India-Bangladesh bilateral business in the context of pandemic

Submitted to:

Dr. Muslima Zahan

School of Business & Economics

North South University

Submitted by:

Mohamed Sajjad Hossen 1835233060

Shadman Rahman 1815396660

Mohammad Anamul Islam 1815196660

MD. Ata -E- Rabbi 1835189660

1825245660
Umama Khanom

Date of Submission
Contents

Introduction.................................................................................................................................................1
Motorcycle..................................................................................................................................................2
Effect of pandemic on motorcycle sector................................................................................................3
Medical Tourism..........................................................................................................................................3
Impact of corona on the medical tourism sector.....................................................................................5
Onion...........................................................................................................................................................5
Impact of corona on the onion market sector.........................................................................................5
Cattle market...............................................................................................................................................6
Impact of corona on the cattle market sector.........................................................................................6
Jute/Jute products.......................................................................................................................................6
Textile/Garments.........................................................................................................................................7
Leather/Leather Products............................................................................................................................9
Tourism/Airlines Business...........................................................................................................................9
Data Analysis.............................................................................................................................................11
Conclusion and Recommendation.............................................................................................................14
Implementation.........................................................................................................................................15
References.................................................................................................................................................16
Introduction

The origin of the strong bonding between India and Bangladesh goes back to the liberation war, wherein
India helped Bangladesh to become independent. Since then, the relationship in all ways has become
stronger over time. The first treaty signed between India and Bangladesh is “Treaty of Friendship” in
1972 for 25 years. In the agreement, fish, raw jute, newsprint and naphtha were considered as principal
export to India from Bangladesh. On the other hand, India’s major export items to Bangladesh, were
cement, coal, machinery and unmanufactured tobacco.

However, there is a huge trade deficit between India and Bangladesh. One of the reasons is Bangladesh
consumers are fond of Indian products ranging from apparels to chocolates, opening a huge demand for
importing Indian products. Another is reason Bangladeshi products do not get access to different parts
of India where there is a demand, indicating a prevalence of obstruction in the import of Bangladeshi
products into India. Bangladesh imports goods worth 6 billion 1 over the formal channel and exports
around 600 million worth of goods. Earlier, Bangladesh enjoys tax benefit on the exported goods to
India. After 2012, the benefit was no longer effective since India imposed a 12.5% tariff on garments and
up to $329 anti-dumping duty on jute exports

Mainly, 80% of the goods imported from India is done through land ports. In 2019, to facilitate the
connectivity in the bilateral trade, both leaders have stressed on the potential of inland water and costal
shipping trade. With that intention, Dhulian-Gadagari-Rajshahi-Daulatdia-Aricha Route (to and fro) and
include Daudkandi-Sonamura Route (to and fro) 2 under Protocol on Inland Water Transit and Trade have
been unrolled for trade.

With no doubt, Bangladesh is highly reliant on India in terms of trade. Very recently, it was seen in the
onion crisis. India put a ban on the export of onion which had had a dire consequence in the onion
market in Bangladesh, with price becoming exorbitant 3. It is a no brainer that India economic slowdown
will have a severe impact in Bangladesh economy.

Since a month ago, the corona pandemic has been taking a huge toll not only on people lives but also on
the global economy. India is now on a 21-days lockdown and so do is Bangladesh. Already, World Bank 4
has declared an impending global recession with layoff becoming certain in many sectors. In this report,
we will do a holistic case study on the India-Bangladesh bilateral trade in the context of the corona
pandemic.
Motorcycle

For a very long time, Indian motorcycle are widely popular among the youths of Bangladesh. Most of the
young Bangladeshi have a penchant for bikes. Over the years, the demand of bike is increasing. It is
because about 75% of the Bangladesh population are less than 40 years old and it augurs well for the
bike industry5. Given the dire condition of the traffic jam in Dhaka, commuters are more likely to buy
bikes mainly for convenience. The rise in income of the middle class and growing preference among the
people for faster transportation will contribute to the growth to bike industry. Now, some of the
companies have set up assembly plant for the eventual manufacture of bike, thereby decreasing the
price of bikes, thanks to favorable policy and tariff structure. The motorcycle market has been expected
to be around 6 lakh units by the end of 2019. Moreover, the ride-sharing sector is providing an impetus
to the bike adoption as it can a be source of earning for the bikers.

Of the top five motorcycle brands, three are from India. This indicates the rise in Indian bike adoption in
Bangladesh.

Source bike export data and report of india 6

In 2017, the highest number of export of motorcycles done by India was to Bangladesh, which was
about 158 crore worth of bikes.
In 2015, Bajaj was the market leader and around 70% of the market is dominated by Indian bikes. From
then onwards, the size of the market is increasing with more players vying for the share.

Effect of pandemic on motorcycle sector

The current pandemic has caused adverse impact on the motorcycle companies. Due to lockdown,
production has come to a halt 7. In many companies, layoff is expected as the companies are incurring
losses. In India, 2500 crore worth of vehicles are stuck in the inventory and liabilities are getting piled
up. Sales will definitely decline with no respite in the near future.

Undoubtedly, the long-term ramification will also be deplorable as recession is expected to strike the
world very badly. During the time of recession, the affordability of the potential bike customer will
decrease. With incomes crunching and limited funds to make their livings, customers will be very
prudent when it comes to buying things like bikes and others. The consumer will likely to save money for
other essentials which have higher priority in the list.

Medical Tourism

Given the huge population of Bangladesh, the demand of health care is enormous. Every day, it a normal
sight to see that hospitals be it small or large are overwhelmed with patients and the doctors are
grappling with giving treatment. Apparently, the quality of healthcare is degrading with no
improvements in the horizon. Now, just wonder about the state of hospital in the rural areas where the
healthcare facilities are scarce. In Bangladesh, there is 1 doctor for 1847 patients 8. Adding to this
conundrum is the burgeoning commercial nature of healthcare. At times, we get to witness multiple
cases of mistreatment of the patients at the hands of the doctors with no accountability. As a result, a
huge mistrust on the doctors is noticed among the patients. Seeing no improvement in the health care
sector, many patients are opting for treatment in India as hospitals in India have gained good reputation
with their services. Indeed, this has helped them to get positive word of mouth.
Clearly, it is the positive word of mouth that acts as the sole driver in motivating the patients from
Bangladesh to visit India for treatment. Indian healthcare has become so popular internationally that
Indian government has identified it to be a medical tourism sector with huge potential beckoning.
According to VAP global9, around 1000 Bangladeshi go to India for treatment every day. In 2018, a
report by Sunday Guardian10 found that Bangladeshi accounted for 50% of the total medical tourists in
India, becoming the largest user of Indian Healthcare. It was an increase of 83% over the span of last
three years. Bangladeshi health tourists are the second highest spenders after Pakistan. Such was its
growth that Niti Aayog, government think tank, termed it as the major source of foreign exchange
earnings. Having observed the potential, Indian government is unfolding a plenty of initiatives to make it
easy for Bangladeshi health tourist.

The chart above shows the rise in the number of Bangladeshi patients visiting India for treatment.
Notably, rate of increase of Bangladeshi health tourist is significantly greater than that of other
countries. However, we have seen a dismal increase between 2016 and 2017. The reason behind this is
yet to be ascertained.

Moreover, as per that report, most of the patients coming to India were for heart disease, cancer,
kidney problem, eye disease, neurological disease, diabetes &urinary disease, liver disease (hepatitis),
gynecological disease, skin disease and some other diseases, for which the treatment is not available in
Bangladesh. With no doubt, India hospitals offer world class treatment at a lower price compared to the
same kind of treatment in the western world, making it more attractive for Bangladeshi patients. In
2017, Bangladesh patients bought $0.34 worth of medical services 11, as reported by Indian media
Business Standard.
Impact of corona on the medical tourism sector
However, in the wake of coronavirus pandemic, the medical tourism sector of India will definitely take a
severe hit. Already, the India High Commission in Dhaka has stopped issuing visas. This will lead to a
severe drop in the patients going to India for treatment and will indeed have a dire consequence as the
revenue earnings from the health tourism sector is directly proportional to the number of health
tourists. The economy of many neighborhoods, in the vicinity of the renowned hospital where there was
a large footfall of foreign health tourist, will bear the brunt of this pandemic as their earnings largely rely
on foreign health tourists. The hospital will also have to refund the advanced payment of the patients
due to the cancelling of bookings. Some of the hospitals provide rental accommodation for patient’s
relative. It is a no brainer that this revenue source for the hospital will be lost.

Inadvertently, many of the agencies in Bangladesh, who are offering services to the patients seeking
treatment in India, has seen a slump in the number of customers. Therefore, a chain effect of the
downward spiraling of all the stakeholders involved in the medical tourism will be noticed in the near
future.

Onion

The onion market in Bangladesh is strongly linked with the market in India as Bangladesh imports onions
from India to meet the significant share of local demand. Thus, any shock in the Indian market is
transmitted quickly to onion market in Bangladesh. Although India is a large producer of onion, her
supply is often affected due to weather factors and price of onion in India is also politically sensitive.

According to the Bangladesh Bureau of Statistics, the country's onion production in 2016-17 fiscal was
1.86 million tons against a demand for 2.4 million tons. The price of onions skyrocketed in Bangladesh
when India banned its export of onions in September last year, with immediate effect. India exported
2.2 million tons of fresh onions in fiscal year 2018-19 up until Mar 30, according to a Reuters report.
Bangladesh's dependency on India for imported onions created the onion crisis last year. Onion prices
crossed Tk 250 a kg in local markets at one point. In a bid to tackle the crisis, the government started
open market sales across the country and imported onions from Turkey, Egypt, Pakistan, and Myanmar.

Impact of corona on the onion market sector

By the start of 2020, when Bangladesh was recovering from the sore pricing of onion, pandemic
happened. Currently, due to the global lockdown, import-export has come to a halt. However,
Bangladesh has already enough of imported onion reserved for the rest of the year from Pakistan. If it
be needed Bangladesh will import from Turkey, Afghanistan, Pakistan and Egypt. Moreover, the
pandemic will pass by and there will not be any short fallings onion. However, if the pandemic last more
than a year then a hardship might be seen but there won’t be any significant effect of it.
Cattle market

In 2015, Bangladesh’s livestock sector was faced with a shortage crisis of cows from India for slaughter
in anticipation of the upcoming Eid ul Azha. The Indian government had increased its vigilance in the
trade following religious sentiments in their country as cows are viewed as sacred by the majority Hindu
population. Prior to this time, an estimate of around 2 million cattle was smuggled into Bangladesh
every year, which has dropped down to a little above 300,000 during the time. Prior to this time, the
vast majority of cattle imported from India were through informal channels as economic benefits of
creating a formal market were overruled by religious, political, and humanitarian issues.

In 2017, India’s beef exports were valued at around $4 bn, despite drives in the country by religious
fundamentalists to stop cow slaughter for consumption. Following the ban, cattle trade from India to
Bangladesh had shrunk from $1.5 bn to $250 mn (2017). An estimated 2.4 to 2.5 million Indian cows
used to enter Bangladesh illegally, but there is no official figure on it yet. The latest data compiled by
Border Guard Bangladesh shows, around 23lakh cows entered Bangladesh in 2013, while this year, till
May, only 75,696 cows entered via the corridors, and the country earned Tk37,61,850 from it.

India's ban on cattle export helped Bangladesh attain self-sufficiency. A large number of farmers, and
traders got involved in cattle rearing, reducing the dependency on imported animals. Bangladesh will be
no longer dependent on neighboring countries for meat production; rather it is planning to export if the
present growth continues.

Impact of corona on the cattle market sector

We know there is surge in demand of cattle due to Eid-Ul-Azha . This time, it is difficult to ascertain what
will happen to the cattle market.

If this pandemic continues, the living standard of people of Bangladesh will fall, which will result in many
people inability to purchase cows this, may create less demand in the economy. Overall, India’s Ban will
not hamper Bangladesh in any way as the government's initiative to create self-employment led many
graduates to get engage in cattle trade, as it is less risky, needs small investment, and space.

Jute/Jute products

According to the Export Promotion Bureau (EPB), in the last fiscal year, Bangladesh export earnings from
jute and jute goods fell to $816.27 million from $1.02 billion in last fiscal year

Export earnings from jute and jute goods witnessed a fall by 20.41% to $816.27 million in the just
concluded fiscal year despite government efforts to restore the lost glory of what used to be called the
country's golden fiber. According to the Export Promotion Bureau (EPB), in the last fiscal year,
Bangladesh export earnings from jute and jute goods fell to $816.27 million from $1.02 billion in last
fiscal year.

Of the total amount, raw jute earned $112.48 million, down by 27.75% from $155.68 million. Jute yarn
and twine, the largest contributor to the sector, fetched $512.42 million posting a 20.89% negative
growth compared to previous year’s earnings of $647.72 million.

On the other hand, jute sack and bags saw a 32.54% decline to $83 million, which was $123 million and
other products earned $108.51 million, which is 9.24% higher compared to previous year’s earnings of
$99.33 million.

In 2017, the Indian government imposed anti-dumping duty ranging from $6.30 to $351.72 per ton on
imports of jute and its products from Bangladesh and Nepal to protect local industry. This duty will
remain effective for the next five years.

Expressing deep concern over the down trend in export earnings from jute and jute goods, the sector
people have blamed the anti-dumping duty by India and slump in demands in global market.

Because of CoVID-19 outbreak all the factories are currently shut down in accordance with the
announcement from the Bangladesh Government. Due to this the transportation routes and all other
communication mediums are in a standstill condition. For the crisis, people are more aware of their
health and only the demand of the necessities e.g. food are there in the market. Other commodities like
jute and luxurious items’ demand are negligible at the moment.

Textile/Garments

Bangladesh is the world’s second-largest Ready-made Garment (RMG) exporter. The RMG and textile
sector has consistently been the key driver of Bangladesh exports for the last several years, contributing
over 80% of total exports from the country. In 2018, exports of RMG generated foreign-exchange
earnings of US$32.9Bn. By 2021, the government aims to raise this figure to US$50Bn.

Bangladesh exports a wide range of apparel products to North America, Europe, Asia, and many other
regions of the world. Generally, RMG and textile products for export are divided into two major
categories – woven and knitwear. The growth of RMG sector has led to the commissioning of many new
factories and generation of new employment opportunities. Bangladesh at present has around 4,500
operating garment factories which provides employment to about 4 million people.

Bangladesh has a global market share of 6.4% of total RMG exports. Due to various factors, China is
slowly transitioning away from RMG and textile production. This factor increases the opportunity for
Bangladesh to capture additional market share from China and increase its percentage of the global
market going forward.

The Covid-19 pandemic has had a profound impact on the supply chain and demand for the apparel
sector. Top exporters like Bangladesh have started feeling the heat due to raw material sourcing
challenges and cancelled orders.
The performance of the RMG sector is more critical for an economy like Bangladesh, since apparel
contributes 84% of the country’s export, employing close to 3.5 million people. While gauging the
possible impact of the pandemic on the apparel sector, it is imperative to look into the demand side
scenario by analyzing the European, US and the emerging markets for apparel export.

Major global fashion brands have taken prompt responses to help in flattening the Coronavirus curve
and this has left significant impacts on worker employment, revenues and overall operations. Due to
large scale closure of stores owing to the lock-down enforced by different governments, apparel sales
for Bangladesh have plummeted, leading to brands postponing or cancelling orders. Bangladesh
Garments Manufacturers and Exporters’ Association (BGMEA) have claimed that USD 1.5 billion worth
of orders have already been cancelled or put on hold by the buyers.

The fall in cotton demand from China has led to demand-supply mismatch. Along with this, decrease in
yarn exports for India to China will mean an even greater excess supply of yarn and lower prices in the
international market. Raw (unginned) cotton in the Gondal (Gujarat) market shed almost 10 per cent to
trade at Rs 4,280 a quintal in the first week of March from a level of Rs 4,755 a month ago. Cotton yarn
lost 2-3 per cent over the last one month, while synthetic yarn declined by 4-5 percent during the past
one month, following a fall in crude prices.

Although Bangladesh had been a victim of yarn-dumping from India, with import prices quoted to be up
to 30% lower than local production costs by India, before the Coronavirus outbreak, domestic prices
have since rebounded. Bangladesh Garment Buying House Association (BGHA) has complained that
spinners are now charging 15% higher compared to last month due to yarn import disruption from India.
Supply chain disruption due to the Chinese lockdown has had negative repercussions across
Bangladesh’s textile and Garments value chain, as Chinese imports accounts for a significant portion of
the sector’s total import (46% of USD 34 billion as of FY 2018-19).

While short term sourcing destinations have not undergone dramatic changes as of yet, employment
layoffs as a result of government mandated shutdowns and quarantines are inevitable. While countries
that have incorporated some form of automation in their apparel industries are slightly cushioned from
this impact, countries such as Bangladesh will suffer greatly given the large number of people employed
in its apparel and textiles sector.

As can be judged by the fast-fashion cycle, COVID-19 since being declared a pandemic, has not yet
spanned the cumulative of the Sell-in and Production Delivery Phases for the average global brand. Thus
a hypothetical cut-off point for these companies has likely not been reached as to when they will switch
supply sources.

It is expected with the progress of healthcare responses globally that the road to recovery may begin as
soon as mid-April. However, there will likely be a price hike for global apparel products which will persist
until equilibrium can be re-established over the coming months.
Leather/Leather Products

The leather industry, country’s second largest export-earning industry, is observing a continuous decline
in export earnings. According to the data of Export Promotion Bureau (EPB), export earnings from the
leather and leather products declined by 16.11% to US$434 million in the five months of the fiscal year
2018-19, which was US$518 million in the same period last year.

In fiscal 2017-18, according to data from the EPB, export of leather, leather goods, and footwear were
USD 1.08 billion. In 2016-17, Bangladesh exported leather and leather goods worth $1.23 billion,
compared with $1.16 billion in the previous fiscal year. Export earnings from the leather & leather
products declined by 16.11% in the five months of the current fiscal year. Therefore, it shows that the
sector is not having a strong and remarkable growth.

Because of CoVID-19 outbreak all the factories are currently shut down in accordance with the
announcement from the Bangladesh Government. Due to this the transportation routes and all other
communication mediums are in a standstill condition. For the crisis, people are more aware of their
health and only the demand of the necessities e.g. food are there in the market. Other commodities like
leather and luxurious items’ demand are negligible at the moment.

Tourism/Airlines Business

The worldwide travel ban amid the coronavirus outbreak has directly hit the country's airline businesses,
putting operators under extreme financial pressure. The disruption in air connectivity has tripped up
other sectors such as tourism, labor market, readymade garments and job market under a chain
reaction effect. Local airline operators are now considering asking the government to reduce airport
charges. The Biman Bangladesh Airlines has made a loss of Tk300 crore since the virus outbreak as it had
to cut 70 percent of flights around the globe owing to travel bans and a fall in passenger growth. Out of
218 flights on international routes, Biman has cut more than 150 flights so far. The coronavirus fear also
hurt businesses in local routes, compelling Biman to cut domestic flights. Biman on Saturday slashed
flight frequencies in Jashore, Rajshahi and Saidpur routes. With coronavirus continuing its onslaught,
Biman had to retreat from its route expansion plan. It is now planning to cutting down costs by reducing
business. The national carrier has postponed its decision to begin flight operations to Guangzhou and
Chennai, slated for March this year. Biman also backtracked from its plan to expand its wings to two
new routes – Sharjah of UAE and Bahrain. With six new Dreamliner in its fleet, Biman was planning to
increase flight frequencies to India and Middle Eastern countries, but coronavirus has now forced Biman
to put those plans on the backburner. Biman is now limiting its businesses by cutting various costs
instead of expansion. The drastic cut in flights in both domestic and international routes put severe
pressure on the cash flow of the company. If the situation lingers, it will be difficult to continue even
loan payment for the airlines.

Biman will need the government's support to reduce charges on airlines' operations and loan
rescheduling facility, considering the current disaster, he added. US-Bangla, the largest private local
airline, has cut more than 60 percent of flights on international routes. The slash in flight frequencies
caused it to suffer a loss of Tk25 crore to Tk30 crore on an average in the last two months, according to
the company. The airline put on hold its route expansion plan to Delhi and Chennai. Instead, the carrier
slashed its international routes to four from the existing eight.

The International Air Transport Association (IATA), in a press release issued, said the coronavirus impact
would create enormous cash-flow pressures for airlines. It said airlines would need emergency measures
to get through this crisis. The governments should be looking at all possible means to assist the industry
through these extreme circumstances. Extending lines of credit, reducing infrastructure costs, lightening
the tax burden are all measures that governments will need to explore, said the press release.
Data Analysis

Export

As per Export Promotion Bureau (EPB) information, Bangladesh's export to India increased to $1.25
billion, up by 42.91%, which was $873.27 million in the previous FY. Bangladesh's export to India for the
first time reached the billion-dollar mark, with products worth $1.25 billion being exported in the fiscal
year 2018-19.

Export to India (in Million$)

1400.0
1200.0
1000.0
800.0
600.0
400.0
200.0
0.0
2015-16 2016-17 2017-18 2018-19 2019-2020 (Upto
February)

In the above chart, we see the trend of Bangladesh’s export to India over the previous years, which was
upward sloping up until the current fiscal year. Export to India from Bangladesh for FY 2018-19 was
US$1.25 billion and for 2019-20 upto February was US$784 million.

If we project this linearly, then at the end of FY 2019-20 it will end at US$1.05 billion, which is still
farfetched. That is because ADB’s latest posted analysis says that about 0.2 percent to 0.4 percent of
Bangladesh's GDP may be lost due to spillover effects of the global Covid-19 pandemic. In such scenario,
the final export figure to India for FY 2019-20 will be US$993 million, which is a great step back from the
potential exponential growth trend that was beginning to surface before.
 Top 5 Export Products to India
500.0

400.0

300.0

200.0

100.0

0.0
Knitted and Woven Vegetable Textile Animal and  Jute and Jute Goods Leather and Leather
Garments Fibre and Paper Yarn Vegetable Fat Goods

Export (in Million$) (2018-19) Export (in Million$) (2019-20 upto Feb)

If we take a look at the breakdown of products exported to India, for FY 2018-19, apparel sector
contributed almost half of earnings at US$499 million, Vegetable fiber and Paper yarn earned US$142
million, Animal and vegetable fat brought US$ 159 million, Jute products brought US$85 million and
Leather goods brought US$33 million. But if we see at the state of FY 2019-20 upto February, we will see
a significant drop, by 15% average on the linearly projected final figure. But then, this is not the end of it.

The apparel sector, which is the bread and butter of our country, will take a significant hit due to Covid
19, as international orders are being cancelled. This will also hit the export figure earned from India.
Import

It would have been a boost to reduce our inflation rate if export figures were not projected to be dismal.
That is because the backlash effect of Covid-19 also includes Bangladesh’s import to India. As per export
data from India to Bangladesh, trendline is downward sloping.

Import from India (in Million$)

9000
7500
6000
4500
3000
1500
0
2015-16 2016-17 2017-18 2018-19 2019-2020 (Upto
February)

From the data we see above, the peak import reached was in the fiscal year 2017-18, which was US$8.6
billion. Although it fell a notch the following year, at UD$7.7 billion, it was due to some products being
banned to export to Bangladesh. But the major inclination can be seen this current fiscal year. Up until
February, the import was US$4.9 billion, linearly projected to US$6.5 billion, which is almost 19% less
than the previous FY. That is before GDP factor comes in.

According to ADB report, importers say that their businesses have declined. In the aftermath of Covid-19,
894,930 employments will be lost, as per last month's ADB investigation. This number in both divided in
the export and import sector. Since majority of import comes from India, majority of job lost in the
import sector will be due to loss of import to India.

Top 5 Import Products from India

2100

1750

1400

1050

700

350

0
Cotton Vehicles Mineral Fuels and Machinery & Cereals
Oils Mechanical
Appliances

Import (in Million$) (2018-19) Import (in Million$) (2019-20 upto Feb)
As with the case with export, in the case of top import products, we see similar situation. Unsurprisingly,
cotton is the top-most imported product, standing at US$2.04 billion for the FY 2018-19. Most of our
raw cotton is exported from India for the garments sector. But since major apparel brands, who are also
present in India, have been cancelling their orders since the outbreak, we are seeing the effect. After
linear projection, import of raw cotton will stand at US$1.7 billion for FY 2019-2020. Other products such
as Vehicles will also see a decline from US$1.2 billion to US$737 million. These are mostly two and three
wheelers, popular in our country and dependent on import from India.

Refined mineral fuels/oils market is also like to take hit as we do not have sufficient refineries and thus
dependent on India. This product is likely to see decline from US$857 million to US$548 million,
potentially increasing fuel price across the country.

Conclusion and Recommendation

The impact of the running pandemic has already caused havoc both on the lives of people and the
economy. It is just at the beginning stage and the full impact is yet to be felt. In light of the information
and analysis above, we see that major economic recession is ahead of us. Because since trade between
India and Bangladesh have been hit hard, one can also say trade between other major trading partners
will also be hit. Such a condition is always hard to cope, much less solve, even for developed economies.
Even with exceptional strategies, it will be naïve to think that economy can be brought back to track
without some damage. Although some east Asian countries like Taiwan, South Korea, Vietnam, Japan,
China, because of their quick reaction and far-sightedness, is already back on track to some extent. Since
our time to react to the pandemic was slow, we already suffered quite a damage. Having said all this, we
may have been late but it is not too late. Policies and steps to counter the economic impact can still be
taken, so prevent further damage and salvage what is dented.

Firstly, government must announce a stimulus package, especially for the mass who live hand to mouth.
Since almost all the factories and transport service is closed, majority people of this sectors are the daily
wage earners. Also, all the other countries took this measure as the first step for economic damage
control. Secondly, for the business owners, central bank should deploy policies, which will enable the
owners to avail emergency loan at the minimum interest rate. This is necessary for the people at the
mid to low end of wealth chain to sustain themselves while they are at home. Since business is
effectively suspended for the time being and no goods or services are being sold, such steps are the only
lifeline. Thirdly, to support the export market, since all forms of exports are on hold, a form of Export
Development Package is necessary. It can be in the form of tax grants or reduced interest loans
disbursed as needed to the crucial export sector.
Implementation

Since the announcement of social distancing and lockdown towards the end of march, government is
starting to roll out decisions to tackle the looming economic recession. On April 1st Bangladesh Bank
announced that it will extend Tk 50bn coronavirus relief package to exporters as bank credit. The Bank
will release the fund to the commercial banks while the entrepreneurs will apply for the loans by
submitting estimates of the money, they need to pay wages and allowances of workers and employees.
The loans carrying a 2 percent interest rate will be repayable in two years with a grace period of six
months. Finance Minister said the interest in reality is the service charge for the banks to distribute and
collect repayments. The government will not give the money from the national budget, rather, the
finance ministry will issue Tk 50 billion bonds and the central bank will raise a refinancing fund against
the bonds.

Also, on April 5th, the government announced four fresh stimulus packages worth Tk 67,750 crore to
enhance its effort to overcome the economic losses due to the coronavirus situation. The overall size of
the stimulus packages now stands at Tk 72,750 crore, nearly 2.52 per cent of the country’s gross
domestic product. Of the fresh packages, Tk 30,000 crore announced for big industries and the service
sector will be distributed by commercial banks as working capital loan at 9 per cent interest rate with
the government providing 4.5 per cent in subsidy. Under the second package worth Tk 20,000 crore,
small and medium enterprises, including cottage industries, would also get working capital loan at 9 per
cent interest rate with the government giving 5 per cent subsidy. Besides, a Tk 12,750 crore package was
earmarked under the Bangladesh Bank’s Export Development Fund to facilitate raw materials imports
under back-to-back Letter of Credit at 2 per cent from 2.73 per cent interest rate. Lastly, an amount of
Tk 5,000 crore was made to facilitate the ‘Pre-shipment Credit Refinance Scheme’ at 7 per cent interest
rate.
References

1. Report, S. B. (2018, April 9). Analyst shows ways to cut Indo-Bangla trade gap. Retrieved from
https //www.thedailystar.net/business/analyst-shows-ways-cut-indo-bangla-trade-gap-1560508
2. Chaudhury, D. R. (2019, October 7). India, Bangladesh sign MoU for setting up a coastal
surveillance system radar in Bangladesh. Retrieved from https
//economictimes.indiatimes.com/news/defence/india-bangladesh-sign-mou-to-set-up-a-
coastal-surveillance-system-radar-in-bangladesh/articleshow/71457316.cms
3. Gunia, A. (2020, March 31). Virus Could Throw Some Asia Economies Into Recession Report.
Retrieved from https //time.com/5812908/world-bank-report-asian-economies-recession/
4. Parvez, S., & Habib, A. (2019, January 20). Motorbike market to race faster in 2019. Retrieved
from https //www.thedailystar.net/business/news/motorbike-market-race-faster-2019-1690051
5. Retrieved from https //www.exportgenius.in/blog/bike-export-data-and-report-of-india-march-
2017-20.php
6. Coronavirus impact Hero, TVS, Bajaj struggle to clear BS-IV vehicles worth Rs 2,500 crore. (2020,
March 24). Retrieved from https //www.businesstoday.in/sectors/auto/coronavirus-impact-
hero-tvs-bajaj-struggle-to-clear-bs-iv-vehicles-worth-rs-2500-crore/story/399053.html
7. The Financial Express. (n.d.). Bangladesh has one doctor for every 1847 people. Retrieved from
https //thefinancialexpress.com.bd/health/bangladesh-has-one-doctor-for-every-1847-people-
1519053209
8. Report, S. B. (2018, May 3). Bangladesh a key source market for medical tourism. Retrieved from
https //www.thedailystar.net/business/tourism/bangladesh-key-source-market-medical-
tourism-1571314
9. Jacob. (2018, August 4). Over 50% medical tourists to India are from Bangladesh. Retrieved from
https //www.sundayguardianlive.com/news/50-medical-tourists-india-bangladesh
10. Independent, T. (n.d.). Bangladesh yet to make a breakthrough in the health sector. Retrieved
from http //m.theindependentbd.com/printversion/details/94898
11. Correspondent, S. (2020, April 3). ADB on Bangladesh High outbreak of Covid-19 may hurt
economy. Retrieved from https //www.thedailystar.net/frontpage/news/adb-bangladesh-high-
outbreak-covid-19-may-hurt-economy-1889335
12. Genius, E. (n.d.). India Export Data. Retrieved from https //www.exportgenius.in/export-import-
trade-data/india-export.php