India finalises draft Economic agreement with Bangladesh to reduce trade deficit significantly
The India Saga | 7 May 2022
India finalises draft Economic agreement with Bangladesh to reduce trade deficit significantly
by Gautam Lahiri
India’s Commerce Ministry has finalized the draft agreement for the proposed ‘Bangladesh –India Comprehensive Economic Partnership Agreement’ (CEPA) to increase the trade volume for both the countries and to reduce trade gap in a phased manner.
The draft has been sent to Commerce ministry of Bangladesh for due consideration and it is expected that both the External affairs Minister .Dr S Jayshankar and his Bangladesh counterpart Dr A K Abdul Momen will take a view on this issue when they meet at Guwahati in the last week of May.
A high-level team from Bangladesh visited India from March 1-4, 2022 and a Joint Study Group (JSG) for examining the feasibility of the CEPA submitted its recommendations to both the ministries of two countries.
The proposed CEPA between Bangladesh and India has three dimensions: trade in goods, services, and investment. Sources in the ministry said that the main target of the proposed CEPA is to reduce the huge trade gap between Bangladesh and India and open up new economic opportunities, including connectivity, new market and cooperation and partnership.
Moreover, the CEPA is planned to resolve the issues and challenges of antidumping duties and rules of origin through the perspective of multi-modal connectivity and deepening cooperation in sub-regional cooperation. It recognizes the significant benefits of bilateral economic and commercial ties.
According to an official statement released by India’s Ministry of Commerce and Industry, the CEPA will incorporate a variety of issues of mutual interest, including the development of railway infrastructure, port infrastructure, Border Haats, and regional connectivity through Multi-Modal Transportation, Harmonization of Standards, Mutual Recognition Agreement. Further, the agreement is looking forward to stepping up cooperation in new areas such as green technologies, renewables, and IT and digital platforms under CEPA. A CEPA will also strengthen the scope of investment as it includes the new areas and ways of cooperation. It will give a significant boost to two-way trade.
In addition, the agreement focuses on four areas for strengthening the strengthen the scope of investment as it includes the new areas and ways of cooperation. It will give a significant boost to two-way trade. In addition, the agreement focuses on four areas for strengthening the India-Bangladesh partnership, which include Connectivity and maintaining an uninterrupted supply chain keeping in view of the uncertain supply of onion and cotton from India., a joint production of defence equipment ,exploring the potential area of investment and joint manufacturing of vaccine and other medicines.
Explaining the benefit of the agreement an official said that in the backdrop of growing bilateral trade, the trading regime between the two countries, including imports, exports, and related rules and regulations, will get new momentum as the agreement has instruments to work jointly on trade, supply chain and production. If the CEPA is operationalized, bilateral trade potential would be USD 40 billion. India’s strong exports in services and Bangladesh’s exports in goods are a good cause to have a CEPA. Bangladesh Commerce Minister Tipu Munshi during his last visit in India asserted that CEPA is very important in the long run for the expansion of trade and commerce.
The CEPA will produce a cluster of connectivity which will shape the future trade through the Asian Highway Network routes (AH-1 and 2), BBIN, BCIM and BIMSTEC, connecting India and Bangladesh at the Petrapole-Benapole, Fulbari-Banglabandha and Dawki-Tamabil points, and a new rail link between Akhaura (Bangladesh) and Agartala (India), among others.
India claims that once fully implemented, the agreement will ease personal, passenger and cargo vehicle travel across the borders. This will be most visible in bordering areas of Bangladesh, where the price of goods could decrease by more than 4.5 per cent. More trade and transit will inspire new economic activity to raise income and lower costs for businesses and consumers.
Connectivity facilities will have some trickle-down effects on other connectivity projects in the region. For instance, the BIMSTEC Conclave of Ports agreement linking Thailand’s Ranong Port with ports in Chennai, Vishakhapatnam, and Kolkata, a BIMSTEC Coastal Shipping Agreement and a BIMSTEC Free Trade Agreement will bring more than 2 billion people – 22% of world’s population-together into an economic region. It will pave the way for concluding FTAs and PTAs with other neighbouring countries of South Asia when Bangladesh embarks on signing FTAs with Bhutan. Reports suggest that Bangladesh is planning to conclude trade agreements with Thailand and Nepal.
. When the production hub and supply chain are materialized, then it will create a new market for both the countries and the investments will get a new boost in the coming days. Bangladesh has already set up three Special Economic Zones for Indian investors, and Indian companies are investing in various sectors, including telecommunications, pharmaceuticals, FMCG, and automobiles in Bangladesh. These are seen as offering a significant backdrop to the more intense bilateral engagements in trade and investment that India and Bangladesh are chalking out through the CEPA. In addition, a thriving CEPA will support Indian Northeast states to have access to Bangladesh for chemical fertilizer, raw jute and jute manufactures, frozen fish and readymade garments (RMG).
(The writer is a senior journalist specializing in India-Bangladesh relations)
