India and Bangladesh share a strong bond based on their common history, language, and culture. India was quick to recognize Bangladesh and establish diplomatic relations in 1971, right after its independence. This relationship goes beyond just strategic cooperation; it’s rooted in equality, trust, and understanding. When it comes to trade, Bangladesh is India’s biggest trading partner in the subcontinent. In return, India is the second-largest export partner for Bangladesh, making up 12% of its total exports. In the fiscal year 2023, the total trade turnover between the two countries reached an impressive $14.22 billion. This economic collaboration highlights the deep connection and interdependence between India and Bangladesh, showcasing a partnership that extends beyond political ties. Most Bangladeshi products have easy access to Indian markets although this is for now diluted by the difficulty in penetrating the vast but highly competitive Indian market. Indian goods are transshipped through Bangladesh to connect its eastern region with its far-eastern region using Bangladeshi transportation, literally a quid pro quo. 

Bangladesh-India Trade Cooperation 2023 

India experienced a remarkable surge in exports to Bangladesh during the fiscal year 2023, showcasing the robust economic partnership between the two nations. The volume of trade encompassed an impressive array of 6,050 different commodities, highlighting the diversity in goods exchanged. Notably, the export figures reached US$ 12.20 billion, emphasizing significant growth compared to the previous fiscal year’s US$ 16.15 billion. Key contributors to this surge included other commodities valued at US$ 1.17 billion, cotton yarn (US$ 1.02 billion), petroleum products (US$ 816 million), other cereals (US$ 556 million), and cotton fabrics, made-ups, etc. (US$ 541 million). This momentum persisted into the initial months of April-May 2023, with exports reaching US$ 1.67 billion, underscoring the continued strength of the trade relationship.

The fiscal year 2023 witnessed an expanding appetite for Bangladeshi goods in India, as reflected in the import statistics. A diverse range of 1,155 commodities was imported from Bangladesh, contributing to a commendable US$ 2.02 billion in imports. This marked a notable increase from the previous year’s figure of US$ 1.97 billion. Leading items in India’s import basket included RMG cotton (US$ 510 million), cotton fabrics, made-ups, etc. (US$ 153 million), RMG manmade fibers (US$ 142 million), spices (US$ 125 million), and jute (US$ 103 million). The positive trend persisted into April-May 2023, with imports totaling US$ 278 million. This ongoing growth underscores the sustained and expanding economic exchange between India and Bangladesh, affirming the mutual benefit derived from their trade relationship.

2023: Key Milestones in India-Bangladesh Trade Relations

Comprehensive Economic Partnership Agreement (CEPA)

India and Bangladesh are actively working towards a Comprehensive Economic Partnership Agreement (CEPA) in 2023, aiming to strengthen their economic ties. This agreement is anticipated to significantly boost trade, create job opportunities, and enhance living standards in both nations. The collaboration reflects a commitment to expanding the market for mutual benefit, fostering economic growth and development.

Swadhinata Sarak and Maitree Thermal Power Project

The Swadhinata Sarak, a road infrastructure project, serves as a symbol of the growing friendship between India and Bangladesh. Beyond strategic interests, it focuses on enhancing connectivity between the two nations, fostering an environment conducive to increased trade. Additionally, the joint inauguration of the Maitree Thermal Power project by the Prime Ministers contributes to energy security, adding to the already significant areas of cooperation, including trade, connectivity, and water sharing.

Currency Diversification in Bilateral Trade

In April 2023, India and Bangladesh took a strategic step to simplify trade transactions by agreeing to use their own currencies (Rupee and Taka) for a part of their bilateral trade. This move aims to reduce dependence on the US dollar, making trade more convenient for both nations. The gradual shift to local currencies aligns with the global trend of currency diversification and signifies a proactive approach to enhance economic cooperation.

Border Haats Expansion

Bangladesh and India are exploring the establishment of 16 new border haats, particularly in Mizoram and West Bengal. These initiatives aim to boost trade by providing better access to markets and economic opportunities for border communities. The expansion aligns with the broader strategy of reducing informal trade along the border, fostering economic growth in these regions.

Infrastructure and Connectivity Improvements

Both nations are actively enhancing infrastructure and connectivity to promote trade. Supported by initiatives, including Japanese funding, these efforts include the development of the Matabari Port in Bangladesh by 2027. The improved infrastructure is expected to facilitate smoother trade flows from India to Bangladesh and onward to Asian markets. Collaborative projects like the “Bay of Bengal Northeast Industrial Value Chain Concept” further underscore the commitment to strengthening economic ties.

Other developments 

In 2023, India and Bangladesh have elevated their economic partnership to a new level through a series of Memoranda of Understanding (MoUs) covering crucial areas. These agreements represent a comprehensive approach, focusing on water management, railway collaboration, scientific research, space technology, broadcasting, and judiciary. This holistic strategy addresses various facets that collectively strengthen the foundation for increased trade and mutual economic benefits between the two nations.

Key Areas of Cooperation	Significance for Trade Relations
Water Management	Cooperative effort for responsible water use, creating a favorable environment for trade activities.
Railway Collaboration	Enhances transportation connectivity, facilitating smoother cross-border movement of goods and people, promoting trade.
Scientific Cooperation	Commitment to innovation and addressing common challenges, contributing to technological advancements that positively impact trade.
Space Technology	Joint efforts in telecommunications and satellite technology, crucial for enhancing connectivity and facilitating trade-related communication.
Broadcasting Cooperation	Fosters cultural ties and shared narratives, creating a platform for mutual understanding that can positively influence trade relations.
Judiciary Training	Reinforces the rule of law, creating a conducive legal environment for trade and investment.

Expanding Bilateral Trade for Mutual Benefit

The future of Bangladesh-India trade cooperation holds immense potential for mutual benefit and regional prosperity. The Indo-Pacific, with its economic dynamism and strategic relevance, has become a focal point for foreign policy considerations. Within this framework, the Bay of Bengal region stands out as a vital area for growth and collaboration. The bilateral relations between Bangladesh and India serve as a model for the entire region, showcasing collaborative efforts that span various sectors. As the geopolitical construct of the Indo-Pacific evolves, it is crucial for these smaller regions to develop through inter-country cooperation and a shared vision of the future.

The trade dynamics between Bangladesh and India are central to this shared future. Through initiatives like Comprehensive Economic Partnership Agreements (CEPA) and the Bay of Bengal Northeast Industrial Value Chain Concept, both nations aim to boost trade and economic ties significantly. Such collaborations are expected to result in substantial growth in exports and imports, contributing to the prosperity of both countries. An increased focus on water management, transportation connectivity, scientific cooperation, and space technology further strengthens the foundation for a flourishing trade relationship.

As both nations continue to navigate the complexities of regional geopolitics, their commitment to a shared future becomes crucial. By fostering economic cooperation, addressing common challenges, and strengthening diplomatic ties, Bangladesh and India are poised to shape a positive and mutually beneficial trajectory for their trade relations in the years to come.

Navigating Challenges and Building Collaborations

The future of Bangladesh-India trade cooperation is not without challenges. The specter of potential migration due to climate change in Bangladesh poses a unique set of considerations for India. However, a shared commitment to securing Bangladesh politically, socially, and economically becomes a driving force in preventing undesirable scenarios. By emphasizing inclusive policies and sustainable development, both nations can proactively address challenges related to migration, contributing to regional stability.

While China plays a significant role in the region, the unique historical and geographical ties between India and Bangladesh create a distinct imperative for collaboration. Despite China’s economic presence, the strategic importance of India as a neighbor with the longest land border in South Asia cannot be overlooked. This inescapable relationship brings obligations, encouraging a nuanced approach to diplomacy that prioritizes being Bangladesh-friendly.

The potential for a Free Trade Agreement (FTA) adds another layer to the positive trajectory of Bangladesh-India trade. Projections indicate significant growth in bilateral trade if an FTA is established, offering opportunities for both nations to capitalize on their respective strengths. Initiatives like the “Bay of Bengal Northeast Industrial Value Chain Concept” further underscore the commitment to attracting manufacturing and increasing trade.

To conclude, in 2023, the Bangladesh-India trade relations have reached noteworthy milestones, laying the groundwork for unprecedented growth and collaboration. The Comprehensive Economic Partnership Agreement (CEPA) underscores a shared commitment to economic expansion, job creation, and improved living standards. Symbolic projects like the Swadhinata Sarak and the Maitree Thermal Power project signify deepening ties and contribute to enhanced connectivity and energy security, vital elements for fostering increased trade. The strategic move towards currency diversification in bilateral trade reflects a proactive approach to facilitate smoother transactions. Initiatives like the expansion of border haats, infrastructure enhancements, and collaborative projects demonstrate a joint vision for robust economic ties and regional development. The series of Memoranda of Understanding (MoUs) covering crucial areas further exemplify the comprehensive nature of this economic partnership, reinforcing the foundation for increased trade and mutual economic benefits. This collective effort, marked by a collaborative spirit, not only navigates challenges but also contributes to the broader prosperity of the region.