India-Bangladesh Economic engagement: Significant takeaways

20 January, 2017

Economics and Trade


India's economic relations with Bangladesh have witnessed a significant rise. Today trade between India and Bangladesh is estimated at 7 Billion USD, and Bangladesh is India's largest trading partner in South Asia. Petrapole-Benapole Integrated Check Post, inaugurated by Indian Prime Minister Modi along with his counterpart Sheikh Hasina in July 21, 2016, is the second Integrated Check Post with Bangladesh after Agartala (Tripura, India) and Akhaura. Almost half of the total bilateral trade takes place through the Petrapole-Benapole land port, which also happens to be the largest land port in South Asia.

A number of other important developments have taken place in the sphere of connectivity. During Prime Minister Narendra Modi’s visit to Bangladesh in 2015. The Coastal Shipping agreement which will provide India access to Chittagong and Mongla Ports was inked between both sides. The foundation stone for Agartala and Akhaura railway line was also laid recently by Indian Railway Minister Suresh Prabhu and his Bangladeshi counterpart Mazibul Hoque. Two new bus services have also commenced between India and Bangladesh, Agartala-Dhaka-Kolkata and Dhaka-Shillong-Guwahati. Both these were flagged off by PM Modi and Sheikh Hasina and West Bengal Chief Minister, Mamata Banerjee.

It is not just land, rail and sea connectivity which both countries have successfully enhanced, but Bangladesh Prime Minister Sheikh Hasina also provided 10 GB of internet during the inauguration of 100 MW power supply from Palatana Power plant (Tripura) to Bangladesh in March 2016.

The number of factors which have facilitated the strengthening of this economic relationship and increased connectivity. In economic sphere, the political leadership of Bangladesh has exhibited immense courage in granting access to India, to its sea ports, it has also benefitted and realizes the importance of connecting with India’s North East. Subir Bhaumik (2016:28) in a book ‘Agartala Doctrine’ quotes former Foreign Minister Dipu Moni’s remark in this context: ‘During the July 9, 2016 Tripura Conclave, former Bangladesh foreign minister Dipu Moni described Tripura’s relations with Bangladesh as ‘symbiotic’ and based on ‘Swapno’ (Dreams) and ‘Swartha’ (Interests)  .

A clear instance of Bangladesh pragmatism is the Palatana power plant. While Sheikh Hasina allowed trans-shipment of equipment, Tripura on its part requested the centre to give 100 MW to Bangladesh, and the centre agreed to this request. The business community of Bangladesh also deserves credit for not being vary of competition with India. While even after the Free Trade Agreement (FTA) with India, trade remains skewed in favour of India, Bangladesh share in exports to India has witnessed a rise in recent years. There have been demands off course for India to remove some of the prevalent Non-Tariff Barriers which affect the Jute and Garment exports to India. Bangladesh which received over 2 Billion USD in 2015 (and was the second largest rec), has also been seeking more investment from India. Some of the big names which have invested in Bangladesh are Airtel, Marico, Godrej, while Larsen and Toubro is investing in three gas based power plants.

Second, Bangladesh with its unique location would not like to restrict itself to South Asia and remain embroiled in SAARC politics. Along with other countries in the region, it has signed the Bhutan, Bangladesh, India, Nepal (BBIN) agreement, and is also working closely with India in BIMSTEC where sub-regional cooperation between India and Bangladesh is being explored. Dhaka realizes its relevance for the success of India’s Act East Policy.

In addition to the economic rationale, there are a number of political factors which have contributed to the achievements in the economic sphere. The first is off course the foresight and vision of both leaderships. While Sheikh Hasina has exhibited boldness in countering terrorism and strengthened economic ties much to the chagrin of hardliners in Bangladesh. On the Indian side, the UPA government laid the foundations of a strong relationship with Bangladesh, the current government has taken these initiatives forward. Prime Minister Modi with the support of the opposition was able to get the Land Boundary passed in parliament, and formalization of the land agreement was one of the key components of his Bangladesh visit.

Second, while a lot of attention is given to the obstructionist role played by West Bengal CM, Mamata Banerjee in the bilateral relationship, what is often forgotten is the positive role of Tripura CM, Manik Sarkar. Tripura CM Manik Sarkar has taken some important steps for improving ties between both countries, and they have received the support of the current BJP government as well as the earlier UPA government. Bhaumik in fact makes the point that the Tripura CM specifically met PM Modi to urge him for improvement of ties with Bangladesh, soon after Modi took over as Prime Minister.

Third, Bangladesh foreign policy has not been excessively skewed in favour of any one country, and its approach towards infrastructural projects has not been influenced only by geo-political considerations, unlike some other South Asian countries. This is clearly evident from Bangladesh seeking investments from China, Japan and India. Dhaka has also deftly balanced its relationship between India and China. In conclusion, both New Delhi and Dhaka deserve credit for strengthening the economic relationship and enhancing connectivity. Both sides should seek to further accelerate this relationship and ensure that red tape and unnecessary restriction do not impede further progress. In the long run, successful economic relationships are driven by mutual benefits, pragmatism and not mere symbolism.