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Bangladesh has been experiencing persistent and unfavourable trade deficit with India for a long time. The country has a staggering trade deficit of nearly two billion US dollars with its neighbour. In fact, Bangladesh is one of the top five trading partners of India and the formal and informal exports to Bangladesh have been estimated to be to the tune of over 3 billion US dollars.
The imported items are cotton, cotton fabrics and cloths, sulphur, stone, plaster materials, lime and cement, food grains, machinery, mineral fuel, crude oil and refined oil, bitumen, mineral wax, transport machinery and parts, iron and steel, bio-chemicals, electrical machinery and parts, knit fabrics, poultry and livestock feed, coffee and spices, rubber and rubber goods, aluminium and aluminium products.
Bangladesh's exports to India include raw jute and jute goods, chemicals, frozen foods, leather, tea and battery.
The general view here is that the trade surplus that India is having with Bangladesh is at the cost of development of the economy here. The backbone of the economy, the small and medium enterprises (SMEs), are especially affected -- many are being forced to close down.
Discussions on reduction and elimination of tariffs have been going on. But so far it has not been found that these are implemented and formulated in a way where immediate and tangible gains are assured.
To narrow down the huge trade imbalance, Bangladesh wants greater market access to India for its products. There is a strong perception that the solution lies in greater economic integration of India with Bangladesh by giving priority to a zero tariff access to the Indian market as India maintains it with Bhutan and Nepal by investment cooperation, reduction and elimination of non-tariff barriers.
Bangladesh has requested India, at different levels, for tariff exemptions on nearly 200 items, of which India agreed to 40. But it is believed that the duty-free access of 40 items will not make much difference considering the size of the trade imbalance. Actually, India will import such products if those are in demand there. Bangladeshi businessmen should look forward to Indian market for which India has demands.
For years together, Bangladesh has been pressing India for concessions on customs, tariff and associated administrative procedures to facilitate unhindered flow of trade between the two countries and to address these issues on a priority basis. On different forums, Bangladesh tried to negotiate more with the Indian government on luxury tax levied on some Bangladeshi exports and take strict measures on dumping of Indian goods into Bangladesh market at highly reduced price.
As the efforts over the years made little progress, trade bodies from both sides believe that Bangladesh can explore the untapped markets in the Northeast Indian territory, which would reduce the trade gap significantly. They feel that the major problem to foster export from Bangladesh to Northeast India is the inadequate physical infrastructure facility at the declared land customs stations of the both sides.
The economy of Bangladesh has many complementarities with the economy of the Northeast Indian states. The people of the Northeast states would derive immediate benefits from increased imports from Bangladesh. This can be a win-win situation as there is huge demand of Bangladesh's consumer items in this region
While potential for formal cross-border trade remains largely untapped, lack of trade facilitating supports instigate unofficial trades depriving both the countries of revenues.
The volume of unofficial trade through this region would be over $800 million, which would account for one third of total informal trade between the two countries. This figure was stated in a report compiled by a study group of Chittagong Chamber of Commerce and Industry in Bangladesh and Tripura Chamber of Commerce and Industry in India.
As it is said already, the amount of unofficial trade between India and Bangladesh is estimated at $2 billion. The balance is alarmingly against Bangladesh. Bangladesh is lagging behind even compared to these Northeast Indian states. In the fiscal 2003-2004, Bangladesh imported $50 million worth products from Northeast Indian sates while it exported only $2.5 million worth of products.
The report of the chamber bodies suggested a set of measures to increase Bangladeshi exports to Northeast states.
One of the major thrusts is to reduce the communication gap. It is perceived by both sides that without regular meetings, the problems would remain unsolved. The chamber bodies suggested sending trade delegation to every city and the government level negotiation should be vigorously continued to simplify the procedure for Indian importers.
Due to the strategic geographical location Bangladesh can be the regional hub of transportation to Eastern India, North East India, Nepal, Bhutan and other Asean countries if it can capitalise on its location advantages. For this the land customs units on both sides are not properly equipped to support business. There are detailed descriptions about the conditions of the land customs stations in the report. It is found that most of the stations do not have necessary infrastructures. In fact the land customs stations should be developed to facilitate formal trade. In addition to improving the infrastructures the immigration and visa procedures should also be eased.
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