Bangladesh, which is prominent among the second line of emerging Asian economies with sustained average growth rate of more than 7% for the last ten years, has become an attractive destination for trade and investment in the South Asian region. PM Narendra Modi’s visit to Dhaka this Friday and Saturday could open up opportunity for additional Indian investments in Bangladesh.

Bangladesh is set to graduate from the Least Developed Country (LDC) status to a developing country by 2024. It provides great opportunity for Bangladesh to enhance its bilateral ties with India and joint collaboration in various sectors that would ease Bangladesh’s transition process.

The net Indian investment in Bangladesh in FY 2020 was USD123.17 million. India occupied eight position with respect to investment in Bangladesh. Major sector that attracted Indian investment in Bangladesh was power/energy sector followed by banking, textile and wearing and telecommunications. Bangladesh exported goods worth USD 1.09 billion to India and imported USD 5.77 billion worth of goods in the fiscal year 2019-20

India is the biggest development partner of Bangladesh and development is the key pillar of bilateral cooperation. India began institutional assistance with the Line of Credit (LoC) in 2010 to Bangladesh for its various developmental needs. Since then, India has offered nearly $7.36 billion (in three LoCs) to execute projects, mainly in transport & communication sectors.

Small Development Projects (SDPs) constitute an active pillar of India’s development assistance. India has funded a number of SDPs including construction of student hostels, academic buildings, cultural centers and orphanages in Bangladesh and some are currently being implemented.

According to a recent World Bank report, titled ‘Connecting to Thrive: Challenges and Opportunities of Transport Integration in Eastern South Asia’, smooth transport connectivity between India and Bangladesh has the potential to increase national income by as much as 17% in Bangladesh.

After analysing the Bangladesh-Bhutan-India-Nepal Motor Vehicle Agreement (BBIN-MVA), the report suggested Bangladesh to prioritize infrastructure investments in the country to maximise trade & investment benefits. India-Bangladesh bilateral trade accounts for only about 10% of Bangladesh’s trade and 1.0% of India’s trade. According to the report, all districts in Bangladesh would benefit from integration, with the eastern districts enjoying larger gains in real income.

States bordering Bangladesh such as Assam, Meghalaya, Mizoram, and Tripura in the Northeast, and West Bengal on the west, and states further away from Bangladesh such as Uttar Pradesh and Maharashtra would also gain huge economic benefits from seamless connectivity.

The World Bank’s earlier reports suggested that Bangladesh’s exports to India could increase by 182% and India’s exports to Bangladesh by 126% if both the countries sign a free trade agreement. Improving transport connectivity between the two countries could increase exports even further, yielding a 297% increase in Bangladesh’s exports to India and a 172% increase in India’s exports to Bangladesh.

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