Assignment on

Trade Relationship Between Bangladesh & India

MBA (Evening) Program, Spring-2022

Department of Marketing

Course Title: Global Marketing

Course Code: EMKT-6501

Submitted To:
Dr. Shaikh Rafiqul Islam
Professor,
Department of Marketing
Jagannath University

Submitted By:

Sl Name ID Batch Section

1. Md. Adnan Habib M20190204317 19th A

2. Md. Hasnath Jaman Rashu M20190204322 19th A
3. Md. Jakir Hossain M20190204333 19th A
4. Md. Abdullah Al Mamun M20190204339 19th A

5. Chinmoy Saha M19160204304 16th A

Table of Content:
 Sln Content Page No

1 Executive Summary 3

2 Introduction 3

3 Trade Agreement 3

4 Trade Relation 6

Trade Imbalance and Unilateral Trade Concessions by

4.1 6
  India

  4.2 Connectivity 7

5 Conclusion 8

6 Recommendation 9

1. Executive Summary:

Bangladesh incorporates a massive and chronic deficit with its neighboring country India over
the years. This paper explored the trends and patterns of trade between these two countries using
both aggregated and disaggregated data. More specifically, it examined the relative position of
the two countries in global trade, explores the overall trend in exports to and imports from India,
and the trend in trade balance using aggregate level data. Further, utilizing some disaggregated
data, analysis is conducted regarding the commodity composition of Bangladesh exports to and
imports from India by major product categories. Additionally, the paper estimates revealed
comparative advantage (RCA) to reflect inter-industry trade based on comparative advantage by
commodity groups. The paper finds that India has a much stronger position in the global trade
then Bangladesh and that India strongly dominates Bangladesh in consensual trade, resulting in a
very large and insistent trade deficit with India. At a disaggregated level, the paper finds that
Bangladesh has reasonable advantage in some products whereas India has comparative
advantage relatively in more product categories.

2. Introduction:

Bangladesh is a small emerging developing economy in South Asia whereas India is a large and
dominant country in the South Asian region in terms of population, land and other natural
resource legacies, education and technology, and size of the economy compared to Bangladesh
and other of its neighboring countries. In terms of population size, India is the second largest
country in the world after China. In terms of population, being the second largest country in the
world, India still has much less population density (0.36 times) than Bangladesh and India have
about twice (1.83 times). Based on some other indicators, India and Bangladesh have strong
similarity such as in terms of population growth rate 1 times, real GDP in PPP$ growth rate only
1.15 times, and the CPI based inflation rate 0.95 times (Based on world Bank 2018 data).

3. Trade Agreement:

The Government of the Republic of India and the People's Republic of Bangladesh, being
conscious of the urge of their two peoples to enlarge areas of mutual co-operation; Desirous of
expanding trade and strengthening economic relations between the two countries on the basis of
equality and mutual benefit; Have agreed as follows:

Article 1:
The two Governments recognizing the need and requirement of each other in the context of their
developing economies undertake to explore all possibilities, including economic and technical
cooperation, for promotion, facilitation, expansion and diversification of trade between the two
countries on the basis of equality and mutual benefit.

Article 2:
The two Governments agree to take appropriate measures in accordance with the evolving
international trading system for mutual benefit of developing countries and least developed
countries in so far as such measures are consistent with their individual, present and future
development, financial and trade facilitation.

Article 3:
The two Governments agree that expansion of their mutual trade exchanges would make an
important contribution towards their development. To this end, they agree to take appropriate
and special measures during periodic reviews taking into account the asymmetries between the
two countries with a view to augmenting and diversifying their mutual trade specially in respect
of specific products as may be agreed upon.

Article 4:
All payments and charges in connection with trade between the two countries shall continue to
be affected in freely convertible currencies in accordance with the foreign exchange regulations
in force in each country from time to time.

Article 5:
Imports and exports of commodities and goods produced or manufactured in India or
Bangladesh, as the case may be, shall be permitted in accordance with the import, export and
foreign exchange laws, regulations and procedures in force in either country from time to time
taking into account asymmetries between the two countries.

Article 6:
Each Government shall accord to the commerce of the country of the other Government,
treatment no less than that accorded to the commerce of any third country.

Article 7:
The provisions of Article 6 shall not prevent the grant or continuance of
a) Privileges which are or may be granted by either of the two Governments in order to facilitate
frontier trade by separate agreement(s);
b) Advantages and privileges which are or may be granted by either of the respective
neighboring countries;
c) Advantages resulting from any customs union, a free trade area or similar arrangements which
either of the two Governments has concluded or may conclude in the future;
d) Advantages or preferences accorded under any scheme for expansion of trade and economic
co-operation among developing countries, which is open for participation by all developing
countries, and to which either of two Governments is or may become a party.

Article 8:
The Two Governments agree to make mutually beneficial arrangements for the use of their
waterways, roadways and railways for commerce between the two countries and for passage of
goods between two places in one country and to third countries through the territory of the other
under the terms mutually agreed upon. In such cases, fees and charges, if leviable as per
international agreements, conventions or practices, may be applied and transit guarantee regime
may be established through mutual consultations.

Article 9:
Each Government will grant merchant vessels of the other country while entering, putting off
and lying at its ports the most-favored-nation treatment accorded by their respective laws, rules
and regulations to the vessels under the flag of any third country. Both the Governments agree on
the basis of shipper's preference, to utilize to the maximum extent possible, the vessels
owned/chartered by shipping organizations of the two countries concerned for shipping cargoes
imported or exported under this Agreement at competitive freight rates.

Article 10:
The two Governments agree to cooperate effectively with each other to prevent infringement and
circumvention of the laws, rules and regu1ations of either country in regard to matters relating to
foreign exchange and foreign trade.

Article 11:
The two Governments agree to accord, subject to their respective laws and regulations,
reasonable facilities for the holding of trade fairs and exhibitions and visits of business and trade
delegations sponsored by the Government concerned.

Article 12:
In order to facilitate the implementation of this Agreement, the two Governments shall consult
each other at least once in a year or earlier as and when necessary, and shall review the working
of the Agreement with special attention to the asymmetries between the two countries.

Article 13:
This Agreement may be modified, reviewed or amended at any time with the mutual consent of
the two Governments.

Article 14
This Agreement shall be valid for five years with effect from the First day of April, 2015 unless
terminated earlier. It shall automatically be extended for successive terms of five years unless
either Government terminates the Agreement by giving a written notice of its intention to
terminate to the other Government at least six months before the end of such a term. In case of
termination, it shall cease to operate on the expiry of the respective term. But termination shall
not affect the actions taken or agreements reached pursuant to this Agreement.

Done in Dhaka, on the Sixth day of June, 2015, in two original copies, each in Hindi, English
and Bangla, all the texts being equally authentic. In case of difference, the English text shall
prevail.

4. Trade Relation:
In 2020, Bangladesh exported $1.01B to India. The main products that Bangladesh exported
to India were Pure Vegetable Oil-$112M, Non-Knit Men's Suits-$98.3M, and Textile Scrap
$65.8M. During the last 25 years the exports of Bangladesh to India have increased at an
annualized rate of 10.2%, from $88.5M in 1995 to $1.01B in 2020.
In 2020, India exported-$7.91B to Bangladesh. The main products that India exported
to Bangladesh are N/A. During the last 25 years the exports of India to Bangladesh have
increased at an annualized rate of 8.46%, from 1995 to 2020- ($1.04 B to $7.91B)

4.1. Trade Imbalance and Unilateral Trade Concessions by India:

Bangladesh has contended over the last several years that the high level of tariff by India has
been a major constraint in its effort to expand its export. Besides, Bangladesh has not only
reduced the tariff at a faster rate but has also maintained a lower tariff regime over a longer
period than India.
To address this issue of growing trade imbalance between the two countries, India in 2011
announced the removal of all 46 textile items, a key export produce of Bangladesh, from the
sensitive list and zero duty access in all the 46 items meant for Bangladesh’s export to India. It
was expected that Bangladesh’s export to India would increase with this initiative. But
subsequently problems were faced due to the existing Non-Tariff Barrier (NTB). Bangladesh
expects India to remove the NTB as it is a major hurdle to their export growth. Some of the
obstacles which could be targeted for removal of the NTBs, are the requirement of double
laboratory test for every consignment of food product, delay in getting these test results,
imposition of state tax and strengthening the infrastructural facilities at the authorized Land
Custom Stations (LCS). Quite a few of these bottlenecks arose simply because of non-transmittal
of decisions from the policy level to the executing agencies at ground level, while some were
simply reflective of a deeply entrenched mindsets and reluctance to do business differently.
Barrier by barrier, these have had to be addressed for removal, some with success and some
without.
New Delhi and Dhaka have also lately realized the important role played by the Border Haats-
(trading posts) in promoting trade and consequently the wellbeing of the people dwelling in the
remote and inaccessible areas across the borders of the two countries. Locations for opening up
of these Border Haats are selected by both the countries based on the inaccessibility of such
regions and the interdependence of the population. Eight such border hats are currently
operational; four in Meghalaya and four in Tripura states of India. As many as sixteen more are
under consideration. Both sides are reviewing the radial perimeters (presently 25 miles, to 50
miles), and range of goods permissible for trade through these hats. The first border hat started
functioning in July 2011. Both the countries have recently agreed to open more such trading
posts near the Tripura – Bangladesh border after the recent inauguration of Tirupur a–
Kamlasagar Border Hat.

PM Modi during his recent Dhaka visit also took cognizance of the massive trade imbalance in
bilateral trade despite availability of Duty Free and Quota Free (DFQF) access for all but the
revised 25 Bangladeshi items of exports to India. The extension of unilateral trade preferences by
India should also help in reducing the huge trade imbalance. This will also create a beneficial
spill-over effect on the political relationship between New Delhi and Dhaka. What is now
important is for the authorities at the implementation level to pursue these initiatives and
decisions for effective and expeditious implementation. The trade policy negotiators are hopeful
that a Free Trade Agreement (FTI) based on the Global Trade Analysis Project (GTAP) model
may be useful in addressing this issue. There are several advantages for Bangladesh as far as
Free Trade Association (FTA) with India is concerned5. Some of these are: -

I. The concessions under FTA are more stable as they are within a contractual framework.
This contractual framework tends to provide an incentive to expand their export capacity
thereby seizing its potential in exporting to India. Thereafter, an assured access to our
market would result in an enlarged flow of foreign private capital for enhancing export
capacity and infrastructure in development in Bangladesh.
II. FTA also provides for elimination of non-tariff barriers within a time bound framework
unlike the unilateral trade.
III. Our geographical proximity provides Bangladesh with a competitive advantage over the
rest of India in exporting to our north-east areas. This advantage would come into place
with the coming of FTA.
IV. Lastly, FTA would also ensure deeper economic integration, trade facilitation,
harmonization of standards, building and up-gradation in transport facilities.

4.2. Connectivity:

India-Bangladesh is a good example of connectivity through all modes of transport. The

movement of goods by road is operationalized through 36 functional Land Customs Stations
(LCSs) and 2 Integrated Check Posts (ICPs) along the border. This includes the Petrapole-
Benapole ICP through which more than 50% of the bilateral trade takes place on account of
which it has been decided to operate these land ports on 24x7basis since 01August, 2017.

The Protocol on Inland Water Trade and Transit (PIWTT) has been operational since 1972. It
permits movement of goods over barges/vessels from India through the river systems of
Bangladesh on eight specific routes. Trans-shipment of goods to Northeastern States of India
through Ashuganj river port and further through Akhaura -Agartala by road commenced in June
2016 under the PIWTT.
Coastal Shipping Agreement signed during the visit of Prime Minister Narendra Modi to
Bangladesh in June 2015 has also enabled direct sea movement of containerized/bulk/dry cargo
between the two countries. In February 2017, container ship services have started between
Kolkata and Pangaon (which is just around 20 km from Dhaka) under this framework.
Out of the erstwhile 6 rail links that existed, four Broad Gauge inter-country rail links between
the two countries are operational now. The Radhikapur-Birol rail link was the latest to be put
back in operation during PM Sheikh Hasina’s visit in April 2017. Apart from these, work on the
remaining two new rail links is ongoing. The 7thnew rail-link between Agartala and Akhaura is
being financed under grant assistance of India. The ‘Maitree Express’ between Kolkata and
Dhaka now operates 4 days a week and has been converted into a fully AC train service. The
trial run of the 2nd Maitri Express between Khulna-Kolkata was conducted during PM Sheikh
Hasina’s visit to India in April 2017 and will be operational soon.
There are regular bus services between Kolkata-Dhaka, Shillong-Dhaka and Agartala-Kolkata
via Dhaka. A new bus service (Dhaka-Khulna-Kolkata) was launched during PM Sheikh
Hasina’s visit in April 2017.
The Bangladesh, Bhutan, India and Nepal – Motor Vehicle Agreement (BBIN MVA) is expected
to significantly boost connectivity by road. The trial run of Cargo Movement on Trucks from
Kolkata to Agartala via Dhaka and Dhaka to New Delhi via Kolkata and Lucknow was
conducted in August 2016.
There are presently around 100 flights operating weekly between India and Bangladesh
connecting various Indian cities like New Delhi, Kolkata, Mumbai and Chennai to Dhaka and
Chittagong. From Bangladesh, US-Bangla Airlines, NOVOAIR, Regent Airways and Biman
Bangladesh; and from India, Jet Airways, Spice Jet and Air India are operating flights between
India and Bangladesh

5. Conclusion:

Bangladesh trade with India seems to be dominated by imports from India to the tune of about
89% of all trade with Bangladesh exports constituting only about 11% of all trade between them.
In spite of the fact that the annual average export growth seems to be slightly higher than its
annual average import growth, a hopeful sign for Bangladesh to improve its trade deficit position
in the future, however, given its smaller export base and smaller export share relative to import
share in total trade, the deficit seems to be stubborn and persistent for Bangladesh. Added to this
large and persistent deficit in formal trade is the additional trade deficit of similar magnitude
from informal trade between the two countries that makes the situation much worse from
Bangladesh perspective. Thus, the deficit position is not only larger in terms of combined formal
and informal trade, but also the deficits are persistent over time and these should a major concern
for political leaders and policy makers in both countries. To achieve trade balance improvement
faster, it seems clear that more positive policy action would be needed on the part of both
countries to improve the trade imbalance of Bangladesh with India to make it sustainable in the
long-run. Some policy actions
may be that India, being the larger and stronger of the two countries, could take various policy
actions to improve market access of Bangladeshi products into the larger Indian market. At the
same time, Bangladesh needs to expand its export product lines so as to take advantage of such
improved market access. These actions are expected to reduce the deficit towards a more
sustainable level over the long-run, if not immediately.
References:
https://www.google.com/
http://www.epb.gov.bd/
Ahmed I (2006) Bangladesh-India Relations: The context of SAARC and the Emerging Global
Scenario. Conference paper, Asian Affairs, April-June, 28(2): 46-62.
Athens Journal of Business & Economics - Volume 5, Issue 2 – Pages 123-140