India-Bangla trade, now set for CEPA boost

Source: The post is based on the article “India-Bangla trade, now set for CEPA boost” published in Indian Express on 7th September 2022

What is the News?

India and Bangladesh will soon commence negotiations on a Bilateral Comprehensive Economic Partnership Agreement(CEPA).

What is the current bilateral trade between India and Bangladesh?

In 2021-22, Bangladesh has emerged as the largest trade partner for India in South Asia and the fourth-largest destination for Indian exports worldwide.

India is Bangladesh’s second-biggest trade partner and its largest export market in Asia.

India’s main exports to Bangladesh are raw cotton, non-retail pure cotton yarn, and electricity, and its main imports from the country are pure vegetable oils, non-knit men’s suits and textile scraps.

What will be the focus of CEPA negotiations between India and Bangladesh?

The CEPA is likely to focus on trade in goods, services, and investment with a key objective being the reduction of the trade gap between the two countries. 

Note: As Bangladesh is scheduled to become a developing nation by 2026 — after which it may no longer qualify for trade benefits that it currently enjoys as a least-developed country — it is keen to sign the CEPA in a year.

What are the current trade and investment frameworks between India and Bangladesh?

Trade agreement: In 2015, the two countries renewed the bilateral trade agreement for a period of five years with a provision for auto renewal.

Tariffs: Under the provisions of the South Asian Free Trade Area(SAFTA), Bangladesh extends preferential tariffs to Indian exports of products outside the ‘sensitive list’ of 993 items. In 2011, India announced duty-free, quota-free access to Bangladesh for all tariff lines except tobacco and alcohol.

Investment: An Agreement on Promotion and Protection of Investments has been in force since 2011. 

Inland Waterways: To facilitate trade and transit through inland waterways, a Protocol on Inland Waterways Trade and Transit (PIWTT) has been in place since 1972. The protocol allows the movement of goods by barges/ vessels on eight routes between points in India and Bangladesh as well as between points in India through Bangladesh.

Direct Sea Trade: Direct sea movement of containerized/ bulk/ dry cargo began after the signing of a Memorandum of Understanding (MoU) on Coastal Shipping in 2015. This has reduced the shipping time between India and Bangladesh from 30-40 days to 7-10 days.

Ports: MoUs were signed in 2015 on the use of the Chittagong and Mongla Ports for the Movement of Goods to and from India.

Border Haats: Currently, four Border Haats — two each in Meghalaya (Kalaichar and Balat) and Tripura (Srinagar and Kamalasagar) — are functional. Work on setting up two more haats on the Tripura-Bangladesh border and four on the Meghalaya-Bangladesh border is underway.