CEPA may help double India’s exports to Bangladesh, narrow gap with China

Bangladeshi Prime Minister Sheikh Hasina met her Indian counterpart Narendra Modi in New Delhi on September 6 to discuss deals on connectivity, energy, food security and trade. (Image: AP)

A planned Comprehensive Economic Partnership Agreement (CEPA) with Bangladesh could double India’s exports to the country to over $32 billion, according to an analysis of trade data between the countries.

Prime Minister Narendra Modi, during Bangladesh Prime Minister Sheikh Hasina’s visit earlier this month, said discussions on a bilateral CEPA would start soon.

India exported goods worth $16.15 billion to Bangladesh in FY22, an increase of more than 66 percent from $9.69 billion in the year before. This makes Bangladesh the fourth-largest destination for Indian exports. Cotton, cereals, and mineral oils and their products were the top three items that India exported to Bangladesh in FY22.

Imports from Bangladesh climbed 81 percent to $1.97 billion in FY22 from $1.09 billion in FY21, making India its seventh-largest export destination. Non-knitted apparel and clothing accessories, vegetable and animal fats, and knitted apparel and clothing accessories took the top three spots for imports from Bangladesh.

India would be able to double its merchandise exports if Bangladesh reduces the peak tariff on 415 goods in which India has export competitiveness, according to an analysis by the MVIRDC World Trade Center, Mumbai (WTC Mumbai).

Reduced tariffs

“India meets hardly 22 percent of the total import demand of Bangladesh in these 415 goods, as the 25 percent peak import tariff levied by Bangladesh acts as an impediment for Indian exports,” MVIRDC said in a report. The goods include woven fabrics, denim, iron and steel articles, fresh grapes, electric conductors, gems & jewellery, and plastic products.

Currently, India exports $2.4 billion worth of these products to Bangladesh. However, reduced tariffs under CEPA could help Indian exporters to meet the $17.5 billion demand these 415 goods have in the neighbouring country.

The CEPA could also boost India’s share in Bangladesh’s total imports, which currently lags behind its other neighbour, China.

The shares of India and China in Bangladesh’s imports were almost equal at the beginning of the century. India’s share was even higher in 2003. However, China has gone ahead ever since, according to data from the Observatory of Economic Complexity (OEC), an online data distribution and visualisation platform.

China’s share rose to 31 percent in 2020, while India was at 16 percent.

Data compiled from Bangladesh Bank shows that China has also overtaken India when it comes to investments in Bangladesh. India’s annual investments were higher than China’s till 2017, after which China poured in more money than India, except in 2020.

In 2021, China’s investments in Bangladesh were more than triple the value of India’s investments.