EMERGING AND CHANGING TRADE RELATIONS

BETWEEN INDIA AND BANGLADESH:DATA

ANALYSIS SINCE 2010

OVERVIEW

Bangladesh and its neighboring country India has had an enormous and steady
exchange deficiency throughout these years (since 2010). According to how
Bangladesh puts it in his words the “long proven relations with India have been
marked by humanity, heritage, dynamic partnership and exchange at the highest
level. Complementing the G2G initiatives, the two nations offer untapped potential to
maximize on bilateral synergy. As a strategic partner and major source of FDI, India
has been financing many of our development projects in power, railways, road and
transport, health and technical education in addition to investments in textiles,
banking and telecommunications.”1

This paper has tried to investigate the patterns of exchange between the two nations in
question, utilizing examples and both totaled, dis-aggregated information. All the
more explicitly, this research paper aims at inspecting the general situation of the two
nations in worldwide exchange, investigating the general pattern in fares to and
imports from India, and the pattern in exchange balance utilizing total level
information. Further, using some dis-aggregated information, investigation is led with
respect to the item creation of Bangladesh fares to and imports from India by major
item classifications. Also, the paper gauges uncovered relative favorable position
(RCA) to reflect between industry exchange.

To conclude, this research paper finds that India has a lot more grounded position in
the worldwide exchange versus Bangladesh and that India firmly rules Bangladesh in
two-sided exchange or the bilateral trade, bringing about an exceptionally huge and
diligent exchange shortfall with India. At a dis-aggregated level, the paper finds that
Bangladesh has relative preferred position in certain items though India has near
preferred position generally in more item classifications.

1
https://economictimes.indiatimes.com last accessed on 3rd April 2020.

1
“Keywords: Exports, Imports, Revealed comparative advantage, Trade balance” 2

INTRODUCTION

A country on a slow, gradual rise Bangladesh is a nation which is working towards

creation of economy in South Asia whereas on the other hand India is a large and a
nation which has its domination in the South Asia from a very long time known for its
population, land areas, other assets which from regular blessings, exercise and
development, and economy’s size is concerned which lies in contrast to Bangladesh
and other of its(India) neighboring countries. With significantly less populace
thickness (0.36 times) than Bangladesh, India almost has everything and India has
approximately twice (1.83 occasions) the degree of lifestyle which can be estimated
by the expanse of per capital GDP across the globe PPP. Throwing light on some
other highlighters, India and Bangladesh have rigid likability, example for the same
can be, in regards with populace progress charge (multiple times), authentic GDP in
PPP$ progress charge (just 1.15 occasions), more in the list, the CPI build upon
expansion charge (0.95 occasions) (creator computations which are dependent on
world Bank’s 2018 information).

This project inspected an overall situation between the two nations in worldwide
exchange, investigates the general pattern in fares to and imports from India, and the
pattern in exchange stability utilizing total level information. Further, using some dis-
aggregated information, examination is directed with respect to the product creation
of Bangladesh fares to and imports from India by significant item classes. Moreover,
the paper gauges uncovered near bit of leeway (RCA) to reflect between industry
exchange dependent on relative bit of leeway. The paper utilizes information gathered
from different nation level and universal information sources. Both total level and dis-
aggregated level information were used in the investigation. The paper is of basic
significance to political pioneers and approach creators in the two nations, including
scientists, think tanks, scholastics, and different worldwide associations.3

2
https://www.athensjournals.gr/business/2019-5-2-2-Islam.pdf last accessed on 3 rd April
2020.

3
Professor, University of Houston-Downtown, USA.

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INDO-BANGLA TRADE ALALYSIS BY BILATERAL AGGREGATE TRADE

Table 1. “Bangladesh-India Trade, Trade Balance and Trade Growth: 2009-2016”4

When we read through this particular part, the bilateral exchanges of Bangladesh with
India (the question remarks reiterate ration of these two countries) can be pondered
upon on the basis of the lump-sum exchange or by and large exchange. Significantly
pointing out, it can be divided into for the progress, also the significant marking
concerning in sends out, imports, absolute exchange (trades in addition to imports)
and their progress rate, trades as a percentage (%) of all out exchange, exchange
parity and its progress, in regard to others. “The detail study comes to end over late years
over the time period of 2009-10 to 2015-16. The discoveries or figurings’ are accounted for
in Table 1 using recipes given by conditions through introduced prior.” 6

4
https://www.athensjournals.gr/business/2019-5-2-2-Islam.pdf last accessed on 3 rd April
2020.

5
DCCI (2016)-Dhaka Chamber of Commerce and Industries, Dhaka, Bangladesh and author
calculations last accessed on 3rd April 2020.
6
Table 1 mentioned in the paper.

3
INTREPRETATION

India is the country which has been favored between the two countries when we talk
of bilateral trade balance. Considering import taxes were removed in totality by India
on goods of Bangladesh back in 2011, any remarkable growth of exports from
Bangladesh to India however cannot be seen, whereas Indian exports to Bangladesh
have grown even more. While the products coming to Bangladesh from India have
been appreciated, but the growth on the other side should also take place. Hence,
Indian investors are being encouraged who in Bangladesh’s case are the producers, to
look into the aspect of exporting the branded Indian products back to India.

BANGLADESH’S TRADE POLICIES AND IMPLICATIONS FOR INDO-

BANGLA TRADE

An opportunity has been provided for the enhancement of Indo-Bangla trade by the
consistent changes in Bangladesh’s trade policies. Significant growth has been made
which is inclusive of specific pint- sized and vindication of the limits called tariffs,
taking down of related to the trade number related obstructions, unifying exchange
charges and moving to the controlled and the organized floating rate of exchange
ruling. Inspite of several movements from its way, the liberalization or freedom of
trade program is continuing to grow and develop with clock.

Business is mostly dominated by unidirectional flow then no matter what affect the
liberal ruling has on two ways Indo-Bangla trade, where Indian exports to Bangladesh
have been favored. It might also affect the official trade taking place between these
two nations, which, if accounted in totality, is capable of contradicting the
characterization. However, to calculate the effect on the proceedings relating to the
freedom on unofficial business or between the two countries no information has been
present lately. Excluding India, Bangladesh has maintained a remarkable progress of
exports through focusing on a little market. In this decennial, exchange of the best 15
goods of the neighboring nation have grown at a pacing rate as compared to the
development across the globe in the case of the exchange of the talked goods. This
table talks about the representation of the average progress charges of the exchange of
the best 15 goods by the neighboring nation in the due time of 2001-11 and the
4
representation of the average progress of the exchange across the globe of the similar
products in due time of this period. We can also infers combining of neighboring
nation’s exchange power in a product which exists don’t have a remarkable existence
when India is concerned. As a consequence, India accounts for approximately 2
percent as a final market meanwhile the European Union and the United States of
America together account for approximately two-thirds of Bangladesh’s lump-sum
export. Ready-made garments make up almost the fourth-fifths of nation’s lump-sum
export earnings. “Twenty-one out of the top twenty-five export items of the country are
clothing articles, and represent 75 percent of total merchandise exports.” 7 For almost over
a decade these items have dominated the market. When it comes to worldly apparel
market Bangladesh has always had India as it’s competition. While India has turned
into an importer from exporter when it comes to some basic clothing pieces, in
consequence to which Bangladesh’s export of these garments to Indian market is
constantly on increase. Hence, such progress doesn’t show new change in neighboring
nation’s exchange power instead of the dividend of being an adjacent nation among
the biggest pacing or progressing money making countries across the globe. The
Lacking in the rise of strengthening of exchange power is necessary for the
diversification of the exchange’s final place which is also shown in the adjacent
nation’s exchange focus. Possessing the highest exchange focus in the South of Asia
and continuing to be un-relented. “It was 0.37 in 2001 and declined gradually to 0.36 in
2011. The export focuses of India and Pakistan were 0.11 and 0.21 respectively in 2001. Both
of them changing that to 0.18 in 2011. Bangladesh’s export focus can only be compared to
Bhutan, whose economy is less than 2 percent of Bangladesh’s economy and where export is
dominated by Indian imports of electricity.” Countries enclosed by land on all their sides
like Nepal has more diverse exports when compared to Bangladesh. The South Asian
Free Trade Area (SAFTA) agreement, which has been signed in January 2004 by the
nations which are members to SAARC for the promotion of trade across the regions,
still has to make a remarkable effect on trade between India and Bangladesh. Several
studies elaborate the potential effects of the complete implementation of SAFTA on
two-way trade flows where there are mixed researches.

7
Athens Journal last accessed on 3rd April 2020.

5
INDIA- BANGLADESH TRADE ANALYIS: MAJOR PRODUCT
CATEGORIES

Introduction

This section aims at finding out more about the bilateral trade between the two
countries through the comparative analysis of the trade which has occurred due to the
import and export of major products. This will also help us in further noticing the
strengths and weaknesses of the two countries which they aim at fulfilling through the
global market and the global trade. For instance, as noted in the table below India
lacks in Jute goods and that stands as its weakness whereas in contrast Bangladesh
due to various factors involved produce a lot of jute goods which proves to be its
strength and thus it exports it to India to promote the relations between the two
countries and also to promote the global trade. Likewise, this table further mentions
such goods and majorly discusses the trade mentioning the product categories.

Table 2. “India’s Best 9 Import Goods from Bangladesh and Share (%): 2015-16 “8

Analysis

8
https://www.athensjournals.gr/business/2019-5-2-2-Islam.pdf last accessed on 3 rd April
2020.
9
DCCI (2016)-Dhaka Chamber of Commerce & Industries, Dhaka, Bangladesh and author calculations
last checked on 3rd April 2020.

6
Providing further bits of knowledge into the uneven exchange circumstance of
Bangladesh vis-a-vis India (the two countries in question), this area centers around the
analysis of trade using dis-aggregated investigation of current exchange and exchange
designs by significant ware or item classes, comprising especially the top nine items
exchanged between the two nations. The separate piece of the overall industry of top
fare items from “Bangladesh to India as %”10 of all out of the neighboring nation fares
to the home country, is determined utilizing condition. “The calculation of total
Bangladesh exports to India is done by using the stated formula total exports = Xi to
India*100/X to India, where i = 1, 2, .., 9 top export products.”11

In addition to Bangladesh's main nine fare items to India Table 2 shows, alongside the
assessed rate portion of every one of the ten items as % of absolute fares to India for
the year 2015-16, the latest year before the implementing of GST. According to the
presented results fabricated Jute products is the biggest fare worker “(23.79%) followed
by woven”12 articles of clothing “(14.82%)”13 thus, placed at the second position and
crude “jute (14.02%)”14 thus, given the third position separately. Bangladesh likewise
trades a few farming items “(11.89%) and some”15 different things and stuff exclusive
to the country, for instances, knitwear, calfskin and cowhide items and common
materials used at homes. The best 9 items comprise “about 78.34% of Bangladesh”16
absolute fares comprising “of 689.62 million USD with the”17 stating of different items
(as other items) catching “about 21.66% of complete fares to India.”18

Contrary, to the Table 2 Table 3 lists Bangladesh's best ten import items from the
home country here India or the top export items from India to Bangladesh alongside
the evaluated portion of every one of the ten items as % of all out imports from India
to the country for 2015-16, the latest year for which information could be acquired

10
Table 2 mentioned in the paper.
11
Table 2 mentioned in the paper.
12
Table 2 mentioned in the paper.
13
Table 2 mentioned in the paper.
14
Table 2 mentioned in the paper.
15
Table 2 mentioned in the paper.
16
Table 2 mentioned in the paper.
17
Table 2 mentioned in the paper.
18
Table 2 mentioned in the paper.

7
before the implementation of GST which marks as a historic change in the trade of the
two countries.

Table 3. India’s Top exports to Bangladesh and Share (%): 2015-1619

20

Analysis

Table 3 shows that cotton (of different kinds) comprise the biggest import thing to
Bangladesh from the home country comprising “a portion of 26.92%”21 followed by
vehicles “(9.36%)”22 thus, placing it at the second position atomic “related materials
(7.71%)”23 thus, placing it at the third position, furthermore, oats (5.31%)24 thus, giving
it the fourth position individually. Likewise to Table 2 if we conclude The top 10

19
DCCI (2016)-Dhaka Chamber of Commerce and Industries and author calculations last checked on
3rd April 2020
20
DCCI (2016)-Dhaka Chamber of Commerce and Industries and author calculations last checked on
3rd April 2020
21
Table 3 mentioned in the paper.
22
Table 3 mentioned in the paper.
23
Table 3 mentioned in the paper.
24
Table 3 mentioned in the paper.

8
items establish about “70.44% of Bangladesh”25 all out “imports of 5452.90 million
USD”26 with stating different items (the other items) catching about “ 29.56%”27 of
aggregate exports to Bangladesh.

Interpretation

The above section proved the classical theory of economists mentioning the lapses
and the strengths of the countries and hence the reason of trade between the two
countries.

Introduction

Table 4 provides with the aggregated and dis-aggregated information of fares and
imports by 18 HS 2-digit (the goods classification here mentioned under different
codes) significant item classes. It shows the relative comparative advantage or
disadvantage which Bangladesh faces.

Analysis

Column 6 of the table mentions the evaluated items (which are here mentioned in the
first column as codes and in the second column as product categories) and the explicit
all out exchange for these accounted items. Algebraically, “ Total Trade with India in
Product (Ti) = (Xi + Mi), where i=1, 2, .., n product categories.”28 and exchange balance for
every item classification ( accounted for in column 2) is accounted for in column 5
utilizing condition algebraically expressed as “Trade Balance with India for Product
(TBi) = (Xi - Mi), where i=1, 2, .., n product categories.”29

25
Table 3 mentioned in the paper.
26
Table 3 mentioned in the paper.
27
Table 3 mentioned in the paper.
28
https://www.athensjournals.gr/business/2019-5-2-2-Islam.pdf last checked on 3rd April
2020.

9
Further, as assessments that can be seen while examining Table 4, we have
determined the data using the Balassa type, the means thus examined include
estimation that appears and the detailed expression could be seen in the four sections
or columns of the table from the last. Reflecting exchange shortage report, there were

10
certain “RCAi (revealed comparative advantage with respect to India)” 30 showing
uncovered relative bit of leeway for 8 items (44% of the recorded items) for which
Bangladesh has trade surplus whereas for the others or negative RCAi (uncovered
relative hindrance) for the staying 10 item classes (56% of the recorded items) which
India had the trade surplus for. All things when added up we conclude that,
Bangladesh appears to have uncovered relative bit of leeway in items, for example,
fish, covers up and calfskin, characteristic fiber, trim and embroidered works of art,
weave and non-sew clothing, material articles, and footwear for which Bangladesh
has the resources and for which the various other factors are accountable. The
rundown of items with relative hindrance were discovered or inferred to be in grains,
the various kinds of oils and mineral powers, fats and various kinds of oils, composts,
plastics, cotton, iron and steel, mechanical and the electrical materials which include
electronic hardware and the vessels and the ships for which India has the resources.

Interpretation

When we interpret the above stated data we get to know that Bangladesh had
exchange excess (+) for 8 out of 18 item classifications with exchange deficiency than
the staying 10 classifications. The practical discoveries of the project are provided in a
jist in these two points: (1) The home country is to be in a place above the adjacent
nation in the context of global trade and global markets because of some reasons such
as the “better resource endowments, better resource varieties, higher education and skill
level of labor force, better technology, better institutions and infrastructure, bigger internal

11
market with greater size of the economy” 31 (2) However, talking about the advantageous
position of India there are a few similarities in these resource endowments within both
the countries because both these nations have abundance of low-wage or cheap labor,
thus, having a similarity or in other words a comparative benefit of labor-intensive
products in comparison with the rest of the world. In addition to the stated facts both
these nations have a greater degree of trade competitiveness than trade complements,
which has resulted in both these nations competing in similar product ranges in the
global markets.

12
Table 6. Trade, Trade Balance and RCA by 18 HS 2-digit Major Product Categories, 2015-16

29
https://www.athensjournals.gr/business/2019-5-2-2-Islam.pdf last checked on 3rd April 2020.
30
https://www.athensjournals.gr/business/2019-5-2-2-Islam.pdf last checked on 3rd April 2020.

31
Athens journal last accessed on 3rd April 2020.

13
 32

GST IMPLICATIONS

32
https://globaledge.msu.edu, The UN Comtrade, and author calculations last checked on 3rd April 2020.

14
The financial year of Bangladesh 2017-18 (July-June) has proven as a remarkable year in 2-way commercial relations in the history of
commerce between the two nations Bangladesh and India for which credits are given to the latter for introducing the concept of GST in the
country. Because of such a major step for the first time trade between the two countries in question was set to cross $9 billion mark and
Bangladesh’s exports to India closed near $900 million, riding primarily on ready-made garments.

Despite of the fact that India offered duty-free and quota free entry to Bangladeshi goods under the SAFTA (South Asian Free Trade Area)
agreement signed by both the countries in 2011, Dhaka (Bangladesh) was gradually and slowly taking the benefit of this aid provided by India,
because their exchange to the home country can grow “only from $512 million to $672 million over the last six years.”33

In the due course of bygone months, the adjacent nation’s ready-made clothing exports to the home country grew up by “113% from $129 million
to $276 million.”34 Adding to that the exports in footwear, fish, beverages etc also multiplied in numbers. Bangladesh’s exports to India also have
grown up by a “30 per cent ($201 million) since July, 2017.”35

Benefits of GST

An induction of the Goods and services tax by the Modi government in India in July 2017, led to serious consequences for instance “withdrawal
of 12 per cent countervailing duty (CVD) on textiles. The withdrawal of CVD was not only specific to Bangladesh neither it was the only beneficiary.” 36

33
The Hindu Business line report last accessed on 3 rd April 2020.
34
The Hindu Business line report last accessed on 3 rd April 2020.
35
The Hindu Business line report last accessed on 3 rd April 2020.
36
The Hindu Business line report last accessed on 3 rd April 2020.

15
This move of the government has certainly been a benefit for the neighboring nation, and thus it has turned to the globe’s second largest exporter
of ready-made garments. The competitive edge was won over by Bangladesh when India increased the stats in regards to the present “hiking of
import duty on 328 textile products”, which doesn’t apply to the neighboring nation.

The steep rise in the exports to India feared India and put it in a zone of terror thus, attracting concentration of Confederation of Indian Textile
Industry (CITI), that points out on the fact that it will open a “flood gate if India doesn’t amend the FTA, which was entered without sufficient rules of
origin safeguard.”

To conclude the benefits related to GST helped the neighboring nation in grabbing a greater share of Bangladeshi exports by replacing other
destinations.

EXISTING OPPORTUNITIES OF TRADE

As the economy of the home country is in the metamorphic level, it pertains to the fact that our two way relations throw light on the remarkable
chances and thus benefit both the nations in the long run so to achieve it these two countries namely Bangladesh and India in such zones have
been called “as joint high tech research, development and innovation areas which they both further look to trade in for instances:- incubators, JVs on light,
medium and heavy industries, knowledge transfer to transition from 3rd IR to 4th IR including service sector cooperation in ICT, nanotechnology, robotics,
IOT, Cyber security, AI, quantum computing, quantum internet among others.”37

37
Economic times newspaper article last accessed on 3rd April 2020.

16
Adding, to all the advantageous trade options above, informatory exchange for business, speculation and the framework which is specially meant
to look after revenue, planning or formulation of policies, re-construction of business processes involving MSME’s (Medium Small Micro
enterprises), exploring jointly and jointly venturing on the blue economies, information exchange for commercial academia human resource skill
difference are among the several other zones of striking balance or stabilizing between the two nations.

CONCLUSION

This research paper mentions the bilateral trade agreement between the two nations dividing it into two major categories a) the time period when
India was not aware about the concept of GST (Goods and services tax) that is GST was not yet implemented in the country and b) when this
particular tax namely GST was implemented in India. Thus, GST clearly stands as major contention for the trade between the two nations as the
tables changes for India the home country.

To explain this further since the year 2010 India was benefiting from the trade between the nations and after the introduction of GST there is a
complete taciturn in how the positions of both the countries are placed with respect to each other. Bangladesh is now the one who is being the
beneficiary of the recent transactions taking place between the two countries so much so that Bangladesh has now become the second largest
exporter of ready-made garments in the world.

This graph down below further lays emphasis on the points mentioned above. This graph represents the export of Bangladesh in numerical
figures for a vivid analysis. The accompanying table just below the graph mentions the export in numbers to provide an evidence to the research.
The graph is a comprehensive presentation of exports by Bangladesh to India over the years in question that is since 2010.

17
The relations between the two countries India and Bangladesh are since India recognized the nation and that it was the one or the 1 st nation in the
world to provide recognition to Bangladesh as an independent and an individual or a separate state and thus, seeing the opportunity established
diplomatic relations with the new nation immediately after when it got independent in the year 1971. “The relationship between the two countries is
anchored in history, culture, language and shared values of secularism, democracy. It is also based on sovereignty, equality, trust, understanding and win-
win partnership that goes far beyond a strategic partnership. In the last couple of years, the relationship has been further strengthened including thorough
corporation.”38

38
MEA government portal last accessed on 3rd April 2020.

18
19
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BIBLIOGRAPHY

Articles

1. Research Gate:

https://www.researchgate.net/publication/322787002_Bangladesh-
India_Trade_Some_Preliminary_Results

2. JSOR:

https://www.jstor.org/stable/4361227?seq=5#metadata_info_tab_contents

Newspaper Articles

1. Economic Times:
https://economictimes.indiatimes.com/news/economy/foreign-trade/bangladesh-india-
bilateral-trade-was-9-5-billion-in-fy2017-18-fbcci-president-sheikh-fazle-
fahim/articleshow/70229327.cms?
utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

https://economictimes.indiatimes.com/news/economy/foreign-trade/india-proposes-
free-trade-agreement-with-bangladesh/articleshow/65965232.cms

2. THE HINDU

https://www.thehindubusinessline.com/news/india-bangladesh-trade-to-scale-new-
high/article24698283.ece

PDF Documents

1. World Bank:

http://siteresources.worldbank.org/INTBANGLADESH/Resources/Trade.pdf

https://wits.worldbank.org/CountryProfile/en/BGD

21
2. MEA Portal:

http://www.mea.gov.in/Portal/LegalTreatiesDoc/BG15B2412.pdf

JOURNALS

1. Athens Journal:

https://www.athensjournals.gr/business/2019-5-2-2-Islam.pdf

PAPERS

1. Basher Paper

http://ris.org.in/images/RIS_images/pdf/South%20Asia%20meeting%202-3%20may
%2020013%20PPT/Abdul%20Basher paper.pdf

OTHERS:

1. https://www.eastasiaforum.org/2019/09/17/making-the-most-of-bangladesh-india-
trade/

2. https://tradingeconomics.com/india/exports-to-bangladesh

3. https://www.financialexpress.com/economy/neighbourhood-first-india-bangladesh-
to-sign-trade-agreement-soon/1828037/

4. https://bit.ly/2pXfxnz.

5. https://pib.gov.in/newsite/PrintRelease.aspx?relid=193614

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