The Hindu Business Line : Synchronising with Dhaka

Ever since the army-backed caretaker government took over in Dhaka, there have been clear indications of an improvement in ties between India and Bangladesh, leading to the hope that, at long last, relations between the two countries would be put on an even keel leading to fruitful economic cooperation. While there is no question about the potential of such cooperation, the road ahead promises to be full of obstacles as all indications are of the old mindset against closer economic ties with India being quite alive.

Perhaps, this is as it should be because it would be naïve to expect that a mere change in government in Dhaka would automatically lead to a transformation in bilateral relations, especially economic. Yet, it is important to take note of the favourable steps that Dhaka has taken till now (as also New Delhi's response) which are not only a welcome departure from the past but which, if acted upon constructively by both sides, could lead to `normalisation' of bilateral trade and investment ties. Among the steps taken by the two countries is to renew (till 2009) the protocol on inland water transit and trade that is expected to make trading more efficient particularly for the small trader in Bangladesh. A diesel export deal has been signed to transport 120,000 tonnes of the fuel annually to Bangladesh, on the Brahmaputra focusing on, among other things, the merits of water transport in bilateral trade ties. Dhaka has also shown an interest in opening cross-country land routes for Indian transporters plying between Agartala and West Bengal (a long-standing demand of New Delhi), which could revolutionise the transport economics between the North-East and the rest of India. Further, efforts are on to revive rail links between the two countries, which would improve considerably travel across the border. New Delhi is mulling the lifting of restrictions on Foreign Direct Investments from Bangladesh, which would be an important symbolic gesture; India has already offered special import concessions for specific exports from across the border.

However, the litmus test for enduring bilateral economic ties will be the entry of large Indian investments into Bangladesh which, apart from deepening bilateral ties, would also lead to a reduction in Dhaka's trade deficit by ultimately increasing exports to India. Unfortunately, not only there has been little movement in this direction (the $3-billion Tata investment proposal is still hanging fire), Dhaka has approached Beijing with a proposal to invest in the oil and road sectors, a package that could easily have been offered to India. Myanmar has also been approached for hydro-electric power; this could have been met by the 1,000-MW gas-based plant the Tatas would like to set up. The tussle in Dhaka seems to be between geo-politics and economic efficiency. New Delhi will have to toil hard to tip the balance in the latter's favour.

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