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Problems and Prospects of Border Trade between North east India and Bangladesh

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Abstract: Though trade between India and Bangladesh forms only a small part of the total trade, enhancing bilateral trade is of high importance to both countries. For India, increase in trade with Bangladesh would help to address many concerns of economic isolation of its backward north eastern states and generate new market opportunities for small-scale producers from the impoverished hinterlands of eastern states. For Bangladesh, wider areas of cooperation, investment and allied development opportunities will be thrown open with greater trade openness with India. Moreover, both India and Bangladesh has long-standing commitments toward regional economic cooperation in South Asia, of which their bilateral trade is a significant part. Bilateral economic relation between India and Bangladesh has grown since the latter got independence in 1971, albeit at a slow pace. Ups and downs in the political relations between the two countries have had a strong bearing on development of their economic ties. In recent years, both countries have registered good growth rates and have made significant progress in social development. Bilateral trade has also grown, as a result of open economic policy outlook of both countries. Among South East Asian countries, Bangladesh is the largest trading partner of India, with total bilateral trade crossing US$ 5.5 billion in the year 20122. The two-way trade flow between them was US$ 1.08 billion in year 2002. This puts the annual average growth in trade at about 4.7 percent. The present paper tries to highlight the problems and prospects of border trade for North-East India and Bangladesh as a part of India’s look east policy.
Key words: India’s look East Policy, Bilateral trade, South-East Asia, look-East Policy

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Problems and Prospects of Border Trade between North east India and Bangladesh

  1. 1. Problems and Prospects of Border Trade between North East India and Bangladesh Presented by: Swarnima Tiwari Suneeta Dutta
  2. 2. COVERING • General Introduction on Border Trade • North East India And Bangladesh Border Trade • Look East Policy • Problems and prospects • Conclusion • Bibliography
  3. 3. GENERAL INTRODUCTION ON BORDER TRADE • North Eastern India shares land border with Bangladesh, Bhutan, China and Myanmar and has agreements of overland trade with these countries through Land Custom Stations notified under Section 7 of the Customs Act, 1962. While for trading through LCSs situated on Bangladesh and Bhutan border, there is a Free Trade Agreement (SAFTA), Border Trade Agreement have been entered into with Myanmar.
  4. 4. NER-Bangladesh Border Length State Land border(Km) Riverine Total Assam 160 103 263 Meghalaya 443 83 443 Tripura 773 - 856 Mizoram 58 260 318 Total 1434 446 1880 (source: NEC)
  5. 5. State-wise Distribution of LCSs in NER Dealing NER- Bangladesh Trade State Functional Non- functional Total Assam 5 3 8 Meghalaya 8 2 10 Tripura 0 1 1 Mizoram 7 0 6 Total 20 6 26 Source: Office of the Commissioner of Custom, Shillong
  6. 6. NORTH EAST INDIAAND BANGLADESH BORDER TRADE • Among all South Asian Countries, Bangladesh is a major trading partner of India especially in the context of North Eastern Region of India. 20 Land Custom Stations are operational with Bangladesh; the functional Land Customs Stations have been performing well in spites of so many constraints and have been the potential in boosting the Bi- lateral trade to a much bigger scale.
  7. 7. NER Bangladesh Border Trade: Emerging Pattern Resource • Resource industry linkages determine the pattern of India – Bangladesh border trade taking place through the NER. Some critical minerals, which are available in the NER but not in Bangladesh, provide the basis of NER - Bangladesh trade. What follows is that NER’s exports to Bangladesh are distinctly different from major export lines from rest of India to Bangladesh. • The product - wise trade between NER and Bangladesh indicates a complementarily between the resource availability in the NER and the demand structure of Bangladesh. Bangladesh lacks mineral resources like coal and limestone which the country imports from the NER. In return, the NER imports finished products from Bangladesh. This provides a firm basis for trade expansion between the two regions. To summaries, the following are the features of India - Bangladesh border trade:
  8. 8. 1. Exports from NER to Bangladesh dominate NER - Bangladesh trade. 2. The NER exports to Bangladesh like coal, limestone, stone chips, boulder, Stone, raw hides, oranges, fresh ginger, bamboo, dry fish, fresh fruits (citrus) etc. and imports cement, Hilsa Fish, cotton waste, synthetic drinks, plywood, synthetic net fabrics, soap, plastic goods, readymade garments, process food etc. 3. Trade flows through Tripura and Sutarkandi in Assam - Bangladesh sector is dominated by imports from Bangladesh.
  9. 9. Problems and prospects Problems: Need for infrastructure improvement: This is one of the most pressing issues in India-Bangladesh trade and includes a wide range of issues. Most important components of infrastructural requirements are betterment of approach roads, parking space, warehousing facilities, weighing machines, quarantine and testing facilities and up gradation of office equipment and facilities. A part of the investments, those related to governmental offices, equipment and property have to be sourced from budgetary resources. Massive investments required for the rest have to be sourced from private investors. Infrastructural development of LCSs can be met in the short or medium term only by attracting private capital. Build, Operate and Transfer (BOT) model of procurement of public infrastructure, as has been successfully implemented in many other areas, has high potential for speedy delivery in this regard.
  10. 10. • Narrow or single lane approach roads • Poor utilization of existing railway links: • Absence of/ inadequate Weigh Bridges • Absence of Central Warehousing Corporation (CWC) Controlled parking and Warehousing facilities or Inadequate facilities. • Issues with security at the parking spaces • Limited banking facilities • Lack of enabled documentation and processing facilities • Drug trafficking • Anti-terror corporations.
  11. 11. Prospects: • Potential for rise in bilateral trade relations between Bangladesh and India is huge as can be gauged from various indicators. But a large part of that potential still remains un-explored. Though the large trade deficit that Bangladesh maintains with India is pointed out by some to warn against possible Indian domination in the face of increased bilateral trade openness, with a closer look it can be easily seen that the trade imbalance in terms of volume is a mere reflection of the huge difference in the relative economic sizes of both countries. Irrespective of the size of opportunities in absolute terms, both countries can be found to have large amounts of gains in store from enhanced bilateral trade. Emergence of India as a top export destination for Bangladesh is one of the facts that support this claim.
  12. 12. Conclusions • Though trade between India and Bangladesh forms only a small part of the total trade, enhancing bilateral trade is of high importance to both countries. For India, increase in trade with Bangladesh would help to address many concerns of economic isolation of its backward north eastern states and generate new market opportunities for small-scale producers from the impoverished hinterlands of eastern states. For Bangladesh, wider areas of cooperation, investment and allied development opportunities will be thrown open with greater trade openness with India. Moreover, both India and Bangladesh has long-standing commitments toward regional economic cooperation in South Asia, of which their bilateral trade is a significant part. Bilateral economic relation between India and Bangladesh has grown since the latter got independence in 1971, albeit at a slow pace. Ups and downs in the political relations between the two countries have had a strong bearing on development of their economic ties. In recent years, both countries have registered good growth rates and have made significant progress in social development. Bilateral trade has also grown, as a result of open economic policy outlook of both countries. Among South East Asian countries, Bangladesh is the largest trading partner of India, with total bilateral trade crossing US$ 5.5 billion in the year 20122. The two-way trade flow between them was US$ 1.08 billion in year 2002. This puts the annual average growth in trade at about 4.7 percent.
  13. 13. Bibliography • NEDFI Data Bank Quarterly, 2003, Vol. 2, Issue 1, January. • IIFT, 1987, Export Potential Survey of North Eastern Region, Indian Institute of Foreign Trade, New Delhi. • Economic Survey of India, 2007, Policy Brief, October 2007, Web.27, December 2012, http://www.oecd.org/economy/surveys/39452196.pdf . • Kumar, R, “Changing Role Of The Public Sector In The Promotion Of Foreign Direct Investment”, in ESCAP, Asia-Pacific Development Journal, vol. 10, No. 2 , December 2003:10,Web.03 January 2013. http://www.unescap.org/pdd/publications/regcoop/ch1.pdf. • www.nec.com

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