A Free Trade Agreement between India and Bangladesh could increase bilateral trade volume by over 100 per cent, says a new World Bank study

With India seeking to address the issue of “brutal trade imbalance” with its neighbour, a latest World Bank report released on Monday said a Free Trade Agreement (FTA) between India and Bangladesh could push the bilateral trade between the two countries by over 100 per cent.

“An FTA between the two nations would increase Bangladesh’s exports to India by 182 per cent and that of India’s to Bangladesh by 126 per cent,” World Bank lead economist Sanjay Kathuria said while releasing a report titled ‘Unlocking Bangladesh-India Trade’ at a CII function in the Capital.

During 2011-12, the two-way trade stood at $4.3 billion. Bangladesh has long complained that trade with India was unequal with India selling goods worth over $3.5 billion to Bangladesh against the latter’s export to India of about $0.6 billion.

Research and Information System for Developing Countries Fellow Prabir De said India’s closer economic cooperation with Bangladesh can be an important stepping-stone to reduce the economic isolation of India’s north-eastern States. The agreement would also be beneficial for Bangladesh as more manufacturing activity would take place which would generate more employment opportunities.

In 2004, India and Bangladesh had exchanged their documents for an FTA and negotiations were underway. However, talks were stalled over a few issues. India’s exports to Bangladesh include cotton, cereals, nuclear reactors, boilers and machinery, while imports from the neighbouring country comprise edible fruit and nuts, fish, apparel and textiles articles.

The study said to realise the potential of the pact, both the countries need to further liberalise trade, cut tariffs on India’s exports to Bangladesh, reduce and remove non-tariff barriers and improve trade facilitation both at borders and inland. To enable larger gains, Bangladesh and India cooperation should go beyond goods trade and include investment, services and technology transfer, it stated. “The pact could be signed in different phases like initially it could be in goods and later in services and investments,” Mr. De said.

Further, the report said that the issue of trade surplus, which is in favour of India, could be addressed by encouraging investments into the neighbouring nation. It said investments by Indian companies in the neighbouring nation would not only create jobs, but would also increase production of goods, which in turn, could be re-exported to India.

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