CEPA: When it comes to trade with Bangladesh, India is far behind China

China accounted for 10.2 per cent of FDI investments in Bangladesh between 2014 and 2021, India's share was 3.9 per cent

On September 6, prime minister Narendra Modi announced that India and Bangladesh would soon start negotiations on a bilateral comprehensive economic partnership agreement (CEPA). Even though informal talks have been going on between the countries since 2018, Bangladesh's prime minister gave a green signal for CEPA on August 18, ahead of her four-day visit to India.

Trade between India and Bangladesh has increased over the last few years. Still, a Business Standard analysis shows that China has made significant inroads in Bangladesh in terms of investments and trade. CEPA is expected to bridge that gap.

In 2021-22, Bangladesh was the fourth largest destination of Indian exports, accounting for nearly 4 per cent of the country's $422 billion merchandise exports. On the other hand, India was Bangladesh's seventh largest export market and the second largest market for its imports after China.

While China and India accounted for a 12 per cent share each in Bangladesh's imports in 2001, data from the Observatory of Economic Complexity, a data visualisation tool, shows that India's share in Bangladesh's imports has since lagged vis-a-vis China's. In 2020, China accounted for 31 per cent of the country's imports, whereas India's share had increased to 16 per cent.

In terms of investment, China has left India far behind. Analysis of gross foreign direct investment shows that until 2013 of the $8,593.5 million foreign direct investment attracted by Bangladesh, $256.4 million or 3 per cent came from India. In contrast, China's share was half of India's at just 1.4 per cent.

However, of the $26,068.1 million invested in Bangladesh between 2014 and 2020, China accounted for 10.2 per cent of FDI, whereas India's share slightly increased to 3.9 per cent.

Indian investment grew 293.6 per cent between 2014 and 2020, but China's jumped 2170.8 per cent.

Bangladesh's FDI in India has remained below $1 million per year.