Paper: 3203 International Marketing

Presentation on: Bilateral Trade Between India & Bangladesh

Presented by: Arpita Deb Sem: 4th Roll no: 23

India:
It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people. The Indian economy is the world's eleventh largest economy by nominal GDP and the fourth largest by purchasing power parity. It is the world's sixth de facto recognized nuclear weapons state and has the third-largest standing armed force in the world, while its military expenditure ranks tenth in the world. According to the International Monetary Fund, India's nominal GDP stood at US$1.43 trillion, which makes it the eleventh largest economy in the world.

Bangladesh:
Bangladesh is a country in South Asia. Bangladesh is the eighth most populous country and is among the most densely populated countries in the world. It is bordered by India on all sides except for a small border with Burma (Myanmar) to the far southeast and by the Bay of Bengal to the south. Bangladesh's economy is the 44th largest in the world at US$257 billion according to the IMF.

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 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.

Secondly, closer economic 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 been reemphasized by signing on to SAFTA4, which took effect from January 2006.

According to FICCI, India's trade with Bangladesh increased from $1 billion in 2001-02 to $3.17 billion in 2007-08, more than three folds, mainly on the back of a 79.4 percent increase in India's exports.

The FICCI has identified certain key sectors for enhancing trade ties between the two countries. They are textiles, leather, frozen foods and fisheries, jute, agro based industries, FMCG, engineering, chemicals and petro chemicals, ceramic, pharmaceuticals, steel and infrastructure.

Since 1996/97 Indian exports to Bangladesh (in nominal US dollars) have been growing at 9.1% annually, just slightly above the general rate of growth of its total merchandise exports (8.4%), but Indias imports from Bangladesh over the same period have grown on average at only 3% annually, compared to average growth of its total imports of 9.2%.

Consequently Bangladeshs bilateral trade deficit with India has been increasing rapidly, on average at about 9.5 % annually.

In Bangladesh it is often argued that the deficit is aggravated by Indias protectionist policies that have hobbled Bangladesh exports to India. Many of the imports have been coming in over considerably higher tariffs than the tariffs faced by Bangladesh exporters, owing to the extensive tariff preferences given to Bangladesh by India under SAPTA. This suggests that the low level and slow growth of Bangladeshs exports to India reflect fundamental comparative advantage factors, not discriminatory import policies.

For India, trade with Bangladesh is a very small part of its total trade-just over one percent since the mid-1990s, and currently about 3 percent of its total exports and a miniscule share (0.01%) of its total imports (Fig 2.2). For Bangladesh (Fig 2.3) however, India has now become the largest single source of its imports (about 16% of the total, ahead of China and Singapore) and accounts for about a tenth of its total trade, despite exports to India which have declined to only slightly above 1 % of total exports.

Trade between India & Bangladesh

1,200,000.00

1,000,000.00

800,000.00

600,000.00

Export Import

400,000.00

200,000.00

0.00 2005-06 2006-07 2007-08

Values in ` Lacs

2008-09

2009-10

Share of trade with Bangladesh in India's total trade

3 2.5

2
1.5 1 0.5 0 2005-06 2006-07 2007-08 2008-09 2009-10 Share of total trade Share of imports Share of exports

Bangladesh & India signed a series of new agreements in January 2010 to address some of the barriers to bilateral trade through new trade & transit provisions: Greater market access for Bangladesh.

Promotion of transit links between Bangladesh & India.

Promotion of transit links between Bangladesh & India.

In recent times..
Meghalaya and Bangladesh have agreed to set up a task force to further trade and commerce with 10 border haats in the pipeline. This is in accordance of a memorandum of understanding (MoU) signed by India & Bangladesh for the reopening of border haats on October 24 in New Delhi. Bangladesh and India have opened two land ports along the international border to boost bilateral trade and facilitate trading activity of neighbours Nepal and Bhutan.

Conclusion
Bangladesh & India have a long history of agreements to facilitate trade & economic cooperation. Indias trade with Bangladesh is rather small relative to its total trade such that the economic welfare gains from an FTA are modest, largely stemming from gains in producer surplus due to expanded exports. India stands to gain from the continuation of its policies of unilateral liberalization paying special attention to the removal of non-tariff barriers, specific duties on textiles and garments, and prohibitive tariffs on agricultural products.