LDC graduation and India-Bangladesh Trade

In 2026, Bangladesh will no longer be classified as an LDC. The global market will then not offer many benefits. We need to examine the bilateral commercial agreement right away while keeping that matter in mind. In light of this, Bangladesh and India are in the process of negotiating the Comprehensive Economic Partnership Agreement (CEPA), a free trade pact. In this regard, a joint study has also been conducted. The CEPA agreement addresses a wide range of topics, including e-commerce, investment, and trade in products and services.

If this deal is signed, trade between the two nations will rise, and new investment opportunities will become available. This deal will probably result in an increase in the trade deficit between the two nations. So, Bangladesh should proceed with prudence in this regard. Furthermore, this deal should lower import tariffs to allow Bangladesh to adequately reap the rewards. These trade agreements on a bilateral basis can be with China, ASEAN, or the European Union.

Connectivity is vital to enhancing trade links with India. The expansion and facilitation of rail and maritime connection should go in that direction. Two of the seven agreements negotiated while the prime minister was in India have to do with railroads. In one of the agreements, Bangladesh Railway staff would receive training at the Indian Railway Training Institute. Another is IT cooperation between Indian and Bangladesh Railways.

In terms of transporting commodities both inside and outside the rails, rail communication has improved. Transporting products by truck is quite expensive. The trouble is also not less. Train is unquestionably a wise choice from that perspective. Railway infrastructure and other capacities should be improved for that aim. In addition to making such preparations, Bangladesh Railways should consider using the private sector if necessary. The Padma Bridge has already been constructed, and the railway expansion project is underway. This will make rail communication with India simpler. Riverine communication is just as crucial as railroads. Wheat and rice are easily transported up the river by ship. Transporting large construction materials or Indian stone can benefit from the use of rivers. Increasing direct and comprehensive communication with the Kolkata River Port will enable this.

Also, measures to promote Indian investment in Bangladesh should be implemented. In order to improve the dynamism of projects, especially those under active lines of credit (LoCs) a powerful commission may also be established. In addition to government representatives, our business leaders can participate in conversations with foreign multinational corporations to expand Indian investment outside of the Lines of Control. If major businesses like Tata, Birla, Reliance, or Adani from India invest in Bangladesh, both nations will gain economically.

Dhaka shouldn’t be handled the same way India handles other countries because it is Delhi’s dependable and reliable commercial partner. Bangladesh’s dependence on some items is suddenly restricted by India. For example, onions, wheat, rice, and other important goods. In reality, Bangladesh’s onion or rice market here gets unstable whenever India doesn’t export wheat, onions, or rice. Therefore, they require political commitment to trade and economics. A memorandum of understanding was finalized for the distribution of 153 cubic feet of water from the Kushiyara River via the Rahimpur Canal during the PM Sheikh Hasina’s visit to India. The discussions should be continued regarding other rivers as well.

To ensure that no one is left behind, more should be invested in human resources. Bangladesh invests a relatively small amount of its GDP—1 percent and 2 percent, respectively—into the health and educational sectors. The broad use of science, technology, and innovation is now valued in Bangladesh. The growth of productive forces is reshaping the economy. Investment collaboration can be expanded in other areas, such as healthcare and education. The goal of both nations should be to advance their political and economic relationships and bring them to a higher level on the basis of equality and reciprocal cooperation.

The tariff barrier has not been as high in previous years. Since 2011, India has given tariff concessions to Bangladesh as a developing nation, although exporters have complained that they have occasionally encountered non-tariff impediments. Bangladesh’s product exports to India have surpassed $1 billion in recent years. Studies have shown that Bangladesh has a greater potential for exporting to India. The exports will multiply if various tariff and non-tariff restrictions can be eliminated.

Commerce Minister Tipu Munshi stated the CEPA agreement would be signed — it has been determined. How it will be is a question of discussion. In the review report, the Ministry of Commerce says that this agreement will play a role in trade if Bangladesh reaches the level of developing countries. Bangladesh’s product exports to India will increase by 190 percent. And India’s exports to Bangladesh will increase by 188%. Growth will also increase. The CEPA agreement is a win-win situation. As an LDC country Bangladeshi products are going duty-free in India while India-made products coming in full duty. It won’t, however, last forever. It will ne terminated in 2026. Unless Dhaka enters into a new agreement, all of its products will be subject to duty. It will slow the rate at which exports are growing.

The exports will be duty-free and the revenue will fall if the CEPA agreement is signed. However, the overall economy will be boosted by increasing services and investment. A bilateral economic system through trade, investment, and communication will establish a robust supply chain. In 2026, Bangladesh will be promoted from least-developed country to developing country. India’s assistance is unquestionably required for the transition of Bangladesh from LDC status. Beyond old commitments, new commitments should be made to cooperate in the post-LDC situation. Negotiations are important for both to have a ‘win-win’ situation in terms of trade as neighbors.

[Photo by PMO India, via Wikimedia Commons]

Dr. Sabera Chowdhury is a Senior Researcher at South Asian Studies, University of Toronto, Canada. The views and opinions expressed in this article are those of the author.

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