If the dollar exchange rate is calculated at Tk 95, the current trade deficit stands at Tk 1350 billion.
The scenario was found analysing data collected from Bangladesh Bank, Export Promotion Bureau (EPB), and Indian high commission in Dhaka.
The main export items of Bangladesh to India are ready-made garments, jute and jute products, leather products, plastic products, fish, soft drinks, copper, and edible oil. And, the main products imported by Bangladesh from India include rice, raw cotton, onions, automobiles, boilers, electronic products, iron, machinery, milk and dairy products.
Bangladesh prime minister Sheikh Hasina went to Delhi last Monday on a four-day state visit. The next day, Tuesday, he held a bilateral meeting with Indian prime minister Narendra Modi. It talked among other things the signing of the Bangladesh-India Comprehensive Economic Partnership Agreement (CEPA).
Prime minister Sheikh Hasina and her Indian counterpart Narendra Modi announced the signing of the CEPA at a joint press conference held in New Delhi after a bilateral meeting. Narendra Modi said, 'We are interested in gearing up trade between the two nations. This is why we will start the process of signing CEPA.”
Trade scenario of both countries
India granted duty-free facility to Bangladesh on all products except arms and drugs in 2011. The export of Bangladeshi products to the neighboring country has been increasing since then. The tariff concession came into effect after the then prime minister of India, Manmohan Singh, came to Bangladesh on a state visit.
According to EPB data, Bangladesh exported goods worth $870 million to India in the fiscal year 2017-18. Since then the export revenue has been above $1 billion. The exports amounted to Tk $1.99 billion amid the Covid-19 pandemic in the fiscal year 2021-22.
On the flip side, the imports from India witnessed a massive surge. As per Bangladesh Bank data, Bangladesh imported products worth $8.62 billion in FY18. The import flow slowed down slightly in the following few years, but it has almost doubled in the last 2021-22 fiscal year.
The acting president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Shahidullah Azim, told Prothom Alo that India is a big market for Bangladesh in the context of bilateral trade. Importing goods from the country takes less time and cost, while the export also offers the same benefits. He said the CEPA or Free Trade Agreement (FTA) will boost trade and benefit both nations. However, the business leader thinks that infrastructural development of land ports is necessary for increasing trade.
Will the trade gap decrease?
The bilateral trade has always been in favour of India. It suddenly became much bigger in the last financial year. Meanwhile, the multi-faceted challenges that Bangladesh is expected to encounter after its graduation from the group of least-developed countries (LDC) has come up for discussion. Bangladesh has proposed signing the CEPA to deal with these challenges.
The World Bank, in a report titled “Connecting to Thrive : Challenges and Opportunities of Transport Integration in Eastern South Asia”, said some 10 per cent of Bangladesh's total trade is done with India, while India's trade with Bangladesh is only 1 per cent.
However, Bangladesh's exports to India will increase by 182 per cent once the FTA is in place, while India's exports to Bangladesh will increase by 126 per cent.
And, the export of Bangladesh to India will increase by 297 per cent and India's exports to Bangladesh by 172 per cent if an uninterrupted transportation system is introduced.
Selim Raihan, executive director of South Asian Network on Economic Modeling (SANEM), told Prothom Alo that more imports from India is not a bad thing and the trade gap cannot be reduced by increasing exports.
It's true that the CEPA will be beneficial. But it should be considered that the deal will not only increase the export of Bangladesh to India, but also increase the import of Bangladesh from India. India will get more tax benefit from it, he said.
The SANEM executive director noted that more attention should be placed on Indian investments. It will create employment and help in growth. Bangladesh has created a separate economic zone to attract Indian investment, but the success rate is very low.
Indian industrialist Gautam Adani, who is known as the third richest man in the world, had a meeting with prime minister Sheikh Hasina in New Delhi. Selim Raihan believes the meeting to be significant in terms of investment attraction.