Bilateral Trade between Bangladesh and India Acronyms and Abbreviations BEI BIDS CD EPB EU FDI FOB FTA

GDP HS LDC MNF NBR NTB RD RMG ROO SAARC SAFTA SAPTA SD TRQ VAT WB WTO Bangladesh Enterprise Institute Bangladesh Institute of Development Studies Customs Duty Export Promotion Bureau European Union Foreign Direct Investment Free on Board Free trade Agreement Gross Domestic Product Harmonized Code Least Developed Country Most Favored Nation National Board of Revenue Non Tariff Barrier Regulatory Duty Ready Made Garments Rule of Origin South Asian Association for Regional Cooperation South Asia Free Trade Agreement SAARC Preferential Trading Agreement Supplementary Duty Tariff Rate Quota Value Added Tax World Bank World Trade Organization

2011

1|Page

Bilateral Trade between Bangladesh and India

2011

Acknowledgement

We

would like to thank specially our honorable teacher Jannatul Ferdous, lecturer of School of Business Studies, Southeast University, for providing us with different information and advices to prepare our report about the trade patterns, dynamics and volume of Bangladesh with its neighboring country India. Since she taught us the pros and cons of international trade and globalization, different underlying theories of international trade, different case studies, we were able to prepare our report with the help of those studies.

2|Page

Bilateral Trade between Bangladesh and India

2011

Abstract

hat this paper is all about is the trading relationship, patterns, dynamics and trade volume of Bangladesh with India. In this paper firstly we would like to show the patterns of trade between these two developing countries that means to show what kind of theoretical model is best suited for this bilateral trade between Bangladesh and India. Secondly the paper will describe about to what extent Bangladesh trades with India or the trade volume of Bangladesh with India. Thirdly it will show different trading aspects like trade barriers, informal trade between the two countries, negotiations and trade policies between these two countries. Lastly this paper will come up with some sort of recommendations to balance or improve the imbalanced trade between Bangladesh and India like how to improve the trading relationship between two countries, how to remove the trade barriers etc.

3|Page

Bilateral Trade between Bangladesh and India

2011

1. Introduction Since Bangladesh and India are two neighboring countries and having situated in the same region geographically, there exists a good tie between these two countries. If we look at the history of the two countries, then we will find a lot of similarities between Bangladesh and India from different aspects like cultural, political, social and economic. In addition, Bangladesh and India are two major countries of the SAARC. By now as far as trade relation is concerned, India is one of largest trading partners of Bangladesh. Indias position is at the top (2nd) for Bangladeshs imports from the world. Therefore, an analysis of current trade status between the two nations, obstacles and opportunities for mutual trade expansion is very critical for economic development of

both countries, especially of Bangladesh, as Bangladesh has been suffering from historical trade deficit with India since its independence. The trade deficit has been increasing exponentially since the recent past. From the perspective of this argument here in this report we will try to show the trends or patterns of the bilateral trade between Bangladesh and India. With some data of the recent trade between these two countries we will show the compositional changing dynamics of the bilateral trade between Bangladesh and India. Later we will try to discuss the volume of the bilateral trade between the two countries as well as review some strategic ways to balance the historical trade deficit that Bangladesh has been suffering.

4|Page

Bilateral Trade between Bangladesh and India

2011

1.1 Objectives of the study The main objective of this paper is to find out the patterns of trade, dynamics and volume of trade of Bangladesh with India and to review the underlying theoretical context towards the patterns of trade of Bangladesh with India. Another objective of this report is to find out the imbalances of trade between these two countries and discuss some recommendations to resolve these imbalances.

1.2 Scope of the study We all know that there are lots of reports, studies, researches, discussions, debates etc. on the bilateral trade between Bangladesh and India. Therefore, in that comparison our report is very much short and limited. But after all my report will focus some sort of trading relationship like patterns, dynamics volume between these two countries that might help one to understand the basic things of the bilateral trade between Bangladesh and India.
1.3 Methodology of the study

Basically we used secondary data like different literatures, reports, books, documents, eBooks, on the bilateral trade between Bangladesh and India to prepare our repot since we knew earlier that there are lots of works on the bilateral trade between Bangladesh and India.
1.4 Limitations of the study As we said before there are lots of works on the bilateral trade between Bangladesh and India, here we were not able to prepare our report in those large extents due to time constraint. Therefore under shorter time and unavailability of latest country wise data in the website we were just trying to focus the key aspects of the bilateral trade between Bangladesh and India as well.

1. Literature Review: A research was conducted by Ebney Ayaj Rana, Hons 2nd Batch, Department of Development Studies, University of Dhaka in the early 2011. By observing that research some idea has been found. Bangladesh has been suffering massive trade Imbalance with India. It is now almost a self-evident truth. One of the main factors for this massive imbalance is Indias policy of tariff and non-tariff barriers to the Bangladeshi commodities exportable to India. Currently India is the 2nd largest trading partner of Bangladesh and Indias position is at the top for Bangladeshs imports trade. Bangladeshs trade with India increased tremendously especially in the 1990s. The average annual growth rates of Bangladeshs trade with India, during 1980 to 1995, were much higher than those with the SAARC and the world. However, Bangladesh has always been trade deficit with India, and recently it has increased exponentially. Limited export base, backward industries, inadequate infrastructure, lower productivity in Bangladesh, appreciation of Bangladeshs Taka against Indian Rupee, earlier and faster trade liberalization program in Bangladesh compared to India, tariff and non-tariff barriers (NTBs) imposed by the Indian government, huge illegal trade, diversified exports and technologically advanced industrial base of India are identified as the main reasons of this huge trade imbalance. Structural and policy measures such as sound physical, social and economic infrastructure, superior product quality, export diversification, sufficient institutional facilities for banking, credit and insurance, improved law and order situation, labor unrest free environment, an honest and efficient administration,
5|Page

Bilateral Trade between Bangladesh and India

2011

continuous political stability, huge domestic and foreign investments, joint ventures in Bangladesh with buy back arrangements, competitive devaluation of the Bangladesh currency against the Indian currency, removal of illegal trade, tariff and NTBs free entry of Bangladeshs exports to Indian market are suggested to improve this trade deficit. Also cordial and productive cooperation between these two nations is crucial to materialize these measures.

Another research was done by a group of student (Tapash Chandra Das, Md. Ariful Haque, Afsana Rahman, Shakir Md. Bayezid Kabir, Md. Hasnain Chowdhury) Marketing department (Evening MBA) of Dhaka University in the 2008. According to that research paper - Bangladesh suffers a huge trade imbalance with India. Apart from the large size of the economy, maintenance of a high protectionist trade regime by India in the forms of tariff and non-tariff barriers have contributed to this imbalance. While Bangladesh has progressed much ahead of India along with its liberalization of trade, India remains slow. Both Bangladesh and India are two major countries of the SAARC and have a long common historical past and similar cultural and social evolution. As far as trade relation is concerned, India is the 2nd largest trading partner of Bangladesh just after USA in 2003. Indias position is at the top for Bangladeshs imports from the world (IMF: Direction of Trade Statistics, June 2004). Therefore, an analysis of current trade status between the two nations, obstacles and opportunities for mutual trade expansion is very critical for economic development of both countries, especially of Bangladesh, as Bangladesh has been suffering from historical trade deficit with India since its independence. The trade deficit has been increasing exponentially since the recent past. Official data show that compared to 1983, trade deficit in 2003 is more than 46 times higher1 (IMF: Direction of Trade Statistics). This growing deficit is a cause of serious concern for Bangladesh and has important economic and political implications. Hence the importance of the study is realized, and it is expected that the study will help policy makers to understand the roots of the problems on the way of trade expansion, and to formulate and execute the appropriate policy measures to mitigate or remove these problems. With this objective in mind, this paper makes an attempt to deal with the issues of bilateral trade relationship between Bangladesh and India.

Another research was conducted by Monoj Kumar Singh, lecturer of Daffodil International University which published on 2008. The trading relationship between India and Bangladesh is currently of special interest in both countries for a number of reasons. Firstly, there are urgent and longstanding concerns in Bangladesh arising from the perennial, large bilateral trade deficit with India, and from the large volumes of informal imports from India across the land border which avoid Bangladesh import duties. These concerns have been particularly acute on the Bangladesh side in the context of discussions between the two governments of the possibility of a bilateral free trade agreement along the lines of the India-Sri Lanka FTA. Secondly, even though (because of the disparity in the size of the two economies) Indias trading relationship with Bangladesh is much less significant for it than it is for Bangladesh, closer economic
6|Page

Bilateral Trade between Bangladesh and India

2011

integration with Bangladesh is nevertheless seen as a very important way of reducing the economic and political isolation of the seven Indian eastern and north eastern states from the rest of the country. Finally, both countries have long shared common objectives for closer economic integration within the South Asia region, and these have recently been reemphasized by signing on to SAFTA, which is to come into force in January 2006. Under SAFTA, the preferential tariffs agreed in the various rounds of SAPTA-- so far largely ineffective in generating much intra-regional trade-- will continue, but a number of ambitious new objectives have been enunciated. These include the eventual elimination of tariffs and non-tariff barriers on trade between the members, the harmonization of Customs procedures and documentation, the facilitation of banking relationships, and cooperation and improvements in the infrastructure for regional trade and cross-border investments.

2. Balance of Payments

Any transaction that causes money to flow into a country is a credit to its BOP account, and any transaction that causes money to flow out is a debit. The BOP includes the current account, which mainly measures the flows of goods and services; the capital account, which consists of capital transfers and the acquisition and disposal of non-produced, non-financial assets; and the financial account, which records investment flows.

The balance of payments is an accounting of a country's international transactions over a certain time period, typically a calendar quarter or year. It shows the sum of the transactionspurely financial ones, as well as those involving goods or servicesbetween individuals, businesses and government agencies in that country and those in the rest of the world. Every international transaction results in a credit and a debit. Transactions that cause money to flow into a country are credits, and transactions that cause money to leave a country are debits. The BOP statement divides international transactions into three accounts: the current account, the capital account and the error and omission account. 1. Current Account The current account is composed of four sub-accounts:
7|Page

Bilateral Trade between Bangladesh and India

2011

Merchandise trade consists of all raw materials and manufactured goods bought, sold or given away. Until mid-1993, this was the figure that was used when the "balance of trade" was reported in the media. Since then, the merchandise trade account has been combined with a second sub-account, services, to determine the total for the balance of trade. Services include tourism, transportation, engineering and business services, such as law, management consulting and accounting. Fees from patents and copyrights on new technology, software, books and movies also are recorded in the service category. Income receipts include income derived from ownership of assets, such as dividends on holdings of stock and interest on securities. Unilateral transfers represent one-way transfers of assets, such as worker remittances from abroad and direct foreign aid. In the case of aid or gifts, a debit is assigned to the capital account of the donor nation.

2. Capital Account The capital account has four sub-accounts:

Foreign direct investment (FDI) or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. It usually involves participation in management, joint-venture, transfer of technology and expertise. There are two types of FDI: inward foreign direct investment and outward foreign direct investment, resulting in a net FDI inflow (positive or negative) and "stock of foreign direct investment", which is the cumulative number for a given period. Direct investment excludes investment through purchase of shares. Portfolio Investment The purchase of stocks, bonds, and money market instruments by foreigners for the purpose of realizing a financial return, which does not result in foreign management, ownership, or legal control.

Some examples of portfolio investment are Purchase of shares in a foreign company, Purchase of bonds issued by a foreign government, Acquisition of assets in a foreign country. Purchase of stocks in a foreign company. Factors affecting international portfolio investment are tax rates on interest or dividends (investors will normally prefer countries where the tax rates are relatively low), interest rates (money tends to flow to countries with high interest rates) ,exchange rates (foreign investors may be attracted if the local currency is expected to strengthen)

Capital transfers include debt forgiveness and migrants transfers (goods and financial assets accompanying migrants as they leave or enter the country). In addition, capital transfers include the transfer of title to fixed assets and the transfer of funds linked to the
8|Page

Bilateral Trade between Bangladesh and India

2011

sale or acquisition of fixed assets, gift and inheritance taxes, death duties, uninsured damage to fixed assets and legacies.

Official Reserve the current account should balance with the capital plus the financial accounts. The sum of the balance of payments statements should be zero. For example, when the Bangladesh buys more goods and services than it sells (a current account deficit), it must finance the difference by borrowing, or by selling more capital assets than it buys (a capital account surplus). A country with a persistent current account deficit is, therefore, effectively exchanging capital assets for goods and services. Large trade deficits mean that the country is borrowing from abroad. In the balance of payments, this appears as an inflow of foreign capital. In reality, the accounts do not exactly offset each other, because of statistical discrepancies, accounting conventions and exchange rate movements that change the recorded value of transactions. 3. Error and Omission account:

Balance of Payment must be balanced. We know that debits and credits under balance of payment should agree. But the accounts of two countries never matched. The reasons behind the gap are as follows a) Due to spoiled goods / damage of goods b) Due to smuggling c) Information of payments for imports not passing through banking channel is obtained from other channel. d) Time lag- The time of recording of each country may vary These differences would arise and its shown separately as error and omission account. Transactions that escape official channel are recorded under this head to balance the balance of payment.

9|Page

Bilateral Trade between Bangladesh and India

2011

4. Scenario of BOP between BD and India

4.1. Historical Development of India-Bangladesh Trade Relations Bangladesh and India signed the Treaty of Friendship, Cooperation and Peace on March 19, 1972 in Dhaka for 25 years. Owing to this treaty, both countries signed the first one-year trade agreement on March 28, 1972.In the agreement, fish, raw jute, newsprint and naphtha were identified as the principle exports of Bangladesh to India. Indias major export items to Bangladesh, on the other hand, were cement, coal, machinery and unmanufactured tobacco. The trade between the nations was limited to government level. This agreement also provided border trade between Bangladesh and Neighboring Indian states; and within 16 kilometers of both countries border, free trade was allowed for certain commodities. The expected level of trade was not achieved under the first trade agreement. Also free border trade between Bangladesh and India led to some illegal trade and hence was abolished in October 1972 by mutual consent of the both governments. However, to attain the desired level of trade, the first trade agreement was further extended up to September 27, 1973. The first trade agreement of 1972 was replaced by another trade agreement for three years. This agreement was signed on 5 July 1973 and became effective from 28 September 1973. Raw jute, fish, newsprint, etc were identified as major exportable items of Bangladesh to India. On the other hand, major exports of India to Bangladesh were unmanufactured tobacco, cement, coal, raw cotton, cotton yarn, cotton textiles and books. This agreement provided for a system of Balanced Trade and payment Arrangement (BTPA) and most favored nations treatment to each other. The desired level of trade between the two nations was not achieved by the agreement of 1973, and trade imbalance increased in the very first year. Rupee trade was found to be a barrier in the bilateral trade, and thus abolished rupee trade from 1 January 1975 by a Protocol signed on 17 December 1974. It was decided that trade would be conducted in free convertible currency. India and Bangladesh signed another trade Protocol on 12 January 1976 for higher volume of trade and long-term arrangements for trade of coal and newsprint. BTPA 4 between Bangladesh and India was extended for another three years till 27 September 1979 on 5 October 1976.

10 | P a g e

Bilateral Trade between Bangladesh and India

2011

On 4 October 1980, the third trade agreement was signed between these two nations initially for three years. By mutual consent, this agreement was extendable for another 3 years.
On 8 November 1983, Bangladesh and India renewed a Protocol on trade of 1980 for

further three years. In May 1986, the trade agreement of 1983 was extended for another three years till 3 October 1989. Subsequently this agreement was renewed a number of times. Based on available information, this agreement was valid up to 31st March 2009. 4.2. Institutional Framework for Facilitating Trade and Economic Cooperation The first Trade Agreement between India and Bangladesh was signed in 1972. The revised IndiaBangladesh Trade Agreement signed in March 2006 governs the present trading arrangements between the two countries. Other Agreements/MOUs for facilitating trade and economic linkages include: (i) Protocol on Inland Water Transit and Trade (IWTT); (ii) Bilateral Air Services Agreement between India and Bangladesh; (iii) Bilateral Agreement on the Establishment of Joint Economic Commission (JEC); (iv) India-Bangladesh Convention for the Avoidance of Double Taxation; (v) India-Bangladesh Agreement for the Regulation of Motor vehicle passenger traffic; (vi) Agreement on Revised Travel Arrangements between India and Bangladesh; (vii) Rules for Interchange of Traffic between India and Bangladesh; (viii) MOU between BIS and BSTI for cooperation in the area of standards; (ix) MOU for cooperation in the field of agriculture; (x) MOU for cooperation in the field of science and technology; (x) Protocols for operation of passenger bus service between Dhaka & Kolkata, and Dhaka and Agartala. Discussions are also underway for concluding revised agreement on regulation of passenger and cargo vehicular traffic. 4.3. Trade Related Bilateral Forum Trade related issues are discussed between the two Governments under following main bilateral mechanisms, which meet periodically: (i) Joint Working Group on Trade (JWG); (ii) Joint Group of Customs Officials (JGC); (iii) Protocol Renewal Committee and Standing Committee to review implementation of Protocol on Inland Water Transit and Trade; (iv) Inter- Governmental Railway Meeting; (v) Commerce Secretary Level Talks; (vi) Foreign Office Consultations; and (vi) Joint Economic Commission (JEC) at the Ministerial level. 4.4. Mutual Investments Besides merchandise trade, efforts are underway to promote mutual investments and technology collaborations. There are significant proposals from large Indian industrial groups (Tata, Essar etc.) to invest in Bangladesh. There are other Indian small and medium sized firms, who are interested in investing in Bangladesh. A large number of Indian firms from both public and private sector have been working on different turn key projects in Bangladesh in sectors such as power, transmission lines, textiles, chemicals and pharmaceutical, glass and plastics, engineering. To encourage increased investment flows, discussions on bilateral investment protection and promotion agreement (BIPPA) have almost been completed, and the agreement is expected to be signed shortly. In November 2007, Government of India has removed the
11 | P a g e

Bilateral Trade between Bangladesh and India

2011

prohibition on investment into India by citizens of Bangladesh or entities incorporated in Bangladesh, allowing investments that have prior approval of the foreign investment policy board of the government of India. A total 181 FDI and joint venture investment proposals from India worth over us $ 435 million have been registered with the Board of Investment, Govt. of Bangladesh in sectors such as agro industry, textiles, chemicals and engineering industries. Out of 181 projects, more than 57 are already in production stage. 4.5. Trade Infrastructure and Connectivity The movement of goods by road is through more than 20 operational land customs stations (LCSs) along the border. Government of India has taken up upgradation of seven LCSs in two phases, and their development as integrated check-posts (ICPs). These ICPs include Petrapole, Hili, Changrabandha, Agartala, Dawki, Sutarkandi and Demagiri. Petrapole, which accounts for more than two-thirds of Bangladesh-India trade, will be developed in the first phase. A Sub-Group under the Joint Working Group on Trade has been set up in November 2007 to look into ways and means of strengthening border trade infrastructure in a more coordinated way. The Protocol on Inland Water Trade and Transit (IWTT) has been operational since 1972. It permits movement of goods over barges/vessels through the river systems of Bangladesh on eight specific routes between points in West Bengal & Bangladesh; Kolkata and points in Assam (Dhubri, Karimganj) and between points in Assam. The protocol was renewed in 2007 for period up to March 2009. There are four points along border for movement of goods by train. Forty-three years after a similar train service was discontinued in March 1965, direct passenger train service between Kolkata and Dhaka commenced its operation on April 14, 2008 (Bi weekly) following the signing of the Inter-Governmental Agreement in Dhaka on April 10, 2008. There is direct bus service between Dhaka and Kolkata (started in 1999) and Dhaka - Agartala (since 2003). India has requested for a direct bus service between Agartala and Kolkata via Dhaka. Under the bilateral India-Bangladesh Air Services agreement, a total 61 flights per week are permitted to operate by designated carriers from both sides. Bangladesh Biman, Air India, Indian, GMG Airlines, Jet Airways are operating services on Kolkata-Dhaka, and Delhi-Dhaka sectors. Airlines from both sides have plans to expand their operations on these sectors as well as include new destinations. Besides 61 flights per week to metropolitan cities, since 2006 India has offered an open sky policy to SAARC member states to 18 tourist destinations in India. A number of proposals for improving trade infrastructure and boosting connectivity (between India and Bangladesh and North-East states of India) are at various stages of discussion between the two governments. For example, India has proposed movement of containers through riverine route and rail; access to Chittagong Port for use by North East States of India, development of Akhaura-Agartala rail link, declaration of Ashuganj as new Port of Call under IWTT, and opening of new trade routes including Kawrapuchchiah/Demagiri (India) Thegamukh (Bangladesh) and Sabroom (India)

12 | P a g e

Bilateral Trade between Bangladesh and India

2011

Ramgarh (Bangladesh). The response from Government of Bangladesh is awaited on these proposals.

4.6. Technical Cooperation Bangladesh is an important ITEC partner country, and a number of participants from Bangladesh have availed of training courses under the ITEC programme. In the last three years, more than 400 participants from Bangladesh have undergone training in India under ITEC programme and Tata Consultancy Services (TCS) under Colombo Plan. Under a special Train the Trainer Programme in Information Technology sponsored by the Government of India, about 500 participants from Bangladesh have visited India in the past two years for the six weeks long training courses conducted by TCS. 4.7. ICC Offers SEZ to Bangladesh On 6th April 2009 in Dhaka, the Indian Chamber of Commerce delegation from India offered to set up a Special Economic Zone to attract investments from India and assured an investment worth $5 billion from India towards developing the proposed SEZ and has requested a suitable plot of 150 acres of land for this purpose. The ICC also suggested opening of a Deputy High Commission office at Guwahati or Shillong. The suggestion was received positively by Prime Minister Sheikh Hasina, who felt that opening of a Consulate or Deputy High Commission office in North-East would significantly contribute towards improving trade and tourism relations between the two countriesSectors such as energy, power, steel, telecommunications, healthcare, fertiliser, oil and gas, limestone and forest-based industries such as paper, export of plantation crops were some of the areas that could drive strong bilateral economic relationship between the two countries, the ICC team observed. 4.8. Trade and Transaction Costs The Petrapole crossing in India handles by far the largest share of the recorded India-Bangladesh land border trade. Petrapole is on a major road 95 kilometres from Kolkata. The neighbouring town on the Bangladesh side of the border is Benapole, which in turn is linked by a highway to Jessore and Dhaka. The infrastructure deficiencies and procedural hazards at Petrapole include inadequate and congested roads, absence of government bonded warehouses, irregular power supplies, inadequate sanitary facilities and drinking water, prevalence of theft and other crimes, frequent strikes, prevalence of speed money, a single border gate which handles all truck and other traffic as well as individual travelers and which is wide enough for only one truck at a time to pass through. Investments need to be made for improving the infrastructure and facilities at Petrapole and at the other land border Customs stations. For Bangladesh the present system involves substantial terms of trade losses, since the landed costs of imports from India of products such as wheat, rice, fruit, cattle feed, bauxite and other products appear to be much higher than they would be if the congestion were removed. Bangladesh exporters and potential exporters also have an obvious interest in faster and less expensive commodity movements
13 | P a g e

Bilateral Trade between Bangladesh and India

2011

across the border. If the required investments are not made, congestion will increase with the general growth of trade, and would largely cancel or offset economic benefits that would otherwise occur if tariffs or other trade barriers were to be reduced. Without very substantial investments in infrastructure and administrative capabilities, increases in trade would be slowed down or blocked by increases in congestion and the associated increases in economic rents, and an FTA would become ineffective. Hence, both countries will need to improve the infrastructure physical and administrative-at their land border Customs posts. This would need to be done in a coordinated way-there would no point if the infrastructure were improved on one side of the border but bottlenecks were to remain or even increase on the other side of the border. 4.9. Energy Cooperation The last caretaker government had decided to initiate talks with India on interconnecting the national power grid of Bangladesh with the north-eastern power grid in India based on the feasibility study of the USAID, Asian Development Bank (ADB) and SARI Energy cooperation. Bangladesh could bring 200 MW of electricity from Tripura or Assam, where India has hydroelectric plants. India has also offered to link Bangladesh to its electricity grid and sell it power to help it overcome persistent shortages in peak demand periods. At the DCCI 50th Anniversary conference held in November, Indian State Minister for Power, HE Jai Ram Ramesh stated that Bangladesh could buy electricity from plants in Tripura, where generation capacity exceeds demand, and other north-eastern Indian states bordering Bangladesh. "India is ready to pen a deal with Bangladesh to sell up to 1,000 MW of electricity."
4.10. Bangladesh-India trade: Some stylized facts and recent trends

In this section of the report I will try to show the present trend of the bilateral trade between Bangladesh and India, how there occurs the trade imbalance between the two countries. Here I am starting with some recent statistics of trade between Bangladesh and India. Over the recent past Bangladesh has witnessed a widening of trade deficit with India which stood at $3.0 billion in FY2008 and $2.6 billion in FY2009. However, it is important to note the recent dynamics: Between FY2004 and FY2008

Export to India has experienced significant rise: from $89.3 million to $358.1 million in FY2008 and $276.6 million in FY2009 a threetofour fold increase within a span of five years.

14 | P a g e

Bilateral Trade between Bangladesh and India

2011

Table 1: Trade Balance of Bangladesh with India Trade balance between India and Bangladesh

FY Export (mln $) Import (mln $) Trade Balance (mln $) FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 50 61 39 53 89.3 143.7 242.0 289.4 358.1 276.6 945 1195 1146 1489 1598.4 2009.1 1850.9 2227.0 3384.3 2839.0 -895 -1134 -1107 -1436 -1509.1 -1865.4 -1609.0 -1937.6 -3026.2 -2562.4

Source: Estimation based on CPD database compiled from EPB and BB statistics

Although from relatively low base, this growth provides an indication about potential opportunities to expand Bangladeshs exports to India. Now if we make the graphical representation of the trade between Bangladesh and India from the fiscal year of 1990-1991 to 2008-2009 then we will see a clear trade imbalance between Bangladesh and India. It demonstrates the trade deficit of Bangladesh with India by showing the huge gap between import from and export to India by Bangladesh.

15 | P a g e

Bilateral Trade between Bangladesh and India

2011

Figure1: Trade between Bangladesh and India

Source: The Daily Star, February 02, 2010

Now the table 3 shown below provides us with record of trade between Bangladesh and India in the fiscal year of 1995, 2000, 2008 and 2009 that will provide us with comparative statistics of export and import of the two countries in the context of their total and global percentage.

4.11.Trends of performance in FY2009-2010

Bangladeshs export to India as a share of Bangladeshs global export - 1.78% (on the rise) Bangladeshs import from Bangladesh s India as a share of her global import 12.62% (about the same) Indias export to Bangladesh as a share of Indias global export - 1.54% (declining) Indias import from Bangladesh as a share of her global import - 0.09% (about the same) The bilateral trade deficit has consequently increased from $1.5 billion to $2.5 billion between FY2004 FY2009. This bilateral trade deficit of about $3 billion would be much higher if the deficit in the informal trade is added to the abovementioned formal trade. In mid1990s informal trade was estimated to be about 1.2 times the formal trade. With significant reduction in MFN tariffs and formalization of some of the illegal trade (e.g. cattle), informal trade is
16 | P a g e

Bilateral Trade between Bangladesh and India

2011

reckoned to have come down (but still estimated to be equivalent to about threefourths of formal trade). However, one should keep in mind that in a globalised world, it is the global trade deficit which counts, not bilateral deficit. Imports from India helps Bangladeshi consumers access final goods at a competitive price, producers to keep cost of production low, and exportoriented entrepreneurs to reduce lead time and remain competitive. Many of the imports from India (e.g. fabrics and other industrial raw materials) goes into Bangladeshs exportoriented sectors (e.g. RMG industry) and helps Bangladesh maintain healthy trade balance with some of the other major trading partners (e.g. a $3.6 billion trade surplus with the USA in FY2009). For Bangladesh, in the context of trade with India, the worry should be not as much the bilateral deficit but addressing the challenge of increasing her exports to India deficit, India, which is also incidentally the best way to reduce the bilateral trade deficit as well.

4.11. Dynamics of India-Bangladesh trade: Compositional Change

If we concentrate on the dynamics of India-Bangladesh trade, then we will experience a compositional change in the bilateral trade between Bangladesh and India. If we look at recent past statistics of the Bangladesh-India trade, then we will see that Bangladesh sin now exporting its non-traditional commodities whereas it was exporting only some traditional commodities to India.

Till FY2004, more than 90% of Bangladeshs exports to India were traditional items such as chemical fertilizer, raw jute and jute manufactures, frozen fish, RMG etc. In recent years, share of traditional commodities in total export to India has tended to come down (68.8% in FY2009), whilst that of nontraditional items have gone up (31.2%), although in value terms both have posted a rise. It is important that a renewed effort is undertaken to support export of the nontraditional items. Table 2: Export of Traditional and NonTraditional Commodities to India (Share in %)
Commodity groups FY 2004 FY 2008 FY 2009

Traditional Chemical fertilizer Raw jute Frozen fish Jute manufactures (including sacks and Bags) RMG Naphtha

90.5 43.6 23.1 5.6 4.8 3.1 3.0

60.4 23.1 11.6 8.1 6.5 1.4 0.0

68.8 17.2 10.6 12.8 13.0 4.0 0.0

17 | P a g e

Bilateral Trade between Bangladesh and India Betel nuts Leather Soap toilet Jute yarn and twine Others (Non-traditional) Total (mln USD) 2.7 1.9 1.5 1.2 9.5 100.0 (89.3)

2011
4.1 2.1 0.5 3.0 3.5 2.5 0.6 4.6 31.2 100 (276.6)

39.6 100.0 (358.1)

Source: Estimation based on CPD database compiled from EPB

The new Bangladeshi products in the Indian market include textile fabrics, plastic goods, cement, furnace oil, battery, cut flower pharmaceutical flower, products, copper wire, melamine, etc. Increased export flow to India is underpinned, in part, by new items of export from Bangladesh, indicating some export diversification. And I think this trend needs to be supported by appropriate policies. Table 3: Export of New Commodities to India Commodity group FY 2004 90.5 9.5 (Share in %) FY 2008 FY 2009 60.4 39.6 68.8 31.2

Traditional Non-Traditional Of which New products Furnace oil (refined) Cement Cut flower Textile fabrics Soybean oil Copper wire Accumulation battery and parts Glass sheet

1.3 0.2 0.0 0.0 0.6 0.0 0.4 0.1 0.0

26.8 10.0 3.8 3.6 2.3 1.5 1.2 1.1 0.8

16.2 4.7 2.3 0.5 1.7 0.1 1.8 0.4 1.3

18 | P a g e

Bilateral Trade between Bangladesh and India Home textiles Zinc waste Plastic goods Cane sugar Pharmaceuticals Coriander seed Others Total (mln USD) 0.0 0.0 0.0 0.0 0.0 0.0 8.2 100.0 (89.3) 0.8 0.0 0.2 0.6 0.1 0.8 12.8 100.0 (358.1)

2011
1.3 0.3 0.4 0.4 0.5 0.5 15.0 100 (276.6)

Source: Estimation based on CPD database compiled from EPB In recent years, between FY2004 to FY2009, share of top 5 traditional products in Bangladeshs export to India has declined; at the same time number of exportable products has increased. Among the 162 product categories (according to EPB classification) in Bangladeshs global export 100 categories were exported to India in FY2009 compared to 86 in FY2004. Table 4: Diversification of Bangladeshs export in Indian market Share of product category Number of product exported (out of 162 EPB categories)

FY

Top 10 in FY 2008

Top 5 (FY 2004)

FY 2004 FY 2006 FY 2008 FY 2009

78.8 70.3 71.8 60.4

75.9 58.8 47.7 46.2

86 102 94 100

Source: Estimation based on CPD database compiled from EPB

19 | P a g e

Bilateral Trade between Bangladesh and India

2011

Now if we consider the features of trade dynamics with the bilateral trade between Bangladesh and India, then we will see some sort of relevancies between the predictions of trade dynamics and dynamics of Bangladesh-India trade. Here the three important predictions of trade dynamics are: It predicts that many small firms enter and exit the market very frequently, The growth of export sales is higher for small firms, It also predicts that the variance of growth rates of export sales is higher for firms with lower sales, when restricting attention to the sales of firms selling to a given destination. Now if we look at these three important predictions of trade dynamics then we can easily say that these predictions define the trade dynamics of Bangladesh-India bilateral trade well. As per we have already experienced that there is an increasing trend of exporting the new small firm commodities or the non-traditional commodities to India by Bangladesh. As a result the growth of export sales is to some extent becoming higher for small firms in our country Bangladesh. Now what Bangladesh should do is to keep this trend up by the appropriate strategies or policy actions in different sectors. 4.11.The volume of trade between Bangladesh and India As we have already known the features of the bilateral trade between Bangladesh and India, it is now very clear to us that to what extent Bangladesh trades with India. As already shown in the upper section of the report that the patterns of trade between the two countries we are now more experienced about the bilateral trade between the two countries. We have already seen that there is an ultimate trade imbalance between Bangladesh and India almost in every year because Bangladesh usually imports huge from India where exports very little to there. Now to understand the volume of trade between Bangladesh and India, we can analyze the total trade between Bangladesh and India in recent fiscal years. Table 5: Volume of trade between Bangladesh and India FY 200405 FY 200506 FY 200607 FY 200708 (In million US $) FY 2008FY 200909 10 (first mine moths) 276.58 257.41

Bangladeshs exports to India Bangladeshs imports from India Total trade

144.2

241.9

289.42

358.08

2030.0

1864.70

2268.0

3364.0

2841.06

2300.22

2174.20

2106.70

2557.4

3722.08

3117.64

2557.63

20 | P a g e

Bilateral Trade between Bangladesh and India

2011

(Source: Bangladesh Bank/EPB) Therefore from the table 7 it is very much understandable that there is sustaining an increasing volume of trade between these two countries. India became the 2nd highest trading partner in the international trade of Bangladesh. But at the same time Bangladesh incur a huge trade deficit approximately 10% with India. Since I have mentioned earlier about the comparative advantage of two countries that is Indian producers can produce different commodities with lower costs than that of Bangladeshi producers, India doesnt import from Bangladesh as much as Bangladesh does. As a result there sustains an ultimate trade deficit for Bangladesh to trade with India. To overcome this kind of situation Bangladesh should foster its export to India. We will see the export volume of Bangladesh to India in the later part of the report. Now if we look at the total international trade scenario of Bangladesh in the fiscal year of 2009-2010, then we can see the situation of trade volume of Bangladesh to India.

Figure 2: Bangladesh Export-Import against other Asian countries

21 | P a g e

Bilateral Trade between Bangladesh and India

2011

Source: The Daily Star, February 02, 2010 To balance this imbalance of trade of Bangladesh with India, Bangladesh has to foster its export to India like United States or Canada. Bangladesh has to enter into the Indian markets and sell its products. As a result Bangladesh has to produce the commodities with a lower price than that of India. Recent records of exports to India by Bangladesh are showing a prospect to foster the exports of Bangladeshi commodities to Indian markets. If we look at the recent volume of export to India by Bangladesh, then we can understand easily the prospective export trend of Bangladesh to India.

Table 6: Export volume of Bangladesh to India

FY FY 2010-11 (July to January)

Volume
249,678,597.35

Thousands Taka
18,284,460.84

USD @ 70.16 TK
260,610,901.31

FY 2009-2010

365,334,457.28

21,073,990.22

304,625,473.03

FY 2008-2009

444,887,218.76

18,966,210.97

275,671,671.04

Source: Bangladesh EPZ Therefore it can be said that if Bangladesh wants to compete with India to balance the trade deficit of her, then Bangladesh should capture the Indian markets. To foster the export to India Bangladesh government should take the further measures and strategies as we are having an increasing export to India as well.
5.

Balance of Payment condition of Bangladesh

5.1. Problems Causing Indo-Bangladesh Trade Imbalance

22 | P a g e

Bilateral Trade between Bangladesh and India

2011

Although the trade deficit with a particular country is not bad if the overall trade balance is satisfactory, yet from the distribution aspect of trade policies (the distribution of benefits and cots among groups of producers and groups of consumers) the growing trade deficit with India is a great concern for Bangladesh. Bangladeshs fear is that if this deficit continues, Bangladesh will be dependent only on a few products for its exports, and imports from India displace domestic production to such an extent as to de-industrialize Bangladesh. As a result, it is argued, a severe polarization in Bangladesh and high levels of unemployment will occur. Therefore, increasing trade deficit with India is a problem, and attempts are made here to find out the causes of this problem.
5.2. Informal trade between Bangladesh and India

We know that formal trade is carried out between two countries by following established rules of market behaviors and regulations. It has well-defined products and markets and is enforced by the individual governments, so that transactions are recorded and account for the nations Gross Domestic Product (GDP) with transparent and unrestricted market

information.

On the other hand informal trade is deficient of the above-mentioned traits of its formal

counterpart and its execution is clearly illegal and secret. Interestingly enough, the burgeoning practice of informal trade between India and Bangladesh is divided into two categories:

Firstly, the informal activities which involve large numbers of local people, individually transporting small quantities of goods is called bootleg smuggling And secondly, trade carried out in larger quantities - mostly in truckloads - through the formal legal Customs and other channels, yet involving explicitly illegal practices such as under-invoicing, misclassification and bribery of officials is known as technical smuggling. Although these two varieties of implementing informal trade are conceptually distinct, there is, however, an intrinsic contiguity between them

For instance, though the illegal goods may be carried across the border in small quantities by large numbers of people, trucking to the border areas and storage is frequently organized by medium and large traders. The geographical distribution of Bangladeshs informal channels (accommodated with 3-10 informal traders on an average) embraces the district centres of Jiban Nagar, Jessore, Benapole, Kushtia, Rangpur, Khulna, Darshana, Rajshahi Godagari, Dinajpur, Lalmonirhat, Burimari, Nawabgunj, Sonamasji, and Hilli. The items generally traded by these illicit networks
widely range from Foodstuff (rice, pulses, onion, and excess PDS supplies); Textiles (Sarees and readymade garments); Consumer goods (salt,sugar); Drugs, intoxicants, narcotics (Phensidyl, wine, cannabis, heroin); Foreign and fake currencies; Illegal arms, ammunition and explosives (gun, pistol, revolver, bomb); Overabundance of other objects (stone, cement, coal, low quality medicines, low quality machinery and motor parts); 23 | P a g e

Bilateral Trade between Bangladesh and India

2011

And even living beings (cattle, women and children) etc.

Now here I am having so suggestions to reduce informal/illegal imports. Therefore to reduce

informal/illegal trade between the two countries, both countries need to

improve infrastructure physical and administrative at land border customs posts; streamline and harmonize customs procedures and administration at the border to reduce incentives for corruption expand facilities at smaller customs border posts For Bangladesh, bring down the high protective tariffs. Trade Liberalization Program under SAFTA will facilitate this process.

5.2.Tariff and Non-Tariff Barriers It is generally agreed that Bangladesh has initiated the program of tariff liberalization earlier than India- in the mid 1980s, and the speed of liberalization in Bangladesh is faster than that in India. Bangladesh has continued this higher speed of liberalization till recent years.

Fig 1 India 1996/97-2005/06 Example of a typical industrial tariff . MFN rate and preferential SAPTA rate for Bangladesh
70 60 50 Tariff % 40 30 20 10 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

MFN tariff Preferential tariff for Bangladesh

Statistics shows that Bangladesh sharply reduced its tariff rates in all categories of imports in 199798 compared to 1990-91. Both un-weighted and import-weighted tariff rates have always been higher in India than in Bangladesh. Also significant quantitative restrictions on consumer goods imports in India were in place during this period.
24 | P a g e

Bilateral Trade between Bangladesh and India

5.3. Some concessions on Tariff and non-tariff barriers of Bangladesh-India trade

2011

We know that Bangladeshs trade strategy with India must revolve around the SAPTA tariff negotiations. In this regard zero export duty strategy is getting importance. India should take necessary steps of unilaterally taking the decision of providing zero-tariff access of Bangladeshs exports to India. Tariff preference should be given on those items that have high import value, are actually traded and have high potential for entering into Indian market. India may exclude those irrelevant items from its concession list for Bangladesh, which Bangladesh does not produce, or hardly exports. However, mere tariff concession will not reduce trade deficit of Bangladesh to any significant extent if NTBs are not phased out simultaneously. Appropriate measures must be taken by India in this regard. Such measures would certainly encourage local, Indian and regional investors to locate investment in Bangladesh targeted to the larger Indian market. The ROO (Rule of origin) requirement should be modified in order to bring change in the local content requirement. To be eligible for SAPTA concessions, this local content requirement for Bangladeshs commodities should be brought down to 25 per cent. 5.4. Recent High Level Contacts
On 9th Feb 2009, India and Bangladesh linked two trade deals to further strengthen

economic ties between the two South Asian neighbours. Indian External Affairs Minister Pranab Mukherjee, who was on a daylong visit in Dhaka, signed the Bangladesh India Trade Agreement and the Bilateral Investment

Promotion and Protection Agreement after official talks with his Bangladesh counterpart Dipu Moni. Commerce Minister Faruk Khan and Industries Minister Dilip Barua signed the two deals on Bangladesh's behalf. The deals would help the two neighbours bridge the existing huge trade imbalance in favor of India and encourage fresh investment in both countries. Once the

agreement comes into being, India and Bangladesh will be allowed to transport their goods using their water, rail and road routes for transportation of goods. India has been enjoying limited transit facilities only on water

routes through Bangladesh. The agreement on mutual investment promotion and protection will give most-favored-nation status to each other.
India has continued to constructively engage the Caretaker Government in Bangladesh

that assumed office after the imposition of emergency in the country on January 11, 2007. The External Affairs Minister (EAM), Shri Pranab Mukherjee, visited Bangladesh on
25 | P a g e

Bilateral Trade between Bangladesh and India

2011

February 19, 2007 and extended an invitation to Bangladesh to participate in the 14th SAARC Summit in New Delhi. During the visit, he held detailed discussions with President Dr. Iajuddin Ahmed, the Chief Adviser of the Caretaker Government, Dr Fakhruddin Ahmed and Foreign Affairs Advisor Dr. Iftekhar Ahmed Chowdhury. In the context of bilateral relations, both sides agreed to take steps to place bilateral relations on an irreversible higher trajectory. Prime Minister Dr. Manmohan Singh met Bangladesh Chief Adviser Dr Fakhruddin Ahmed on April 2, 2007 in New Delhi during the 14th SAARC Summit. During the meeting, the two leaders held discussions on all major bilateral issues. EAM, Shri Pranab Mukherjee, again visited Bangladesh on December 1, 2007 to announce Indias support to Bangladesh in the wake of Cyclone Sidr, as also to undertake a tour of cyclone-affected area. During his visit, EAM announced Indias decision to waive ban on export of five lakh tonnes of rice to Bangladesh and proposal to adopt ten severely affected villages for rehabilitation.

5.

Findings, Recommendation and Conclusions

Patterns of trade between Bangladesh and India: Underlying theory and the gravity model We know that there are different theoretical backgrounds that determine the patterns of trade in international trade. Therefore if we consider the pattern of the bilateral trade between Bangladesh and India, there comes the question of the theoretical aspect that determines the pattern of trade between Bangladesh and India. We know that India is one of the top suppliers or importing countries of Bangladesh. In the fiscal year 2009-2010, the value of importable goods by Bangladesh from India was 2839 million dollar on the other hand the value of the exportable goods by Bangladesh to India was only 276.6 million dollar. As a result there is always a trade imbalance between Bangladesh and India. In the FY 2009-2010 the trade deficit in Bangladesh with India was 2562.4 million dollar. Now if we look at the exportable and importable goods between Bangladesh and India then we will see that Bangladesh imports from India mainly the capital machineries, textile fabrics and dying chemicals. Again India supplies to Bangladesh different essential commodities like rice, sugar, pulses and onion etc. On the other hand India import a few commodities like chemical
26 | P a g e

Findings:

Bilateral Trade between Bangladesh and India

2011

fertilizer, raw jute, frozen fish, jute manufactures, betel nuts, RMGs etc from Bangladesh to a very little extent. Now if we consider this kind of trade pattern in the context of underlying theories that determine the pattern of trade between Bangladesh and India, then we have to consider different theoretical aspects that determine the pattern of trade. We know that there are different theoretical backgrounds like comparative advantage theory, Heckseher-Ohlin model, gravity model etc. that determine the pattern of trade in international trade. Now if we consider the pattern of the bilateral trade between Bangladesh and India in the light of these underlying theories of determining pattern of trade, then we can analyze that what theory is to determine the pattern of bilateral trade between Bangladesh and India. Here if the comparative advantage theory is considered, then it seems clear that Bangladesh has a very low comparative advantage in producing commodities than that of India. On the other hand India has huge comparative advantage in producing different commodities than that of Bangladesh. As a result Bangladesh imports a lot from India every year where export a little amount to India. Therefore we cannot define the comparative advantage theory to determine the bilateral trade pattern between Bangladesh and India. Now if we take Heckseher-Ohlin model into account then we will find that Bangladesh and India will export the good that uses its abundant factor intensively. But in reality, India is more efficient to use its abundant factors of production than that of Bangladesh. Although Bangladesh has abundant labor as a factor of production but it cannot use this factor intensively due to the lack of skill or knowledge. On the other hand India uses its abundant factors like labor, capital, land etc. intensively and skillfully that result in large scale production. Therefore the export of India to Bangladesh is very high than the export of Bangladesh to India. As a result Bangladesh experiencing a huge trade deficit or imbalance with India in every year that has already been shown above. Now if we concentrate on the gravity model to determine the pattern of the bilateral trade between Bangladesh and India, then we will find the model more relevant than that of other theories. We know there are three important things that gravity model tells that determine the pattern and volume of trade between two countries. These three things are (a) the size of the two countries, (b) GDPs of two countries, (c) the distance between two countries. Here it is assumed that trade is proportional to the product of the two GDPs and inversely proportional to the distance between the two countries. Although the size of the two countries Bangladesh and India largely differs, the growth rate of the two countries doesnt differ largely. If we look at the recent past statistics of the growth rate of two countries, then we will experience that there is little gap between these two countries growth rate although Bangladesh is very small in size with the comparison of India. Table 7: GDP growth rate of Bangladesh and India Country GDP growth rate of Bangladesh FY 2008 6.0 FY 2009 5.6 FY 2010 5.8 FY 2011 6.3

27 | P a g e

Bilateral Trade between Bangladesh and India (%) GDP growth rate of India (%) 6.4 5.7 9.7

2011

8.4

Source: Bangladesh country report-Global Finance So by now it is clear to us from the table 1 that although Bangladesh is a very tiny country in size than that of India, the GDP growth rate of the two is not very much differentiated. On the other hand as both countries are neighboring countries the distance between Bangladesh and India is not a matter of concern. As the geographical location of both countries is very near to each other, the transportation cost is very low between the two countries. Again since both Bangladesh and India are the members of SAARC, the two countries have opportunities in trading with each other. So with the argument brought by gravity model that is trade is proportional to the product of the two GDPs and inversely proportional to the distance it can be said that since the GDPs of both countries are not largely differentiate and the distance between the two countries is very low, the bilateral trade between Bangladesh and India is being strengthened over the years. Other important coincidental aspects between two countries are historical, cultural and political aspects. As we know that the Indian subcontinent was under the British regime for about 200 years as a result both countries share some common historical and cultural affinities as well. Again some parts of India share the language of Bangladesh. We all know that India helped Bangladesh achieve independence from Pakistan in 1971, as a result there has been built a good rapport between Bangladesh and India. Another important issue is the transit issue that has already been signed by both countries. It will also add a new dimension to promote the bilateral trade between Bangladesh and India. Since this will ease the transportation between Bangladesh and India, it will foster the trade between Bangladesh and India.

Recommendations
Given the current trade scenario with India, the obvious question is now what can be done to reduce, if not remove, the huge trade deficit of Bangladesh. There is no simple and shortcut answer to this question. The search for effective solution must be looked at with due consideration of macroeconomic reality, different policy options and honest will of cooperation of both countries. It is important to note that one cannot expect dramatic reduction of trade deficit of Bangladesh with India within a short span of time even though required policy options are designed and implemented. This is realized based on the current pattern and trend of bilateral trade and prevailing state of fundamentals of the Bangladesh economy. However, in the short run, detrimental impacts of bilateral trade deficit can be minimized if appropriate steps are taken. For effective and durable solution, medium and long-term measures must be undertaken too. Below are some remedial measures that could be considered to improve the trade imbalance between these two neighboring countries.

Conclusions
Although the issues of the bilateral trade between Bangladesh and India are very much debatable and broad I have tried to review some important issues like patterns, dynamics and volume of the
28 | P a g e

Bilateral Trade between Bangladesh and India

2011

bilateral trade between the two countries. Therefore to conclude the report it can be said that the trade deficit of Bangladesh with India is historic, and recently it is growing very sharply. Limited export base, backward industries, inadequate infrastructure, lower productivity in Bangladesh, appreciation of Bangladeshs Taka against Indian Rupee, earlier and faster trade liberalization program in Bangladesh compared to India, tariff and NTBs imposed by the Indian government, huge illegal trade, diversified exports and technologically advanced industrial base of India are the main reasons for this huge trade deficit. Therefore, current unequal bilateral trade needs to be transformed into mutually beneficial, balanced and interdependent one. This has to be done for the great interests of both economies. If Bangladesh cannot improve the situation, the country would eventually become a market for Indian products, lose the existing industries, experience high level of unemployment and lose import capacity by losing income from its exports. On the other hand, for the sake of Indias own interest India should promote Bangladeshs export to India. If Bangladeshs exports were increased, this would induce higher imports of raw materials and intermediate goods from India. The demand for the Indian consumer goods exports would also increase in Bangladesh due to higher income from increased exports. So lastly it can be said that to export at a large extent to India, Bangladesh should be given that opportunity and on the other hand Indian government should also be cordial to remove the existing trade imbalance in Bangladesh with India as well. In addition, existing different regional and multilateral cooperation like SAPTA should be more effective and operational to remove this trade imbalance between the two countries. 6. References
Bayes, Abdul (2002). India-Bangladesh Informal Trade: Findings on Bangladesh Imports from India.

World Bank: India-Bangladesh trade study, project report.

Das, Samantak and Sanjib Pohit (2003). Quantifying the Transport, Regulatory and Other Costs of

Indian Overland Exports to Bangladesh. NCAER: India-Bangladesh trade study, project report.
Goyal, Arun (2004). Study on Financing of India-Bangladesh Trade. Academy of Business Studies,

Delhi. India-Bangladesh trade study, project report.

Mehta, Rajesh (2004). An Overview and Analysis of India-Bangladesh Trade. RIS. India-Bangladesh

trade study, project report.

Pursell, Garry (2004). Analyzing the Economic Welfare Consequences of a Free Trade Agreement: Partial Equilibrium Methods of Industry Level Studies. India-Bangladesh trade study, project report. Pursell, Garry (2004). Free Trade between India and Bangladesh? Analyzing and Quantifying Potential Economic Costs and Benefits: A Case Study of the Cement Industry. India-Bangladesh trade study, project report. Pursell, Garry (2004). Free Trade between India and Bangladesh? A Case Study of the Sugar Industry.

India-Bangladesh trade study, project report.

Bayes, Abdul (2002). Technical Smuggling: Impressions from Informal Investigations, India-Bangladesh

trade study, draft project report.

29 | P a g e

Bilateral Trade between Bangladesh and India

2011

Center for Monitoring Indian Economy (2004). Indias Trade. Doing Business 2009: Country profile for Bangladesh, World Bank Export promotion Bureau, Ministry of Commerce. Bangladesh Government International Trade Centre (ITC), UNCTAD Bangladesh economic review 2004, 2005, 2006, 2007, 2008, 2009, 2010 National Board of Revenue, Bangladesh Government (2008) The Global Competitiveness Report 2008-2009, World Economic Forum (WEF) Bangladesh Bureau of Statistics Bangladesh Bank Centre for Policy Dialogue (CPD) Bangladesh Web links: www.google.com www.global-finance.com

30 | P a g e