Combatting Chinese influence
Mahfuja Mukul: Strong economic ties are very important to boost India-Bangladesh bilateral trade, which is gradually becoming one of the major components of two neighbours economic developments.
Prabhakar Saho, a professor at the Institute of Economic Growth in Delhi, and Durgesh K. Rai, a fellow at the Indian Council for Research on International Economic Relations, commented on the growing importance of trade between the two neighbors and what India could do with the growing Chinese influence in Bangladesh. An excerpt from an article published in the Indian media Deccan Herald on January 18 was presented.
Indian President Ramnath Kobind committed to gear up the trade and investment with Bangladesh by attending as the chief guest at the Golden Jubilee celebrations of Bangladesh’s independence on 16 December last year in Dhaka. His presence clearly highlights the good relations between the two strategic neighbors.
Bangladesh is not only India’s largest trading partner in South Asia, but also one of their major export destinations. However, China’s growing economic efficiency and strategic investment in South Asia have in the recent past reduced India’s influence in Bangladesh overseas economic profile. China is proposing to waive tariffs on 97 percent of imported goods from Bangladesh.
Therefore, if India wants to maintain its economic influence in Bangladesh, it needs to address the issues that hinder trade and investment and identify key areas of mutual cooperation.
Over the past decade, India’s trade with Bangladesh has grown faster than any other country in the world. From $3.4 billion in 2010, the amount almost tripled to $9.6 billion in 2016. Bilateral trade has shown greater resilience even in the face of the coronavirus epidemic. At that time, India’s global trade decreased by 19.6 percent but with Bangladesh it decreased by only 5.5 percent. Again, in 2021, their trade with Bangladesh has increased faster than other countries in the world.
However, India has always maintained a ‘favorable trade balance’ with Bangladesh, which is a matter of concern for Bangladesh. Bangladesh’s share in India’s exports in 2010 was 1.4 percent, in 2021 it increased to 3.5 percent. In contrast, India’s share in Bangladesh’s exports is 3.3 percent and it is their eighth largest export destination. China is the 15th export destination of Bangladesh with a contribution of only 1.85 percent.
However, in 2020, China became the top exporter, occupying about 30 percent of Bangladesh’s import market, leaving India second with 16 percent. In other words, Bangladesh has more trade inequality with China than India.
As part of the South Asian Free Trade Area (SAFTA), both Bangladesh and India have priority in each other’s markets in terms of tariff exemption. However, there are a number of non-tariff barriers (NTBs) that hinder the full potentials of bilateral trade.
Bangladesh raises two specific concerns about the export of goods to India – first, the new Indian tariffs, which provide for ‘Made in Bangladesh’ guarantees, and second, the anti-dumping tariffs imposed by India on imports of jute goods, hydrogen peroxide and fishing nets.
Limited commercial route
Non-tariff barriers to Bangladesh-India trade include limited routes, harassment at customs, visa issues, etc. These increase the cost of bilateral trade. For Bangladesh, the sea trade infrastructure with China is more effective than the road trade through Benapole-Petrapole with India.
One of the key areas that could significantly increase bilateral trade and where urgent attention is needed is to improve the infrastructure of existing Land Border Customs Stations (LCS) and create new LCS without port complications. As the volume of trade between Bangladesh and India increases, it is becoming more and more diverse. This has necessitated reciprocity and accreditation in terms of standards.
As a Least Developed Country (LDC), Bangladesh enjoys duty free access to the markets of most of the developed countries of the world. In that case, Bangladesh and India can look for ways to strengthen their position in the global supply chain. There are similar opportunities in the jute sector.
Concerns about China
China is capturing Bangladesh’s market by exporting relatively cheap goods, aggressive investment and increasing financial benefits for strategically important projects.
In Bangladesh, the Chinese authorities have already invested in various sectors such as deep-sea port projects (Chittagong and Mongla), financing and construction, development of power generation and distribution lines. It has also been involved in visible infrastructure projects such as the Maitri Bridge, Sewerage Center, Economic Zone, Airport Expansion, Road and Rail Communication. These are creating positive perceptions in the minds of the people about them.
Bangladesh’s importance in India’s foreign relations is immense. For this reason, India must increase economic relations with Bangladesh to dominate China. This is also good for Bangladesh. This is because trade with China is relatively unfavorable and there is a risk of falling into the trap of Chinese debt. In this situation, India must invest in the visible infrastructure sector and help Bangladesh to counteract China’s growing influence in the region, regardless of its economic benefits.
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