Economy of Bangladesh - Wikipedia
Bangladesh's economy has been one of the best performing economies in South Asia in . Average inflation, rose rapidly from percent in FY to .. Indo – Bangladesh Trade. Relations. India and Bangladesh share more than Learn more about the Bangladesh economy, including the population of inflation and other data and analysis on its economy from the Index of Economic British partition of India in resulted in the creation of East Pakistan in the Unions are heavily politicized, and labor–management relations remain adversarial. conducive to higher economic growth of a country via investment spending. In Bangladesh It is basically the difference between weighted average Uruguay ) and Asia (e.g., Malaysia, Indonesia, Philippines, South Korea, Thailand, India.
Progress on the political front has captured the spotlight, with the recent Land Boundary Agreement. But both sides have also made significant progress in developing their economic ties and connectivity. A number of recent developments illustrate this point. This is the largest credit line that India has extended to any country. The two countries have also signed key partnerships in the energy and power sector. Bangladesh will start receiving megawatts of power from the megawatt thermal power plant at Palatana in Tripura from 23 March.
Beyond the energy sector, Bangladesh and India have taken some important steps to enhance connectivity. Bus services linking India and Bangladesh have been established and multiple agreements signed to enhance trade by improving maritime cooperation. This includes a Memorandum of Understanding on the use of the Bangladeshi ports of Chittagong and Mongla, which would enable the movement of goods to and from India.
In Junetransport ministers from Bhutan, Bangladesh, India and Nepal signed the Motor Vehicles Agreement to regulate the transportation of passenger, personnel and cargo vehicle traffic between their countries.
The political consensus that has formed within India has been vital to developing the bilateral relationship with Bangladesh. During the electoral campaign, Prime Minister Narendra Modi adopted an aggressive posture towards Bangladesh, but since gaining power he has sought to strengthen the relationship. This can be seen in the urgency with which he pushed through the Land Boundary Agreement as well as greater economic ties and connectivity.
The GEP, in its report submitted inprojected a vision of South Asia moving within the next 20 years to an economic union via a free trade arrangement and customs union. The datelines for achieving these landmark objectives were fixed and a roadmap was drawn up for moving from one stage of integration to the higher stage.
However, for want of political will, the SAARC member-governments did not accept either the vision or the goalposts or the roadmap projected and prepared by the GEP. This Agreement, which came into force in Januarysuffers from a large number of basic deficiencies and fundamental flaws. On the whole, the prospects for India and Bangladesh, along with the other South Asian countries, achieving economic integration in the near future through the route of the SAFTA are not promising. It is true that even after successive phases of external trade liberalisation commencing fromIndian tariffs on an average are higher than those of Bangladesh.
Besides Bangladesh has reduced tariffs at a faster rate and maintained a lower tariff regime over a longer period than India. This is an important factor lending justification for India extending unilateral trade preferences to Bangladesh. A far more important justification is that the growth and prosperity of Bangladesh would in the long term redound to the benefit of India and would also be a major factor in bringing stability to the region as a whole.
Extension of unilateral trade preferences by India is also likely to help in reducing the trade gap between the two countries which will have a beneficial spill-over effect on the political relations between the two countries. This is because of the numerous problems that Bangladesh faces in mobilising export supplies, mounting an effective export promotion drive and over-coming the transport and other infrastructural bottlenecks.
It did extend tariff concessions to Bangladesh from time to time but they were always too late and too little. Later, India agreed to allow duty-free entry for 39 more items. Bangladesh did not find these concessions of much significance as these did not include most of the items of export interest in which it enjoyed competitive advantage like jute and jute goods, footwears, readymade garments, knitwears, ceramic products etc.
On the other hand, the Government of India also got frustrated because it felt that there was no appreciation for the concessions given by it in the face of what it considered to be formidable domestic opposition. Therefore, at a meeting of Commerce Secretaries held in New Delhi in late MarchIndia indicated to Bangladesh that further trade liberalisation would be possible only within the framework of a bilateral free trade agreement FTAof which India subsequently submitted a draft.
Init was reduced to and in to With this, practically all the items in which Bangladesh has export interest in the Indian market have been removed from the negative list. There is, therefore, little rationale for maintaining the negative list at all. The Prime Minister of India would have been well advised to declare during his visit in that there will be no negative list for Bangladesh and that henceforward Bangladeshi exporters should treat the entire Indian market as an extension of their domestic market.
This would have enhanced the prospect of Bangladesh narrowing the trade gap with India, and provided incentives to Bangladeshi manufacturers and their Indian and foreign collaborators to invest in industrial development in Bangladesh with an eye on the vast Indian market. An FTA is no panacea for dealing with trade problems, including that of trade imbalances between two countries.
Besides, designing an FTA between two countries placed in a highly asymmetrical economic position as India and Bangladesh are, is by no means going to be an easy task. At the same time, there are obvious advantages in an FTA which cannot be ignored and which the extension of unilateral tariff concessions cannot ensure. This would eliminate several anomalies that have surfaced in the current trade relations between the two countries.
With the implementation of the FTA with India, this advantage would come fully into play, assuming that other barriers to trade like the cumbersome customs formalities and transport bottlenecks are also removed. Bangladesh as a less developed country is likely to gain more than India from these measures of deeper integration. However, the extent to which Bangladesh can derive the above benefits will depend largely on how the FTA with India is designed.
In order to enable Bangladesh to derive maximum benefits from an FTA with India and make it really worthwhile for it, the following features must be included in it: This has already become a reality on the ground because of the unilateral concessions recently extended by India. A suitable mechanism should be created to identify such barriers and monitor progress in their elimination on a regular basis.
This is also already a fait accompli by the action recently taken by the Government of India. Progression to CEPA AN FTA between India and Bangladesh should be a part of a wider arrangement for cooperation in other related areas, particularly management of water resources, science and technology, energy, environment and natural disasters.
To this end, the two countries should enter into a Comprehensive Economic Partnership Agreement CEPA of which the FTA could be the kingpin and cooperation in areas outside trade, the other key components. In spite of suggestions for negotiating a CEPA between the two countries made by independent experts, neither of the two governments has displayed any eagerness to embrace it.
Perhaps political considerations are coming in the way of either of the two countries mooting this idea formally to the other. An important provision of this Agreement is the establishment of a Joint Consultative Commission for its effective and smooth implementation.
The Commission will function under the leadership of the Foreign Ministers of the two countries. It is encouraging that the Foreign Ministers have already met twice under the aegis of this Commission. Under the Framework Agreement on Coope-ration for Development, the two countries can, if and when they muster the necessary political will, negotiate an FTA or a CEPA which, apart from providing for free trade, can include the measures of deeper integration described above. If and when a CEPA is negotiated between the two countries, it must include provisions for cooperation for the optimal utilisation of the waters of the common rivers, including for a more effective functioning of the Joint Rivers Commission.
Credit Arrangement INDIA has extended credits to Bangladesh since the liberation of the country with brief interregnums without credit. As a result, they were quickly disbursed. Subsequently Indian financial aid to Bangladesh increasingly assumed the form of export credits. They were offered at more rigorous terms and conditions and their utilisation was tied to supplies from India. There were also bureaucratic delays in processing projects both from the Indian and Bangladesh sides.
Moreover, as a least developed country, Bangladesh started receiving credits from international financial institutions and major donors either in the form of grants or under very liberal terms and conditions.
Indo-Bangladesh Economic Relations
This made Indian credits even less attractive to Bangladesh. Due to these factors, there were long delays in the utilisation of the Indian credit, making it necessary for it to be extended from time to time. If extended as grants and on softer terms and if bureaucratic delays in implementation are removed, credits from India can still play an extremely important role in underpinning the economic relations between India and Bangladesh.
Bangladesh can use Indian credits because it is in need of external resources for development and it is faster to get supplies from India than against the credits extended by other countries. Besides, some of the supplies available from India are uniquely suited to meet the requirements of Bangladesh. It was the single largest amount of credit extended by India to any country.
It has been granted under very soft terms and conditions with 1. A good proportion of this credit, amounting to about million dollars, is in the form of grants. The projects identified for being financed under this line of credit are mostly in the sector of transport infrastructure.
Indian Investment in Bangladesh INDIA can be a very important source of foreign direct investment FDI for Bangladesh, thereby contributing to the expansion of its export capacity as well as to the growth of its economy.
The Bangladesh Government claims that it maintains one of the most liberal regimes in the developing world for foreign investment. In spite of this, the overall flow of FDI into Bangladesh remains at a very low level as compared to the inflow of FDI into several other developing countries.
It is mainly because foreign investors do not feel very secure in investing in Bangladesh. Indian investors are particularly apprehensive on this account.
Inthe Tatas put forward a proposal for the investment of close to three billion dollars in Bangladesh for setting up a steel plant, fertiliser factories and power plants, mainly based on the local supply of gas. It was the largest investment proposal made by any foreign investor to Bangladesh. This led to other Indian companies like Reliance, Mittal and Birlas also showing interest in similar and other projects for investment in Bangladesh.
But after keeping the proposal under consideration for about three years, the Bangladesh Government rejected it on the ground that because of the limited gas reserves in Bangladesh, it could not guarantee the supply of gas needed for operating these projects. While one has to accept this explanation at its face value, there are reasons to believe that political factors have also played a role in arriving at this decision.
Indo-Bangladesh Economic Relations - Mainstream Weekly
The big-neighbour-small-neighbour syndrome, which impels Bangladesh to look with suspicion at every major initiative for linking its economy with that of India, has also been in operation in the process of decision-making on this issue. The real breakthrough in Indian investment in Bangladesh will come only if there is a marked improvement in the political relations between the two countries. These relations have no doubt looked up after the Awami League, under Sheikh Hasina, returned to power following the parliamentary election in December But there is still a long way to go before Bangladesh gets rid of its apprehensions regarding forging really close economic ties with India and before Indian investors are assured about the durability of the improved climate of relations.
This was disrupted by the India-Pakistan war of when East Pakistan, as an integral part of Pakistan, constituted present-day Bangladesh and has not been restored since then.
Some of the infrastructures, through which the goods in transit were carried, have decayed or got disrupted because of sheer negligence and prolonged disuse. After the liberation of Bangladesh, on several occasions India took up with the Bangladesh Government the question of the restoration of these transit facilities, but Bangladesh until now has continued to deny them to India.