Bangladesh-India trade cooperation is perhaps not growing proportionately to the warmth, emotion, good will and friendship these two countries share with each other. A substantial trade deficit (USD 2.5 billion) with a balance tilted to the Indian side seems to be the major point of discontent both for the government and business community in Bangladesh. There exists host of complementariness between Bangladesh and India which could and should properly be channeled into the mutual economic growth and benefits. But the opportunities have possibly not been optimally tapped and thus the trade volume has remained far below its potentials. The problems are, however, identified, needs are articulated and understanding between the two governments is well underlined but things are not seemingly implemented, at the pace as it is expected, on the ground. It is the need of the hour to work resolutely to step up mutual cooperation in this sector, not only to close the trade gap but also to give visibility to their relationship. The result oriented trade cooperation may be serving as a confidence building measure between the two countries and in turn make phenomenal contributions to the over all bilateral relations, positively impacting on the other long pending/ outstanding issues. At this critical juncture of bilateral relations, both India and Bangladesh should look ahead to redefine their bilateral trade and commercial cooperation in a way that would only promise prospects and opportunities but no challenges.
Bangladesh is surrounded by four-north-eastern states which all together share a 1,880 km border with Bangladesh with 1,434 km on land and 446 km riverine. North-east India may serve a gate-way for Bangladesh’s access to Indian markets and in the course of time may act as a game changer in the Bangladesh-India trade relations. For long, it has been argued that the geography has made the north-east India an isolated, landlocked region that shares less than 2 per cent of its borders with the rest of the country, and 98 percent with Bhutan, Bangladesh, Myanmar and the Tibetan region of China. The geographical disadvantages resulted in the cutting off the regions from trade and commerce, transport and communication as well as other linkages that existed in pre-partition days. Before the partition, the economy of the eastern side of Indian sub-continent functioned as an integral entity. Even the rail and Inland water trade was allowed up to 1965. However the perception on the land-lockedness of the north-east is now being eroded, gradually but noticeably. Efforts are being made to convert the region into the ‘land-linked’ from the ‘land-locked’. With a well thought-out long-term policy, this region has the potential to emerge as a strategic base for domestic and foreign investors to tap the potential of contiguous markets of China, Myanmar, Bangladesh, Laos, Thailand, Vietnam, Cambodia, Malaysia, Indonesia and beyond. With the growing realization of the Indian policy makers about the potentiality of the north-east, it appears to be a necessity for the policy makers of Bangladesh to view the region at the same wave-length which would bring mutual benefits to both the nations.
The present paper seeks to highlight:
(i) The nature of complexities Bangladesh and India share in their bilateral trade cooperation with particular attention to the current economic realities and more specifically the factors that have led to the trade imbalance between the countries
(ii) role of the India's north-east region in determining the course of the Indo-Bangladesh trade relations, with particular emphasis on the competitive advantages to the north-east in this particular case
(iii) additional measures/initiatives required to facilitate trade interactions between Bangladesh and north-east region of India in particular and Bangladesh-India at large in view of the current developments in this sector
Present Status: Facts and Figures
The following tables capture the trade figures between Bangladesh and India. While the first table shows the huge trade gap between the two countries, the second table manifests meager amount of trade India is conducting with Bangladesh in terms of its total global share.
Table 1: Total Trade and Balance
(Value in million USD)
Head 2006-2007 2007-2008 2008-2009
India’s export to 1,629.57 2,923.72 2,497.87
Bangladesh
India’s Import from 228.00 257.02 313.11
Bangladesh
Total Trade 1,857.57 3,180.74 2,810.98
Trade Balance 1,401.57 2,666.70 2,184.76
(towards Indian side)
Table 2: India’s Trade with Bangladesh vis-à-vis its global trade
(Value in million USD)
Total Trade 2005-2006 2006-2007 2007-2008 2008-2009
and Balance
India’s total 1,791.39 1,887.57 3,180.74 2,810.98
trade with
Bangladesh
India’s total 152,256.26 312,149.29 414,786.19 488,991.67
global trade
% Share 0.71 0.6 0.77 0.577
The following tables demonstrate the range of products being traded between the two countries. It is important to note that cereals and cotton are the major exportable items from India to Bangladesh and both of them play a major role in the socio-economic development of Bangladesh. Cotton is required for industrial consumption, especially for the ready-made garments, one of the major revenue earners for Bangladesh.
Table 3: Top 10 Items of Imports from Bangladesh to India
(Value in million USD)
S. Commodit 2007-2008
No.
1. Fertilizers 51.43
2. Textile fibres, paper yarn and woven fabrics of paper yarn 48.62
3. Inorganic Chemicals; Organic or Inorganic compounds of
precious metals 22.12
4. Fish and crustaceans, mollusks and other aquatic
invertebrates 21.61
5. Other made up textile articles; clothing and worn textile
articles; rags 16.27
6. Mineral Fuels and related products 11.24
7. Electrical machinery and equipment 10.85
8. Salt; sulphur; earths and stone; plastering materials,
lime and cement 9.90
9. Copper and related products 7.05
10. Iron and steel 6.70
Table 4: Top 10 Items of Exports from India to Bangladesh
(Value in million USD)
S.No. Commodity 2007-2008
1. Cereals 701.10
2. Cotton 645.76
3. Mineral fuels and related products 216.18
4. Sugars and Sugar Confectionery 144.81
5. Vehicles other than railway or tramway rolling stock 137.25
6. Vegetables 118.53
7. Residues and waste from Food Industries, prepared
animal fodder 107.56
8. Iron and Steel 81.73
9. Machinery and mechanical appliances 81.71
10. Organic Chemicals 60.66
Major Impediments to export to India:
Things that are understandably creating the yawning trade imbalance between Bangladesh and India are productivity issues and structural factors. India has productive advantages both in agriculture and industry as compared to Bangladesh because of its sheer size and scale of economies. Structurally Indian economy is much larger, more diversified and technologically advanced. All these factors have made Indian products very competitive, both in terms of price and quality in Bangladesh’s markets. On the other hand, India’s imports from Bangladesh are limited to a few items, as Bangladesh does not have a large supply base to offer a wide variety of products to India. The obvious result is an increase of trade imbalance between the two nations. But if one could assume that market competitiveness and technical/technological sophistication are the only factors that have been denying Bangladesh’s goods and services in India’s large growing market, he/she would be missing the larger part of Indo-Bangladesh trade relations. The other important factors causing this imbalance are the tariff and non-tariff regimes as described below:
(a) Tariff barriers
Duty structure imposed by the Indian authority on the products from Bangladesh is complex and difficult to interpret as the duty varies not only from category to category but also differs from product to product belonging to the similar category. In some cases, basic duty may be nil but other forms of duty, in aggregation, may ultimately precipitate to a substantial figure which is at all not encouraging for exports from Bangladesh. The following tables indicate different type of duties one has to pay to export his/her products from Bangladesh to India:
Tables 5: Food products
ITEMS DRINKS JUICE CHIPS CRACKERS Milk Fruit
Candy flavored
candy
BASIC
DUTY 0% 0 0% 0% 0% 0
CVD 8.24% 0 0.00% 8.24% 14% 8.24%
CESS 3% 0 0% 3% 3% 3%
ACD 4% 0 0% 4% 4% 4%
CVD- Countervailing duty, CESS- kind of local taxation, ACD-Additional Custom Duty
Table 6: PVC, plastic & light engineering products
ITEMS PVC Plastic Plastic household Hand tube
pipes Furniture items well
BASIC
DUTY 12.5% 0 12.5% 0%
CVD 8.00% 8% 8.00% 8.00%
CESS 3% 3% 3% 3%
ACD 4% 4% 4% 4%
It is observed also that there are different types of duty structures for similar types of products from which one may conclude that the duties are randomly imposed/calculated in terms of Bangladesh’s export to India. The following tables reflect the same.
Table 7: Drinks
ITEMS Litchi Drink Junior Juice
BASIC DUTY 0% 0
CVD 8.24% 0
CES 3% 0
ACD 4%
Table 8: Chips/Crackers
ITEMS CHIPS CRACKERS
BASIC DUTY 0% 0%
CVD 0% 8.24%
CES 0% 3%
ACD 0% 4%
(b) Non-Tariff barriers
Trade facilitation is not an isolated matter, rather it is a comprehensive matter which requires the coordination/combination of the elements involved in it- (a) simplification (Elimination of unnecessary elements and duplications in formalities, processes, procedures and documentations), (b) harmonization (Alignment of national procedures, operations and documents with international conventions, and practices, (c) standardization (Adopting internationally agreed formats and practices, procedures, standards and information) and (d) modernization (Provide adequate infrastructure, modernize and enhance efficiency through information technology across logistic chain). Some of the non-tariff barriers that are hurting hard Bangladesh-India trade relations are furnished below:
Restrictions on the movements of Bangladesh citizens: The movements of Bangladesh citizens inside the Indian cities for the purpose of business/investment or even for tourism/ medical treatment are not easy. Bangladesh nationals have to go through a number of formalities/procedures for the purpose. Bangladesh citizens are restricted to travel to certain north-east States like Mizoram and Nagaland. They also face problems in renting apartments for accommodations and are subject to police reporting on a weekly basis. Visa procedures adopted by the Indian authority for Bangladesh travelers are also not encouraging for good business interactions between the two countries.
Vehicle Movement restrictions: Bangladeshi trucks and drivers are not allowed to cross the 'no man's land' to unload the goods which is causing many unnecessary hassles in the transshipment of goods across the border. This is not only a hassle or time-consuming matter but also a costly affair. The costs pertaining to loading/unloading and warehousing are no less substantial and ultimately add to the product cost.
Technical Standards: Any products going to Indian markets from Bangladesh requires Lab test from CFL located in Calcutta or Guwahati as reports/certificates from Bangladesh Lab are not accepted by the Indian side.This is done for each and every consignment and it often takes at least 15 -25 days to get the CFL report. The products are held at the port till the arrival of reports and this long time waiting may affect the quality of products.
Infrastructure at Land Custom Stations: Logistics and infrastructures at the border specially countries enjoying geographical proximity and cross border trade play a vital role in boosting trade between the neighboring countries. Lack of infrastructure facilities at the LCSs between Bangladesh and India are causing delays in valuation and product clearance. Apart from this, there is also route- restriction of imports meaning that certain products are allowed to import/export through only a few specified land ports.
The following table gives a hint about days spent for a shipment to reach Petropole (Bangladesh land border) from Kolkata :
Table 9: Export Shipments from Kolkata
Activity Hours
Loading at Kolkata 5.00
Transit time from Kolkata to Bongaon 10.00
Waiting time at the outskirts of Bongaon and Petrapole 52.00
Waiting time at Central Warehousing Corporation parking yard 52.00
Waiting time at the border gate for entry into Bangladesh 2.00
Unloading at Benapole 22.00
Return to Petrapole 5.10
Total 148.10
Banking barricades: Indian banks lack direct correspondence arrangements with Banks in Bangladesh and vice-versa. The absence of this sort of arrangements ultimately adds up to the product’s cost making the product lees competitive and less attractive.
The following table displays how deeply the tariff and non-tariff barriers impact on the value chain of a product. The figure reveals that 13% of the cost is increasing because of duty while the non-tariff barriers make the product cost rise up to 15%.
Table 10
Head of Expenses Value in INR %
FOB Price 230
Duty 29.9 13%
Other non-tariffs (Avoidable) 34.5 15%
1. Truck Dammarage 18.4 8%
2. Additional loading unloading 6.9 3%
at port
3. Additional carrying 9.2 4%
CFL test 4.6 2%
1. Importer’s margin 14.7 5%
2. Onward Freight (Importer to SS) 15 6.50%
3. SS Margin 14.7 5%
4. Onward Freight (SS to Distributor) 15 6.50%
5. Sales Vat 45.67 12.50%
6. Distributor’s Margin 23 10.00%
7. Retailer’s Margin 46 20.00%
MRP 507.57
Interaction between Bangladesh and North-Eastern part of India
The major business/investment destinations in the north-east fall within 20 km perimeter from the Bangladesh capital, Dhaka which gives an exclusive attraction for business between Bangladesh and North-East India. Apart from the distance, the cultural affinity and similar needs and demands of their people also facilitate their bondage in many areas including trade and commerce. The table furnished below explores the competitive advantages of North-East India:
Table 11
Items Bangladesh Tripura Assam Meghalay Mizoram
Total land area 1 47570 10492 78438 22429 21087
(sq km)
Agricultural land 8.44 0.28 3.55 0.022 0.63
(million Hectors)
Total population 124 3.19 26.65 2.31 0.89
(million)
Density of population 843 305 340 103 42
Per capita Agricultural 681 878 1332 97 7079
land (sq meter)
As reflected in the above table, per capita Agricultural land of every North-Eastern state is higher than that of Bangladesh. On the area of agricultural trade, Bangladesh and north-east could harness the potentials the sector offers and create a symbiotic condition to meet the agriculture and trade related demands of both the sides (using north-east’s land for agriculture as per needs and demands of Bangladesh).
Since many of the States in the north-east suffer from underdevelopment, they have huge demands for the outside products. Bangladesh can sell its products in the north-east which has a market for about Rs.25000 crore, nearly five times the trade deficit of Bangladesh. Bangladesh-north-east trade is mainly conducted through Assam, Meghalaya and Tripura with ranking Meghalaya number one in terms of trade volume (64% of total trade). The following tables feature trade routes and trade figure between Bangladesh and north-east of India:
Table 12 : Active Land Customs Stations
State Road Riverine
Assam Sutarkandi (Sheola) Mankachar (Natun Bandar),
Guwahati Steamer-ghat, Karimganj Steamer and Ferry
Dhubri Steamer-ghat Ghat (Jakiganj)
(Rowmati)
Meghalaya Dawki (Tamabil),
Bholaganj (Chatak),
Shella Bazar (Sunamganj),
Gasuapara (Karoitol),
Borsora, (Borsora),
Mehendraganj (Dhanua),
Dalu (Nakugaon),
Baghmara (Bijoypur)
Tripura Agartala (Akhaura),
Srimanthapur (Bibirbazar),
Manughat (Chatlapur),
Ragnabazar (Batuli),
Dhalaighat (Kumarghat),
Khowaighat (Balla),
Muhurighat (Belonia)
Note: Names in italics refer to the interchange points in Bangladesh
Table 13
LCS-wise NER-Bangladesh Trade (2 year average: 2006-08): Rs. Lakh
LCS Export Import Total Trade %
Karimganj Stamer 396.50 36.00 432.50 1.12
and Ferry Station
Sutarkandi 3,785.00 2,232.00 6,017.00 15.56
Guwahati 549.50 21.50 571.00 1.48
Steamerghat
Mankachar 19.50 9.50 29.00 0.07
Borsora 10,253.00 0 10,253.00 26.52
Bholaganj 1,049.50 0 1,049.50 2.71
Dawki 5,425.50 0.75 5,426.25 14.03
Shellabazar 1,845.00 0 1,845.00 4.77
Baghmara 68.00 0 68.00 0.18
Dalu 1,123.50 30.09 1,153.59 2.98
Ghasuapara 4,048.00 0 4,048.00 10.47
Mehendraganj 76.50 512.50 589.00 1.52
Agartala 57.00 6,644.50 6,701.50 17.33
Srimantapur 75.00 384.00 459.00 1.19
Dhalaighat 0 0 0 0
Khowaighat 0.03 1.50 1.53 0
Manu 0.07 3.05 3.12 0.01
Muhurighat 0 0 0 0
Old Ragnabazar 3.50 16.50 20.00 0.05
NER 28,775.10 9,891.89 38,666.99
Latest Developments
A Joint Communiqué issued during the visit of Bangladesh’s Prime Minister to India in January 2010 dedicates several paragraphs in improving trade and commercial ties between Bangladesh and India. The Communiqué reads “with a view to encouraging imports from Bangladesh, both countries agreed to address removal of tariff and non-tariff barriers and port restrictions and facilitate movement of containerized cargo by rail and water.” Bangladesh side agreed to open its sea ports (Chittagong and Mongla) for the use by India, Nepal and Bhutan which would certainly make substantive contributions towards the enhancement of Indo-Bangladesh trade relations, particularly with the north-eastern part. Both sides agreed to declare Ashuganj and Silghat as ports of call; operationalise land customs stations at Sabroom-Ramgarh and Demagiri-Thegamukh and set-up border haats on a pilot basis at selected areas which are landmark initiatives in the trade cooperation between Bangladesh and north-eastern part of India.
While both the sides agreed to make Rohanpur-Singabad railway link available for Nepal, the construction of the proposed Akhaura-Agartala rail link were discussed on the official-level talks with a positive tone. Indian and Bangladesh railway officials recently completed technical formalities and finalized the alignments of the 11-km Agartala-Akhaura rail link.
Both sides agreed to allow the movement of trucks from Bhutan and Nepal to enter about 200 meters into Zero Point at Banglabandh at Banglabandh-Phulbari land customs station. India has decided to construct a bridge over the Feni river in southern Tripura to get access to Chittagong port for carrying goods and heavy machineries for the landlocked region. The proposed bridge to be built at a cost of Rs.13 crore will connect Sabroom and Bangladesh Ramgarh and would not only serve as a trading life line for the whole of north-east India but also help trade from the South-East Asian countries.
Bangladesh Commerce Minister visited India from 21 to 24 October 2010 during which a number of decisions apparently made at Bangladesh’s satisfaction included, among others, export of 11 lakhs bales of cotton to Bangladesh (it meets 30-35% of its cotton requirements through imports from India), duty free import of 1.7 million pieces of textile products in the last quarter of 2010, withdrawal of the requirement of a ‘Made in Bangladesh’ label on each jute bag exported to India and granting of transit to trucs from Nepal to Bangladesh up to Land Customs Stations.
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