of the food grain from Russia and Ukraine before the crisis began.

Not only wheat, this list also includes raw sugar, rice, diesel, yarn and raw materials of the garment sector. The import of all these products increased compared to the previous years.

Bangladesh was fully dependent on Brazil for importing raw sugar. But the high shipping costs forced the traders to source the food commodity from India. The refineries here imported 1 million tons of sugar – 44 per cent of the total import – from India in the last fiscal. But the ratio of Indian sugar was only 4 per cent in the previous fiscal.

BSM Group Chairman Abul Bashar Chowdhury told Prothom Alo that the traders generally import from quick and cost effective sources. Importing commodities from India costs lower than from other nations and the cost decreases further if the goods are imported through the land port. These issues have increased the dependency of Bangladesh on India for importing goods.

Participation of small traders rises

Small importers were on the verge of disappearing from the commodity market. The import giants generally bring around 50,000 tons of goods in a single consignment at a cheaper rate. But the small traders have to bear a relatively higher cost as they import products in small consignments. Thus they were left out of the business until the global crisis opened up opportunities for them.

Around 300 new enterprises joined the import trade last year. Some 221 traders importers brought wheat from India in the financial year 2020-21, but the number rose to 522 in the following fiscal. Some 450 of the 522 importers are small enterprises who brought 10 to 10,000 tons of wheat from the neighboring nation.

Muslim Uddin, proprietor of Nurul Islam and Brothers of Khatunganj, said it is tough to fight the big traders as they import 50,000 to 60,000 tons of wheat in a ship.

But the import opportunities from India have opened up a new door for the small enterprises as they started to import Indian commodities in small consignments, he added.

Trade gap widens

The trade deficit with India has increased despite a significant rise in export trade. The Export Promotion Bureau (EPB) said Bangladesh exported products worth USD 1.99 billion to India in the last fiscal year.

The Indian commerce ministry said the trade gap between two neighboring nations widened further and stood at USD 14.9 billion in FY22.

Mustafizur Rahman, distinguished fellow of the Center for Policy Dialogue (CPD), said, “Import substitution has taken place due to the global crisis and various restrictions. Imports in the private sector have increased due to competitive prices, which is crucial for keeping the local market stable. Although India is taking full geographical advantage in the supply of goods, Bangladesh could not utilise it."