“Comparison and contrast between

the Strategic trade and economic

relation of Bangladesh and India”

Assignment
 Term Paper
BUS 4211: SMGT

“Comparison and contrast between the Strategic

Topics Covered: trade and economic relation of Bangladesh and India”

Submitted to
Dr. Muhammad Joynul Abediin
Course Teacher
Faculty of Business Administration
Fareast International University

Submitted by
Md. Tamim Hossain (18201006)
Faculty of Business Administration
Fareast International University

Latest Date of Submission: August 31, 2019

September 06, 2019

To,
Dr. Muhammad Joynul Abediin
Course Teacher
Department of Business Administration,
Fareast International University

Subject: Submission of assignment on ‘Comparison and contrast between the Strategic

trade and economic relation of Bangladesh and India.’

Dear Sir,

Here is the assignment, ‘Comparison and contrast between the Strategic trade and
economic relation of Bangladesh and India.’ which I am assigned and has been completed
on the underpinned knowledge gained from various research papers, articles and your
guidelines.

Throughout the completion of the assignment, I came to know about many things
regarding the Strategic trade and economic relation of Bangladesh and India.

I do believe that my tiresome efforts will help you to get ahead with this sort of venture.
In this case it will be meaningful to me. However, I would genuinely appreciate and keen
enough to make further corrections where you think it is necessary. Your kind advice will
encourage me to do further research in future.

Thanking you.

Yours obediently,

Name : Md. Tamim Hossain

ID : 18201006
Department : FBA
Program : BBA
Institution : Fareast International University
 Acknowledgement

Indeed all praises and salutations due to ALLAH Subhanahu Wa Ta’ala, The most glorified,
The most high.

My gratitude and thanks goes to my respected supervisor Dr. Muhammad Joynul Abediin,
Course Teacher, Faculty of Business Administration, Fareast International University for
his inspiration and guidance to prepare this assignment on ‘Comparison and contrast
between the Strategic trade and economic relation of Bangladesh and India” Which has
obviously widen my know-how to a great extent.

Last but not the least I admit the perseverance of folks who enable me and my humble
exertion towards finalization of this assignment.
 Table of Contents

Executive Summery 1
Introduction 1
Conclusion 21
REFERENCES 22
 Comparison and contrast between the Strategic trade and economic relation of 1
Bangladesh and India.

Executive Summary
With the start of a new phase in Indo-Bangladesh relations, which has put the bilateral relations
on an upswing, it is only natural that both sides should try to give a boost to bilateral trade.
Though the bilateral trade is not problem free also, the issues involved are far easier to resolve
than many others. At the same time, closer economic ties could also help in resolving other
bilateral issues. There is significant bilateral trade between India and Bangladesh. India an
emerging economic powerhouse caters too many of the needs of Bangladesh. But this has also
skewed the balance of trade in favour of India. The imports of Bangladesh are far more than
its exports. What is more significant is that even the large volume of informal trade that exists
between the two countries is dominated by India. The resultant trade deficit has led to
complaints from Bangladesh.

Key Words: Trade Agreement, Trade Deficit, Tariff and Non-tariff Barriers, Informal and
Illegal Trade, Weak Economic Ties, Connectivity and Transit.

Introduction
India’s relations with Bangladesh have traversed a topsy-turvy path since 1971. India had
played a major role in the liberation of Bangladesh yet this relationship could not sustain the
initial euphoria of mutual goodwill and interest. The bilateral trade between India and
Bangladesh stated after the latter was liberated from Pakistan in 1971. Immediately after
liberation Bangladesh required consumer goods, especially food, which came from India. Soon
after Bangladesh also started opening up its economy. The country introduced economic
reforms in 1982. This led to the increase of Indian exports to Bangladesh. The formal and
informal exports of India grew because of the appreciation of the real taka/rupee exchange rate
by about 50 per cent between the mid- 1980 and 1999. At the same time it retarded the growth
of Bangladesh exports to India. Though an attempt was made to correct the anomalies, after
1999, but Bangladesh’s exports to India continued to stagnate.1 In the 1980s the main exports
of Bangladesh were basic manufactures, including leather, rubber, paper and chemicals.
Gradually, the list has grown and Bangladesh today exports medicines, textiles, iron and steel,
raw jute, Jamdani sarees, medical appliances and clothing accessories. These have found a
growing market in India. Bangladesh imports from India include food grains, fabrics, cotton
yarn, machinery, instruments, glass and glassware, ceramics and coal. The study of the trade
relation between India and Bangladesh shows that Bangladesh experiences chronic bilateral
 Comparison and contrast between the Strategic trade and economic relation of 2
Bangladesh and India.

trade imbalance in her trade with India. Both India and Bangladesh are members of SAARC
and also of several other regional blocs e.g. BIMSTEC, IOR-ARC etc. They are also signatories
of various plurilateral preferential trading agreements like Bangkok Agreement, SAPTA, and
Global System of Trade Preferences (GSTP) etc. These bodies are to promote regional trade
but huge bilateral trade deficit becomes a contending issue in regional cooperation between the
two countries and remains a major topic of discussion in India Bangladesh trade talk.

Trade occurs when citizens from one country can buy from another country or sell to another
country what they can produce. This allows a country to specialize in the manufacture and
export of products that can be produced most efficiently in that country. Trade between
Bangladesh and India is playing a vital role in both the countries’ economy. This assignment
will give you some idea about the current scenarios of the trade between these two countries.

Bangladesh & India are in business operation for a very long period of time. The trade between
these two countries has significant contribution to the economy. Bangladesh has efficiency in
producing some products and India is also efficient in some sectors. So Bangladesh exports
those goods where they are efficient and imports the goods from India where India has absolute
advantage and so does India. The economies of both the countries depend on the trade between
them. Both the countries mission is to meet the needs of the people of those countries. By
trading, the products both the countries can maximize the wealth of their countries. The
companies of these countries are facilitated with maximum profit. And the people can achieve
their maximum satisfaction level because of the trade between Bangladesh & India.

LITERATE REVIEWS

 Waheeduzzaman(2002) observed that restrictions have been reduced and incentives are
many in this region. Yet then, concern about the regulatory framework, bureaucracy,
marketing infrastructure is there. Piecemeal approach may not take the big picture into
account.

 World Bank (2006) commented that the static simulation results show export expansion
for India in all products except garments. In these instances, consumer welfare gains
 Comparison and contrast between the Strategic trade and economic relation of 3
Bangladesh and India.

far outweigh losses in government revenue or producer surplus in Bangladesh. But

these gains could be extremely limited unless infrastructure and administrative
capacities are expanded at the borders.

 Basu and Datta(2007) depicted that Bangladesh should follow an appropriate exchange
rate policy and aim at diversification at export structure in order to avoid Dutch disease
and to reduce bilateral trade deficit.

 Gazi et al.(2014) observed that Indian manufacturing sector is strong and have
diversified product support, This advantageous position and location advantage attract
Bangladesh business community to import capital machinery, raw materials and
finished goods from India causing high import growth.

 Sobhan (viewed on 2016) argued that as India emerges as a global power and its
economic ties deepen with Western, countries as well as developing countries,
current trends suggest that the current focus of India on its Look East Policy would gain
further reaction. Greater initiatives are required by both countries to replace the
acrimonies and contentious relationship of the past with a relationship based on mutual
benefit.

 Hindustan Times (2015) found that the trade volume of $6.5 billion is impressive but
of this, Bangladesh's exports to India account for a mere $500 million. India needs to
narrow the gap.

 India's plans to invest more in Bangladesh need to be speeded up. There is a growing
feeling among sections in Bangladesh that the growing trade only benefits India. For
India, Bangladesh plays a key role in its sub-regional connectivity plans which include
Nepal and Bhutan.

 Ministry of Commerce, GOB (2016) observed that Trade between India and
Bangladesh could almost double to $10 billion by 2018, if non-tariff barriers and
infrastructure related-issues are resolved,
 Comparison and contrast between the Strategic trade and economic relation of 4
Bangladesh and India.

 Rahman (2016) commented that under SAFTA, trade can benefit Bangladesh if trade
creation outweighs trade diversion. Trade creation is feasible only when trade policies
pursued by both countries are conciliatory in nature. Bangladesh requires more
sympathetic outlook from India because of the perpetual imbalance in trade.
From the study we observe that there is a research gap, which through our study we
want to overcome.

Objectives of the study

The study underscores the trend, structure and current picture of Bangladesh-India trade with
an econometric view. The aim of the study is to sketch out:
 The current export situation of Bangladesh with India
 The current import situation of Bangladesh with India
 Existing scenario about Bangladesh and India trade relationship
 Some suggestions for win –win situation in trading for both the countries.
 Comparison and contrast between the Strategic trade and economic relation of
Bangladesh and India.

Methodology and limitation of the study

Time period of the data collection was 2015 to 2019 and before for clarify some key points.
Based on secondary data collected from daily newspaper and various sources. No interview of
company executives involved. The findings of the study are reliable as the authentic sources of
data. The major limitation of the study is that no primary data is involved.

Our respected teacher Dr. Muhammad Joynul Abediin asked us to select Bangladesh and one
random country to make a comparison and also contrast between the Strategic trade and
economic relation of these two countries. We have to apply the theories and concepts that we
covered in our Strategic Management course to complete the assignment. Due to the
availability of resources and data, India is selected to compare with Bangladesh for the purpose
of this assignment.

To complete this assignment different strategies have been tried to analyse what these two
countries have been following. Today’s trade scenarios, trade theories, the effects of the WTO
 Comparison and contrast between the Strategic trade and economic relation of 5
Bangladesh and India.

policies, the strategic management of this type of trade, and how the macro environmental
factor affects this trade and also the international human resource management discussed here.
The description of all the above-summarized information is written in the assignment from
which one might be able to get a good idea about the Strategic trade and economic relation
between Bangladesh & India.

COUNTRY PROFILE (BANGLADESH)

Geography

Location: Southern Asia, bordering the Bay of Bengal,

between Burma and India

Area: Total: 147,570 km2(56,980 sq mi) (92nd)

water: 6.4 %

Population

Population: 163,350,274 (2019)

Population growth rate: 1.03% (2019)

Literacy: Total population: 72.9 as of 2017

Male: 75.7%
Female: 70.09%

Economy

GDP (purchasing power parity): $831.750 billion (2019)

GDP (official exchange rate): $314.656 billion (2019)

GDP – real growth rate: 7.3 % (2018/19)

GDP – per capital (PPP): $4992 (2019)

GDP – composition by sector: Agriculture: 14.23%

Industry: 33.66%
Services: 55.11% ( FY2018)

Inflation rate (consumer prices): 5.564% ( FY2018)

 Comparison and contrast between the Strategic trade and economic relation of 6
Bangladesh and India.

Export: $46.87 Billion (2018/19)

Agriculture – products rice, jute, tea, wheat, sugarcane, potatoes,

tobacco, pulses, oilseeds, spices, fruit; beef,
milk, poultry

Industries: cotton textiles, jute, garments, tea processing,

paper newsprint, cement, chemical fertilizer,
light engineering, sugar, lether

Exports – commodities: garments, jute and jute goods, leather, frozen

fish and seafood

Currency (code): taka (BDT)

Others

Nationality: Bangladeshi

Country name: conventional long form: People’s Republic of

Bangladesh

Fiscal year: 1 July – 30 June

COUNTRY PROFILE (INDIA)

Geography

Location: Southern Asia, bordering the Arabian Sea and

the Bay of Bengal, between Burma and
Pakistan

Area: total: 3,287,263 sq km

land: 2,973,190 sq km
water: 314,400 sq km

Population

Population: 1,366,417,754 (2019) (2nd)

 Comparison and contrast between the Strategic trade and economic relation of 7
Bangladesh and India.

Population growth rate: 1.02 (2019)

Literacy: Total population: 74.04%

Economy

GDP (purchasing power parity): $ 11.468 trillion (2019)

GDP (official exchange rate): $2.972 trillion (2019)

GDP – real growth rate: 7.2% (FY2019)

GDP – per capital (PPP): $8484 (2019)

GDP – composition by sector: Agriculture: 15.87%

industry: 29.73%
services: 54.40% (2019)

Inflation rate (consumer prices): 3.05% (2019)

Export: $330 Billion (2018/19)

Agriculture – products rice, wheat, oilseed, cotton, jute, tea, sugarcane,

potatoes; cattle, water buffalo, sheep, goats,
poultry; fish

Industries: textiles, chemicals, food processing, steel,

transportation equipment, cement, mining,
petroleum, machinery, software

Exports – commodities: textile goods, gems and jewellery, engineering

goods, chemicals, leather manufactures

Currency (code): Indian rupee (INR)

Others

Nationality: Indian

Country name: conventional long form: Republic of India

conventional short form: India

Fiscal year: 1 April – 31 March

 Comparison and contrast between the Strategic trade and economic relation of 8
Bangladesh and India.

TRADED PRODUCTS
 India is a supplier of staple foods such as rice and live animals which helps keep their
prices affordable for the masses of Bangladesh.
 Most of differences are of sharing water resources between the two countries.
 On the other hand, Bangladesh is a supplier of Jute, RMG products to India.

Overall traded products of two countries

Automobiles & Auto Parts Diesel engines Tire

Chemical Products Activated Carbon Sulphuric acid

Construction Railing Fitting in Timber door metal Brass

Electrical Supplies Wire Battery

Electronic Components Hand phone Led digit display

Energy & Petroleum Charcoal

Neckties & Fashion Aloe Vera Juice Green Tea Beverage

Accessories
Food & Beverages

Furniture & Decoration Silver Bed Wooden chair

Crafts & Gifts Flower Ring Valentine Gift

Health & Medical Products Aloe Vera Cream Man’s Fairness Cream

Household Appliances Gas Stove With Oven Air Cooler

Household Goods Apron Bath Mats

Lights Lamps Garden Lamp

Bags Cotton Bag Hand Bag

Security Network Camera IP Camera

Footwear Bat
Sport & Entertainment
 Comparison and contrast between the Strategic trade and economic relation of 9
Bangladesh and India.

Telecommunication Hand Phone

Leather & Textiles Bed Spreads Acrylic

Jewellery, Watches & Diamond Jewellery Fashion Jewellery

Glasses

Toys & Dolls Dolls and Toys

Transport Bicycle Oil Container

Shipping Container

MACRO ENVIRONMENTAL FACTORS

There are some major forces in the company’s macro environment. These forces always have
remarkable effect on trade in any country. So a country’s macro environment factors are needed
to be considered while doing business; especially when the trade is between two countries.

The forces of macro environment are uncontrollable forces. But still these elements must be
adapted.

Factor Could include:

Political e.g. EU enlargement, the euro, international trade, taxation policy

Economic e.g. interest rates, exchange rates, national income, inflation,

unemployment, Stock Market

Demographic e.g. ageing population, attitudes to work, income distribution

Technological e.g. innovation, new product development, rate of technological

obsolescence

Natural e.g. global warming, environmental issues

Cultural e.g. forces that affect a country’s basic values, perceptions, preference
and behaviour.
 Comparison and contrast between the Strategic trade and economic relation of 10
Bangladesh and India.

Political Environment
The political environment consists of laws, government agencies and pressure groups that
influence or limit various organizations and individuals in a country. The laws affect the major
trends of political environment in a country. Some organizations have made some rules and
regulations for trading. These organizations include WTO, SAFTA, and NAFTA and so on.
Trade is highly affected by the rules and regulations of these organizations.

The political condition is not under control of any country. Still, India has stable political
environment compared to Bangladesh.

Economic Environment
Trades require consumers’ demand, buying power, income, wealth, and willingness to pay and
also people. The economic environment consists of factors that affect consumer purchasing
power and spending patterns. Nations vary greatly in their levels and distribution of income.
Some countries consume most of their own agricultural and industrial output.

Bangladesh has efficiency in agricultural sector and India has efficiency in industrial sector
relative to each other. Changes in income and change in consumer spending pattern are the
major economic trend. Economic environment is controlled in India compared to Bangladesh.

Demographic Environment
Demography is the study of human population in terms of size, density, location, age, gender,
race, occupation and other statistics. This demographic environment is important as it involves
people and people make up the markets. So, demographic environment is very important for
any type of trade within or outside the country.

In case of trade between Bangladesh & India, demographic environment should be cautiously
considered. Because these trades are dependent on the change in age structure of the population
and all other factors related to the population. Trade is entirely dependent on the people or
population of a country. This environment is almost uncontrollable for both the countries.
 Comparison and contrast between the Strategic trade and economic relation of 11
Bangladesh and India.

Technological Environment
The technological environment is the most dramatic force that is shaping the destiny of a
country. New technologies create new markets and opportunities. The country that is
technologically advanced can easily cope up with the changes in any type of environment.
India is very much advanced in technology compared to Bangladesh. So India has comparative
advantage and control over Bangladesh in the telecommunication sector.

Natural Environment
The natural environment involves the natural resources that are needed as inputs for producing
outputs, which are traded later. If the natural resources are scarce in any country, the production
will be less for sure. The major trends of natural environment are shortage of raw material,
increased pollution, increased government intervention. Bangladesh has some control over
natural resources. Only because of shortage of money, these cannot be utilized properly.

Cultural Environment
The cultural environment is made up of institutions and other forces that affect a country’s
basic values, perceptions, preference and behavior. This environment shows long- term trend
toward a lessening trust of institution, increasing patriotism, greater appreciation for nature, a
new spiritualism and the search for more meaningful and enduring values. The cultures of the
two countries are similar; in particular India’s West Bengal state and Bangladesh are both
Bengali speaking.

TRADE THEORY
When we talk about the trade between two countries, there must be application of some trade
theories. In case of Bangladesh & India, there are also some trade theories that are applied. In
case of Trade between Bangladesh & India, the Country- based theory, i.e. Absolute
Advantage, Comparative Advantage, Rivalry theory and Endowment…. are applied. And in
some of these trades, Firm-based theory is not that much applicable.
 Comparison and contrast between the Strategic trade and economic relation of 12
Bangladesh and India.

COUNTRY-BASED THEORY
 Absolute Advantage
When one country is fully efficient in producing one product, in that product’s production,
the country has absolute advantage. In Ready-made garments (RMG) business,
Bangladesh has absolute advantage, when India has absolute advantage on industrial
product.

 Comparative Advantage
When one country’s efficiency rate of producing a product is much higher than another
country’s efficiency rate, then this highly efficient country has Comparative advantage.
Bangladesh has comparative advantage on the agricultural sector compared to that of
India.

 Rivalry Theory
When one country has some competitive advantage over another country, this is known
as Rivalry Theory. This competitive advantage includes technological advancement,
differentiation strategies, and operational excellence and so on. So India in producing
many products can also be fall under this theory. India has competitive advantage on
toiletries, cosmetics, food items, electrical alliances and telecom sectors.

 Relative Factor Endowment

Bangladesh has many natural resources that can be utilized to have a tremendous
production. Mainly in the agricultural sector, Bangladesh has many resources that should
be utilized properly. In addition, India does not have that many natural resources but they
can utilize their limited resources in a very effective manner.

STRATEGY
Strategy is the action that managers must take to attain the goals of the firm. We have chosen
mainly four products for finding out the strategic implication. These products are:
 Shipping container from India
 Cosmetics & toiletries from India
 Leather product of Bangladesh
 Ready-made garments of Bangladesh
 Comparison and contrast between the Strategic trade and economic relation of 13
Bangladesh and India.

Businesses use Strategic Alliance to:

 achieve advantages of scale, scope and speed increase market penetration
 enhance competitiveness in domestic and/or global markets
 enhance product development
 develop new business opportunities through new products and services
 expand market development
 increase exports
 diversify
 create new businesses
 Reduce costs.

STRATEGY BY CHOICE
 International Strategy:
Create value by transferring valuable core competencies to foreign markets. Weak
pressure for local responsiveness and cost reduction is needed to be effective. Here,
Shipping Container falls under this strategy.

 Multi-domestic Strategy:
Main aim is to maximize local responsiveness. Customize product offering, market
strategy including production & R&D. Here Leather products and cosmetics falls under
this strategy.

 Transnational Strategy:
Firms aim to reduce cost, transfer core competencies while paying attention to pressure
for local responsiveness. Ready-made garments (RMG) fall under this strategy.

CHOOSING AN APPROACH
There can be three different IHRM orientations in MNCs: Adaptive, extortive and integrative.
These orientations determine the company’s overall HR approach to managing the tension
between integration or the pressure for internal consistency and differentiation or the pressure
for external consistency.
 Comparison and contrast between the Strategic trade and economic relation of 14
Bangladesh and India.

 An adaptive IHRM orientation is one in which each affiliate develops its own HRM
system, reflecting the local environment.
 The second, an extortive IHRM orientation is one in which the parent firm’s HRM
system is being transferred to its different affiliates. This approach emphasizes
integration across all affiliates, developing a highly internal consistent MNC.
 The third, an integrative IHRM orientation attempts to take ‘the best’ HRM approaches
and uses them throughout the organization in the creation of a worldwide system. The
focus here is on substantial global integration with an allowance for some local
differentiation.
 The three orientations of an adaptive, extortive or integrative approach represent three
basic choices for IFIR managers, reflecting an overall approach towards IHRM.
However, in practice, IHR managers may have the option to choose for a mix of the
three approaches. Because the LHR function consists of several tasks and is oriented
towards different types of employees, choices may differ for the different tasks or
employee groups.

 Countries that trade together can choose the mixture of these three approaches to be
successful by sharing core competencies and innovative ideas with each other.
 Necessary Skills and Abilities for International Manager
 When an expatriate goes for work in a foreign country, he needs to have adaptability
skill; so that he can easily cope up with that culture.
 An expatriate should learn the language of that foreign country to mix up with the
foreign people.
 When Bangladeshi labour goes to India or an Indian labour is hired for Bangladesh,
those expatriates face many difficulties that include:

 Differing Culture
 Legal systems of the countries
 Training & development in an international firm is more complex than
a domestic firm
 Compensation system is also different
 Comparison and contrast between the Strategic trade and economic relation of 15
Bangladesh and India.

Managing & Selecting Expatriates

For both India and Bangladesh, it’s very much important to consider the cost while it’s a matter
of IHRM.
 Bangladesh selects expatriates from India mainly on technical competence.
 India selects expatriates from Bangladesh based on functional skill and ability of acclimate.

WTO (WORLD TRADE ORGANIZATION)

WTO plays a key role in the trade between Bangladesh & India.
 It encourages trade between member nations,
 Administers global trade agreement and
 Resolves disputes when they arise.

WTO mainly focuses on

 Agriculture
 Textile & Clothing
 Trade related investment measure
 Dispute Settlement

Principles of the trading system:

 Transparency
 Non-discrimination within countries
 Free trade principle: Optimal utilization of resources
 Decreasing trade barrier
 Fair competition

These policies are applicable for trade between Bangladesh & India. Both the countries have
to maintain this.Bangladesh will sign a deal with India on duty-free export of eight million
pieces of Bangladeshi readymade garments (RMG) to India annually. A meeting of the
country’s council of advisers of Tuesday approved a proposal for signing the Memorandum of
Understanding on duty-free import of the RMG products by Indian government through Tariff
Rate Quota (TRQ) system under the purview of the South Asia Free Trade Agreement
(SAFTA).
 Comparison and contrast between the Strategic trade and economic relation of 16
Bangladesh and India.

A meeting of the country’s council of advisers of Tuesday approved a proposal for signing the
Memorandum of Understanding on duty-free import of the RMG products by Indian
government through Tariff Rate Quota (TRQ) system under the purview of the South Asia Free
Trade Agreement (SAFTA).

COMPARE AND CONTRAST BETWEEN BANGLADESH AND INDIA

Criteria Bangladesh (2019) India (2019)

1. Export $ 46.87 Billion $ 330 Billion

2. Import $ 46.02 Billion $ 514 Billion

3. FDI inflow $ 14.62 Billion (2017) $ 386.35 Billion (2018)

4. Inflation 5.564% 3.05%

5. Current Account $ -5.322 Billion (2017) $ - 57.2 Billion

6. Revenues $ 24.36 Billon (FY 2018) $39.29 Trillion (FY 2018)

Trade Agreement
The first indo-Bangladesh trade agreement viz., ‘ Trade Agreement between the Government
of India and the Government of the Peoples’ of Bangladesh’ signed on March 1972 provides
for border trade for the people within the 16-kilometer belt of the border between West Bengal,
Assam, Meghalaya, Tripura and Mizoram on one hand and Bangladesh on the other.2 The
Indo-Bangladesh trade treaty has provided for 'border trade' between the two countries,
whereby permits would be issued to people living on either side of the border.
Persons holding such permits would be allowed to carry across the border personal
consumption goods in specified quantities and money up to a value of Rs 100 only once a day
in each direction or any two specified days of a week and only through some specified routes.
As 95 per cent of the population of Bangladesh lives in non-urban centres, almost the entire
population along the border would be in a position to take advantage of the provisions.
However, in view of the stringent limits placed on the quantum of goods and cash that could
be taken across the border, traders would find it difficult to operate. In all probability, goods
thus traded will travel beyond the 16 km limit even though people residing only within the 'belt'
are permitted to carry on the border trade. Moreover, in the present unsettled conditions in
 Comparison and contrast between the Strategic trade and economic relation of 17
Bangladesh and India.

Bangladesh and the inadequate administrative machinery, the government would find it
difficult to delimit the border trade to people living in the 16 km limit. After that, a bilateral
trade agreement between Bangladesh and India was signed in 1980 and was later amended
and formalised in March 2006. This came into force on April 1, 2006 and was valid till March
2009.This agreement provided for expansion of trade and economic cooperation, making
mutually beneficial arrangements for the use of waterways, railways and roadways; the passage
of goods between two places in one country through the territory of the other; exchange of
business and trade delegations and annual consultations to review the working of the
agreement.

Hurdles in Indo-Bangladesh Trade

Two countries start trading with each other when they perceived clear comparative advantages
in exporting products required by each other. India has a ‘revealed comparative advantages’ in
many goods that are required by Bangladesh. This is one reason why Indian exports to
Bangladesh have been growing over the years. On the other hand, Bangladesh lacks a similar
‘revealed comparative advantages’. As a result, its products have not been able to find an easy
market in India. Trade is also facilitated when two countries have a complementarity in their
products. This complementarity has to be both of products as well as quantity. India has the
capability to meet the import requirements of Bangladesh. But in most cases, the reverse is not
true. Thus, there exists a case of partial complementarity or one way complementary between
the two countries. In the case of sea borne trade certain products have to go to specific ports
for customs clearance. This has given rise to bootleg smuggling which bypasses custom posts
altogether or even “official smuggling” involving bribes to customs and other officials on both
sides of the border. Trade between the two countries has also been constrained by the lack of
trans-shipment/transit facilities between Bangladesh and India. Although some policy
decisions have been taken in this regard, but progress on ground is still awaited. Trans-
Shipment through Bangladesh is expected to benefit India by cutting the distance between
India’s northeast and the mainland, thus facilitating the transport of goods. These goods can
also be expected through Chittagong Port. This will also bring in significant amount of revenue
to Bangladesh as port fee.
 Comparison and contrast between the Strategic trade and economic relation of 18
Bangladesh and India.

Trade Deficit
The nature of Indo-Bangladesh relations has created a trade deficit for Bangladesh. The huge
trade deficit is a most important concern for Bangladesh with regard to bilateral trade. The
annual deficit shows a rising trend. It went up from $ 166.69 million to $2.48 billion in 2009
with some major fluctuations during the second half of 1990s. It, however, peaked in 2008 at
$3.18 million. Apart from an exponential trend in the annual deficit, the cumulative trade deficit
has touched $24.79 billion over the last three decades. In addition, to its trade deficit
with India, Bangladesh’s trade deficit with the world has also increased significantly over the
years. From only 2.6 per cent in 1980, it increased to as high as one- third of Bangladesh’s total
trade deficit. Recently some initiatives have been taken by India to reduce the huge trade
imbalance. During his visit to Bangladesh, the Indian Commerce Minister said that India has
agreed to increase the import of readymade garment products from the existing 8 million to 10
million pieces. Bangladesh, however, demanded that this be increased to 20 million pieces.

Tariff and Non-tariff Barriers

In Bangladesh there is a general perception that tariff and non-tariff barriers (NTBs) imposed
by India significantly restricts the market access of Bangladeshi products to India compared to
that of Indian products in Bangladesh. It has been calculated that India imposes a higher
average tariff on Bangladesh products compared to the tariff imposed on Indian products in the
Bangladesh market. Out of ten board products groups, six products of Bangladesh attract higher
applied average tariffs in the Indian market. These are (i) meat, fish, dairy products, etc.; (ii)
cereals, oil, sugar, etc.; (iii) edible preparations, beverage, tobacco, etc.; (iv) pharmaceuticals,
fertilizers, plastics; (v) glass, metal products, etc.; and (vi) mechanical and electrical products.
Bangladesh’s exports to India, however, have not been constrained by tariff protection. India
has been giving Bangladesh extensive tariff preferences under SAPTA (South Asia Preferential
Tariff Arrangement, which was a precursor of SAFTA) and many of the tariff barriers
applicable to other countries are not imposed on Bangladesh exports. This shows that India’s
trade policy has not been discriminatory towards Bangladesh and that the slow growth of the
latter’s exports to India’s due to other factors such as a low degree of complementarity and
weak comparative advantages. India has dismantled most of its tariff protection regime for
industrial goods. It has also brought down its general tariff levels and Indian markets are full
of imported goods from all over the world.
 Comparison and contrast between the Strategic trade and economic relation of 19
Bangladesh and India.

Free Trade Area

There have been some strong arguments for regional economic integration in South Asia, as it
will generate significant intraregional trade and welfare gains for South Asian Countries. The
potential benefits expected from South Asian Free Trade Area (SAFTA) and other regional
trading arrangements in South Asia are minimal because there are limited complementarities
in the region as the main trading partners of individual South Asian countries are in the West.
It is also alleged that a Regional Trading Arrangements (RTA) in South Asia will lead to
substantial trade diversion rather than trade creation and it may become a stumbling block for
multilateral trade liberalisation. Keeping these in mind, it is imperative for Bangladesh to look
for some other alternatives in order to reduce its mounting trade deficit with India. One of such
options would be to go in for bilateral Free Trade Agreements (FTAs). Two scenarios can be
considered in this regard: (i) FTA with India to reduce trade imbalance. (ii) FTA with another
major trading partner in South Asia to reduce trade deficit with India. As per Hossain and Kabir
(2011), the application of the partial equilibrium model in the case of Bangladesh- India FTA,
would lead to a substantial increase in exports between them, while Bangladesh’s imports from
its other neighbours would decrease to some extent. The result of the Bangladesh – India FTA
in Global Trade Analysis Project (GTAP) model reveal that by entering into a bilateral FTA,
Bangladesh would come up with an overall positive trade balance effect of $ 108 million while
for India it would be about $97 million. It indicates that an FTA would exert a positive influence
on the trade balance of both countries.

Trade Facilitation Measures

Both India and Bangladesh are reluctant to implement trade facilitation measures. One of the
key areas for the trade facilitation is to improve the efficiency of customs authorities to
facilitate efficient management of cross border trade. Customs clearance procedures are
generally cumbersome and time consuming. However, some changes have taken place because
of customs automation, which has improved the overall state trade facilitation.10 The countries
also suffer from inefficient ports (sea and land based) and airports, which lead to serve
congestion and delay. Most of the land customs stations have been found to be inefficient; only
one station in India (Raxaul) has recently been found to be efficient. Bangladesh also suffers
from congestion and inefficiency at major ports, especially Chittagong (sea) and Benapole
(land), while affects its trade with India and other parts of the world.
 Comparison and contrast between the Strategic trade and economic relation of 20
Bangladesh and India.

Recommendation
 Further trade liberalization and for adopting a fast track approach to tariff concessions
to rectify the trade imbalance, which is heavily in India’s, favor.
 The focus of bilateral cooperation should be on Indian investment in Bangladesh.
 The laws and incentives for foreign investment in Bangladesh were among the most
attractive in the world and Indian investment in the country would largely help reduce
Dhaka’s trade deficit with India.
 There is a wide gap between the two countries with India’s exports of $1,100 million
to Bangladesh and Bangladesh’s exports of only $70 million to India. So it should be
taken into concern.
 To promote exports from Bangladesh and reduce the trade gap, there is need to revise
and relax the rules of origin. WTO can play a tremendous role in this regard.
 It can be recommended that India should provide zero tariff access to Bangladesh to
reduce the trade gap.
 Bangladesh should opt for selling its services, allowing Indian traders to use its roads,
waterways and ports to fill the gap in trade.
 Transit facilities for India would immensely benefit both countries. Not using
Bangladesh’s port facilities to transport goods to its northeastern states was costing
India about Rs 8,000 crore annually. Of the estimated 3.5 million tons of goods
transported to the northeastern states from the rest of India, less than one per cent passed
through Bangladesh.
 Further easing of visa restrictions and promoting tourism and travel between the two
countries.
 Both countries recommend up gradation of infrastructural facilities, including
 provision of improved rail links,
 creation of warehousing facilities,
 easier cross-border movement of vehicles and
 Improved shipping infrastructure.
 Comparison and contrast between the Strategic trade and economic relation of 21
Bangladesh and India.

Conclusion
All the countries want to be wealthy and economically developed to enjoy the moment when
anything seems possible. And that’s just what trade between two countries gives.

Trade between Bangladesh & India can be successful, if the trade barriers are reduced. The
focus of bilateral cooperation should be on Indian investment in Bangladesh. Indian investment
in the country would largely help reduce Dhaka’s trade deficit with India. So, Indian trade with
Bangladesh should take place in a mutual manner.
Justification

From the analysis, we can say that trade between two countries can be very much lucrative, if
there is less trade barrier. Moreover, the trade between Bangladesh & India can also be
successful. But there exists some lacking. These are:

 There is a wide gap between the two countries with India’s exports of $1,100 million
to Bangladesh and Bangladesh’s exports of only $70 million to India.
 The inflation rate of Bangladesh is also high compared to India.
 Although there are many types of trade are being done, there still exists a trade
imbalance between these two countries.
 Should adopt an approach to tariff allowance to resolve the trade imbalance, which is
heavily in India’s favour.

These two countries are very successful in trading different products since many years and we
are hopeful that they will continue their success if they try to implement their innovative and
co-operative ideas.
 Comparison and contrast between the Strategic trade and economic relation of 22
Bangladesh and India.

REFERENCES

 Jayshree, Sengupta, “Time to boost India-Bangladesh Trade and Economic Relations,”

Observer Research Foundation, Issue Brief No. 10, August 2007.

 Das Kumar, Samir, Border Economy of India’s Northeast” World Focus, vol.XXXIV,
No.12, December 2013, P.36.

 Islam, Nurul, Indo-Bangladesh Economic Relations: Some Thoughts, Economic and

Political Weekly September 4, 2004, pp. 4069-4071.

 “Trade Agreement Between India and Bangladesh”, at hppt:// commerce.nic.in/trade/India-

BangladeshTrade-Agreement.pdf.

 Kumar, Anand, India-Bangladesh Trade: Problems and Prospects, in Smruti S Pattanaik,

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 Sun Daily, Dhaka, 24 April 2011.

 Kumar, Anand, op, cit., pp.115-116.

 Sun Daily, Dhaka, 24 April 2011; Dhaka Holiday, 18 November 2011.

 M, I, Hossain and M, Kabir, “Export Promotion and External Issues: Present Status and
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 https://www.dhakatribune.com/bangladesh/2018/09/06/minister-literacy-rate-rises-to-72-9

 https://countryeconomy.com/demography/literacy-rate/bangladesh

 https://en.wikipedia.org/wiki/Bangladesh

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 https://en.wikipedia.org/wiki/India

 https://en.wikipedia.org/wiki/Economy_of_Bangladesh

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 https://www.worldometers.info/world-population/india-population/

 https://en.wikipedia.org/wiki/Literacy_in_India