Lets mend fences with Bangladesh

India has erected too many non-tariff walls, in the process pushing Bangladesh to explore the China market

On paper, India provides tariff-free access to almost all Bangladeshi products. That should make Bangladeshs giant neighbour its biggest market as well.

In reality, though, it seems Bangladeshi manufacturers and exporters are not comfortable penetrating the large market of their next-door neighbour. Rather, they are happier with China, tapping the benefits of the preferential trade arrangement offered by Asias biggest economy.

This is starkly reflected in the latest trade figures. For the first time ever, in the fiscal year ended June 30, 2014, Bangladeshs exports to China overtook its exports to India, that too by a huge margin.

At the same time, exports to India actually declined significantly. Official statistics, released by the Bangladesh Export Promotion Bureau (EPB), also show that Bangladeshs exports to China are growing at a much faster rate and increased fourfold within four years.

In contrast, after getting the duty-free access to the Indian market in November 2011, Bangladesh exports to India dropped in FY12 by 5 per cent from FY11. Exports surged by 15 per cent in FY13 and again declined by around 19 per cent in FY14.

The bilateral trade balance has always tilted heavily towards India, leading to the perception that India doesnt want Bangladeshi products to enter its big market. Over the last decade, Bangladesh, however, gradually increased its exports to India.

Responding to Bangladeshs longstanding demand, India announced tariff-free access for nearly all Bangladeshi products during the Saarc summit in the Maldives in November 2011, except a restricted list of 25, which includes alcoholic products.

The then Indian Prime Minister Manmohan Singh announced reduction of the sensitive list of goods for South Asian Least Developed Countries (LDCs) to 25 from the earlier 480, providing zero duty market access for 99.7 per cent of goods from South Asian LDCs including Bangladesh, Nepal, Bhutan and the Maldives.

On the other hand, China has allowed tariff-free access to 4,888 products for the LDCs since 2010, which covered around 90 per cent of Bangladeshi exportable items.

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Lets mend fences with Bangladesh