The trade imbalance between India and Bangladesh has increased significantly over the past decade even though Bangladesh’s economy has grown rapidly and its exports to the neighbouring country have risen, said sources in the commerce ministry.
The bilateral trade gap in favour of India reached USD 5,458.12 million in the last fiscal year, up from USD 4,761.08 million in FY2015–16, thanks to a rise in imports against the downward export trend.
Talking to The Independent, Md. Shafiqul Islam, additional secretary of commerce ministry (FTA wing), said India is Bangladesh’s second most important source of imports
after China, and India ranks fifth in the list of the country's export destinations.
“Even though we may try to reduce the trade gap with India, it’s not possible as the economies of Bangladesh with India are interrelated,” he said, adding, “Bangladesh imports raw materials from India, which are used in the industrial sector for exports. So, there is no scope for reducing the trade gap with India.”
Md. Shafiqul Islam said the two governments have been trying to improve the situation. India has a plan to remove non-tariff barriers on selected goods in which Bangladesh has interests; India has accepted the certification of the Bangladesh Standards and Testing Institution (BSTI) for 25 Bangladeshi products; Bangladesh enjoys duty-free access to India for all products except 25 products (alcohol, tobacco and drugs).
The share of Bangladesh’s exports in total imports by India was only about 0.2 per cent in FY2011, while Bangladesh’s imports from India accounted for about 13.2 per cent of her total imports in the same year, Shafiqul Islam has said.
According to data provided by the commerce ministry, Bangladesh imported USD 3,393 million in FY 2007–08. This figure reached USD 6,130.53 million in the last fiscal year, which is 108 per cent higher. In contrast, exports reached USD 672.41 million in the last fiscal year but the figure was USD 358.08 million in FY 2007–08, which is 187.87 per cent higher.
“Along with traditional exports, Bangladesh mainly exports raw jute, fish and fertilisers to India; non-traditional export items have made their place in the export basket of Bangladesh, indicating the growing scale and scope of our exports,” Shafiqul Islam said.
The exports of apparel, leather products, cement, plastics and melamine articles, prepared foodstuffs and beverages are on the rise.
While Bangladesh’s global exports are overwhelmingly tilted towards ready-made garments (RMGs), the share of which is almost 80 per cent of the total exports, the composition of Bangladesh’s exports to India is much more diversified (RMG accounts for only about 10 per cent, with the rest being accounted for by traditional and non-traditional items).
He also said most exporters to the Indian market are small-scale business operators, who take advantage of a neighbouring market with which they are familiar.
A study by the Centre for Policy Dialogue (CPD) shows that the share of Bangladesh’s export items in the total Indian imports of those items (barring raw jute) is rather small, indicating potential opportunities for increased exports of those items. It was also found that a number of items are exported by Bangladesh to the global market, but not to India, while India imports those items from the global market, but not from Bangladesh.
Shafiqul Islam said a forum of chief executive officers (CEOs) from both countries will be formed to improve the situation, which will identify the challenges to reduce the gap. If Indian investors come to Bangladesh and export their products, the gap will come down, he observed.
The data shows that the imports of motor vehicles, apparel and yarn have been increasing day by day. In the last fiscal year, Bangladesh imported USD 2.78 million worth of motor vehicles, cotton valued at USD 0.77 million and yarn worth USD 0.56 million.
Bangladesh primarily exports raw jute, RMG products, leather, bicycles and food items to India. Shafiqul Islam was confident the number of export items would increase in the future.