SUNDAY, MAY 31, 2015
What can we expect from Modi? n Reaz Bin Mahmood
he prime minister of India, Narendra Modi, will visit Dhaka from June 6 to 7. All is set in Bangladesh to welcome the charismatic leader of the largest democracy of the world. The milestone visit of the Indian premiere has also created enthusiasm among the Bangladeshi people as they witnessed, just this month, the Indian Cabinet approve the bill to operationalise the long-standing land boundary deal with Bangladesh. This signifies the keenness of the Modi government to resolve the important bilateral issues with Bangladesh. So, hopes are high that the entire gamut of bilateral issues between the two neighbouring countries will be discussed, and several agreements, including the Teesta deal, will be signed during Modi’s maiden visit. The business community of Bangladesh is excited to greet probably the most “pro-business” Indian prime minister in history. Since its birth, and even before that, Bangladesh has had a very good relationship with India, one of the most promising emerging economies, aided by geographical immediacy. But unfortunately, the historic trade deficit of Bangladesh with India persists, and recently it has been growing sharply. The deficit was $4.24bn in 2011-12. It became $5.58bn in 2013-14. So, the visit of the Indian prime minister is also a good occasion to point out the problems which lie in the bilateral trade
relations between the two countries, and to ensure mutual trade benefits for both. Being a strong trade prospect among the Saarc member countries, Bangladesh has seen almost no progress in trade with India and Saarc at large.
warehouse facilities in many land ports, lack of testing facilities near any land port, and lack of banking services in border areas. The appreciation of Bangladesh’s taka against the Indian rupee is also detrimental to the growth of Bangladesh’s export to India.
It is hoped that the visit of the Indian PM will be instrumental in transforming the current unequal bilateral trade between the two countries into a mutually beneficial one
The South Asian Free Trade Agreement (SAFTA) was considered a vehicle which would ease various tensions among the countries. But poor implementation of the SAFTA agreement has generated frustration within the Bangladesh trade and business community. Some other reasons for the slow growth of Bangladesh’s exports to India are poor logistics at land ports, cumbersome customs requirements, manual clearance, troublesome visa procedures for visitors, excessive inspection as an excuse for security, no customs cooperation or joint inspection, lack of
Moreover, although India has granted Bangladesh duty-free access to all items except tobacco and liquor, there exists, reportedly, several types of local duties (8% countervailing duty on assessable value and 4% special additional duty). Altogether, this comes to around 15%, and this discourages exports from Bangladesh to India. Researchers in both countries have found that Bangladesh has a potential export market of $2bn in India. We are a strong supplier of RMG goods all over the world, and can be a potential supplier to India in this regard. The middle-class population is rising fast in India,
and is expected to reach 260 million in the next five years. Their income and buying power are also increasing, making it a potential apparel-export destination for Bangladesh. On the other hand, for the sake of India’s own interest, India should promote Bangladesh’s export to India. If Bangladesh’s exports were increased, this would induce higher imports of raw materials and intermediate goods from India. The demand for Indian consumer good exports would also increase in Bangladesh due to higher income from increased exports. Therefore, it is hoped that the visit of the Indian prime minister will be instrumental in transforming the current unequal bilateral trade between the two countries into a mutually beneficial, balanced, and interdependent one. It is expected that during the visit, significant progress will be made in the areas crucial for trade such as road and rail connectivity, transportation of goods between the countries through rivers, speedy clearing of export goods at land ports, reduction of local duties on the export of Bangladeshi garments, supplying power to Bangladesh from India, easing of visa procedures etc, in order to attain the highest possible mutual gains for both the countries and exploiting all trade potential. l Reaz Bin Mahmood is the Vice President (Finance) of BGMEA.