In the fiscal year 2022, Bangladesh is expected to be India’s fourth-largest export destination, jumping from the fifth place it is currently holding. This is definitely a landmark for the Indo-Bangladesh relations which began on 6 December 1971 with India’s recognition of Bangladesh as an independent state. Bangladesh is thus to be in the list of top five export destinations of India, allowing both countries to generate more benefits from this economic engagement.
According to the available data till October 2021, during the first seven months of fiscal year 2021, exports from India to Bangladesh increased 81 percent over the same time period in the previous year to $7.7 billion. This makes Bangladesh the fourth largest export destination of India after the USA, UAE and China respectively. Sri Lanka and Cambodia may also follow Bangladesh’s footsteps to make its market more attractive to Indian investors.
What makes Bangladesh such an attractive export destination for India?
This has become possible because of Bangladesh’s economic boom which has ultimately contributed substantially to India’s export growth to Bangladesh. Bangladesh has demonstrated extreme economic success and growth in the past decades, especially among the South Asian countries. The RMG sector, which is responsible for almost 80 percent of the total export earnings, worked as a main engine of economic growth and development. According to the Global Knowledge Partnership on Migration and Development (KNOMAD), Bangladesh has become the eighth largest remittance earner in 2020.
In 2020, the remittance Bangladesh earned from its expatriates accounted for 6.6% of the GDP. This remittance inflow ensures stable household income, increased consumption level and improved living standards of the people. Economists also predict that Bangladesh may even surpass India in terms of per capita income in the coming year. Sri Lanka and Cambodia may learn from Bangladesh’s macroeconomic policies to manage their economies for further growth.
In the Fiscal Year 2020-21, the Per Capita Income (PPI) in Bangladesh was $2,554 and the Gross Domestic Product (GDP) of Bangladesh had increased to $409 billion. If we analyze the GDP and PPI of Bangladesh over the last 10 years, we see a growing trend which ultimately indicates that the purchasing power of the people of Bangladesh has increased over this timeframe. When the PPI increases, demand for goods and services increases, which makes Bangladesh an attractive market not only for domestic companies but also for the foreign ones.
How did India penetrate into Bangladesh’s market?
There are a number of factors that helped Indian companies to successfully penetrate into Bangladesh’s market. The shared civilizational bonds, common history and cultural and social affinity have brought Bangladesh and India closer. People of these countries have similar tastes in food and other day-to-day necessities which made Indian companies read the psychology of Bangladeshi consumers well. On the other hand, Indian media is widely broadcast in Bangladesh, which also created a huge demand for Indian goods through successful marketing promotion and advertising. Besides, Indian companies grabbed the Bangladesh market perfectly with quality products and affordable prices. Noteworthy to mention here, the major goods exported to Bangladesh from India, during April-October 2021, were cereal, cotton, electricity, vehicle parts, and mechanical appliances.
In Fiscal Year 2019-20, the bilateral trade between India and Bangladesh crossed $10 billion, where India’s exports to Bangladesh were of $8.2 billion and Bangladesh’s exports to India were of $1.26 billion. This data shows that there is a huge trade deficit for Bangladesh which should be addressed immediately by both countries, especially by India. Besides, India, as a South Asian giant, should provide different types of trade facilities, such as tariff reductions to create a level playing field for Bangladesh. The countries may undertake a bilateral comprehensive economic partnership agreement (CEPA) to address the aforementioned issue and to have greater bilateral engagement. Not to forget, without addressing issues of tariffs and non-tariff barriers, the countries cannot expect to sustain the growth in their economic ties for a long time.
*The writer works as a consultant in an NGO based in Bangladesh.
January 9, 2022
The viewpoints expressed by the authors do not necessarily reflect the opinions, viewpoints and editorial policies of Aequitas Review.
