Bangladesh and India did not feature much in the world economy only two decades ago. However, powerful economic growth paired with steadfast leadership revolutionized the economic situations of these two nations. The spectacular expansion of the Bangladesh economy and India’s global engagement is today considered as a classic example of the “broken chain of economic depreciation.” To continue the journey together, Bangladesh and India have strengthened their economic connection throughout the years. The Bangladesh prime minister’s planned visit to her Indian counterpart is a step toward greater collaboration. Nonetheless, the South Asian economy is not the same as it was 20 years ago, and the leadership of the South Asian economy has shifted dramatically. These two nations trade for more than $10.78 billion in 2021, and commerce between these two countries has increased at an unparalleled rate in the recent decade.
On the other hand, the present global economic crisis has created a disastrous scenario. Rising inflation, price increases, energy price increases, and currency devaluation are impeding the international economy’s natural recovery after the COVID-19 pandemic. That is why Bangladesh’s Prime Minister’s visit to India is so crucial. In order to confront the global economic crisis, both Bangladesh and India, as significant sections of the global economy, needed to adapt to new economic changes. In this time of economic uncertainty, not just Bangladesh and India, but the whole South Asia, are eagerly watching the approaching summit of the two South Asian economic heavyweights. Because the influence of Bangladesh-India economic cooperation is obviously influencing the whole South Asian economy, only a collaborative appraisal and commitment to future collaboration can preserve the entire South Asian economy.
South Asia’s economic challenges
Both nations have lately suffered economic issues such as inflation, diminishing foreign reserves, growing foreign debt percentage, factory shutdowns, price increases, energy price increases, and trade declines, all of which are influencing regional components of economic growth. Because without the assistance of the Indian and Bangladeshi economy, regional economies have nothing to fall back on. Sri Lanka has already seen economic ramifications, and the country’s economy has been hit with a shock that might limit the country’s progress for a long time. The Pakistani economy, on the other hand, is presently on the cusp of a huge economic collapse. Furthermore, Nepal and Bhutan are experiencing the knock-on impact of global and regional economic issues. The forthcoming summit may see new progress in a host of collaborative areas.
Trans-shipment and the prospect of seamless trade
India has initiated trial runs for cargo transshipment to its northeastern provinces, using two main land ports in Bangladesh: Tamabil in Sylhet and Bibir Bazar in Cumilla. From numerous views, this new link will be an important role in future commerce between the two countries. Because of the Ukraine conflict and the global economic downturn, industrialized nations began to suffer from trade imbalances, decreased output, inflation, food shortages, and energy problems, which are reflected in their trade transportation system. The dependable South Asia is currently experiencing a trade imbalance with the developed world, as well as a shipping issue. Both India, as a regional powerhouse, and Bangladesh, as a leading example of a developing economy, had an opportunity to describe the trading system more eloquently. This articulation is about developing a complete new common commerce service in the area, not just transit for one nation. Bangladesh, as a critical geostrategic location, has a huge chance to develop commerce with India via this transshipping route. Furthermore, owing to Western sanctions and the complexities of world politics, Bangladesh has encountered certain difficulties in developing commercial relationships with other actors. At the same time, the Indian trance shipment offers Bangladesh the ability to escape the complexity of choosing sides in world economic commerce and instead adopt an effective stance on the trans-shipment, allowing Bangladesh to gain from trade with global players while avoiding complexity.
Energy trading and the prospect of achieving sustainability
Bangladesh and India have always had diverse sources of electricity generation, which has kept this nation away from energy cooperation for a long time. However, in the previous decade, the two nations have begun collaborative energy production and transportation projects. In a major step, the Bangladesh government is likely to undertake successful energy trading via IEX. In contrast, demand for Indian power is growing in Bangladesh, which acquired 17.31% more energy from India in 2020-21, worth 4712.91 Taka (Rs 4,150.99), than the previous year. The current global energy crisis has highlighted the necessity of energy cooperation among neighboring nations. Energy prices rose over the globe as western sanctions imposed, transportation costs increased, demand increased in Western nations, and output decreased. Bangladesh and India are two possible instances of low-cost collective energy exchange. On the one hand, India may gain from trade by selling energy units, while Bangladesh can benefit by purchasing low-cost energy. This system will eventually alleviate the economic struggle, allowing both the nation and the region to continue the growth process.
Food as a sign of friendship; the possibility of working together on the food supply chain
Food prices globally have declined for the third month in a row, but remain around record highs in March. The FAO food price index, which analyzes the monthly change in global food commodity prices, declined 2.3% in June compared to the previous month. Vegetable oils, cereals, and sugar are still 23.1% higher in international markets than a year earlier. Cereal prices, on the other hand, are still 27.6% higher than a year ago, while wheat prices are 48.5% higher than a year ago as a consequence of the Russia-Ukraine conflict. Food costs are growing in both Bangladesh and India. However, they remain secure in comparison to other South Asian nations. Furthermore, the forthcoming visit coincides with the optimum moment for large food trade deals to stabilize food prices.
The completion of the CEPA is a timely step to defend the area economy
The planned Bangladesh-India Comprehensive Economic Partnership Agreement (CEPA) extends beyond standard free trade agreements to include services trade, investment, intellectual property rights, and e-commerce. The proposed agreement, which asks for duty exemptions, is likely to increase Bangladesh’s exports by 190.15 percent or more if transaction costs are also cut via enhanced connectivity. In addition, India’s exports to Bangladesh are predicted to expand by 188%. According to the study, the CEPA will increase Bangladesh’s GDP by 1.72 percent and India’s GDP by 0.03 percent. Given these CEPA achievements, it is past time for both Bangladesh and India to fulfill the agreement and achieve a more secure, collective, and durable position in terms of economic cooperation.
Possible New Paradigm for Expanded Economic Relations
Economic connections between Bangladesh and India have the potential to expand further since the foundation of these interactions is mutual collaboration. People-to-people interaction, cultural interchange, ancient history, and shared culture have established an intangible relationship between two nations that cannot be seen or severed. To strengthen future economic ties, both countries must look to the past and restructure current cooperation structures.
Both nations stand to benefit from the continuation of trade liberalization and the simplification of border procedures, which may be accomplished via trade facilitation and better physical connection. If Bangladesh and India worked together more closely on the economic front, Bangladesh’s chances of luring further investment from India would be strengthened. Such investments, which may take the form of joint ventures or businesses owned entirely by Indians, would help the nation improve its capacity to serve export markets and would also lead to an increase in exports to both the region and the rest of the globe. Given Bangladesh’s existing economic standing, however, cooperative economic cooperation between Bangladesh and India is the only realistic choice for the betterment of the area. On the other hand, India cannot confront the rising economic uncertainty in the region on its own. Bangladesh’s investment in Northeast India will also immensely benefit Indian economy and its people. Collaboration between India and Bangladesh presents an opportunity for both nations, as well as for the South Asian region as a whole, to benefit.
[Photo by Prime Minister’s Office (GODL-India) / GODL-India]
*S. M. Saifee Islam is a Research Analyst at the Center for Bangladesh and Global Affairs (CBGA), Dhaka, Bangladesh. The views and opinions expressed in this article are those of the author.