India with large trade surplus can be more liberal to Bangladesh; can further build on economic ties: ASSOCHAM Paper

When Prime Minister Narendra Modi visits Dhaka on June 6-7, for stitching a stronger political relationship with the strategically positioned neighbouring country, bold moves are expected to take the mutual economic relations much beyond the thread of cotton and textiles industry which dominates the bilateral trade, an ASSOCHAM paper has pointed out.

Composition of India's export and import basket related to Bangladesh shows growing intra industry trade in cotton textiles sector. For instance, raw cotton is the single largest item of export to Bangladesh accounting for a share of more than a quarter in India's total exports to Bangladesh. Also Bangladesh is sourcing dyeing materials and a variety of filament yarns for its textile industry from India',' the ASSOCHAM paper on BIMSTEC said.

The paper has analysed India's economic engagement with each of the BIMSTEC members including Bangladesh, Mynamar, Sri Lanka, Bhutan, Nepal and Thailand.

With Bangladesh, the second largest member of the BIMSTEC in terms of number of people, India's trade is governed by SAFTA framework. India-Bangladesh trade has increased over the years but the share of Bangladesh in India's total imports remains miniscule. Share of Bangladesh in India's exports has remained around 2% in recent years India has consistently maintained a trade surplus with Bangladesh.

With such a huge trade surplus in our favour, India can afford to be much more liberal towards its neighbor in granting market access. In fact, while a fair competition is welcome, India and Bangladesh can get together in jointly tapping the global textiles market with advantage of cost effective Bangladeshi workforce, while India can provide support in technology, branding, scale etc ASSOCHAM President Mr Rana Kapoor said.

Of the total bilateral trade of USD 6.65 billion , India's exports comprised USD 6.16 billion while imports were less than USD 500 million, leaving a large trade surplus of USD 5.68 billion .

As much as 14% of India's total exports to Bangladesh consisting of machinery and capital goods with close to U.S. 500 million of exports of transport equipment consisting of automobiles and auto parts., India's imports from Bangladesh consist of primary products, viz, betel nuts, jute fibre/yarn, oil cakes, fish etc. Also India is importing increasing volumes of cotton apparel and accessories as India has granted duty free access to a range of cotton made up articles

On a holistic level, as India, Thailand or Sri Lanka climb up the ladder of their dynamic comparative advantage, more labor-intensive industries can potentially move to lower wage countries such as Bangladesh and Myanmar.

These developments have already started in the textile and garments sector, in particular in Bangladesh. Increasing economic interdependence with India creates opportunities to expand BIMSTEC's markets for goods and services and improve economic and financial stability through diversification of risk outside traditional economic partners such as the United States and the European Union. BIMSTEC can be seen as a model of integration between large and relatively small economies in producing a win-win situation, the ASSOCHAM paper noted.

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