The Hindu Business Line : Enabling Dhaka

In recent days, two things happened at the policy level that should, in the normal course, have a favourable impact on India-Bangladesh trade and investment ties. However, in view of the extra-economic dimension to bilateral relations, there is no certainty that the steps taken will automatically lead to an improvement in ties, though some of the policy barriers in the way of such an improvement have been lowered.

The first, and perhaps more important, of the two measures is that citizens of Bangladesh and corporate bodies registered in that country are now allowed to buy shares and debentures in Indian companies after prior permission from the Foreign Investment Promotion Board. Admittedly, the approval process has not been accorded automatic-route status, but this aberration can perhaps be explained by the argument that, given Dhaka’s political and strategic problems, a step-by-step approach is always preferable so that unforeseen problems do not crop up later. The hope, of course, is that, at some point, Bangladesh investments can flow into India through the automatic channel, an eventuality that would truly set the seal of maturity on bilateral ties. The second step was the scrapping of import duties on goods from four SAARC members, including Bangladesh, from January 1, giving effect to a commitment made by the Prime Minister, Dr Manmohan Singh, at the 14th SAARC summit in New Delhi last April. Clearly, as far as Bangladesh is concerned, the onus is now on Dhaka to provide a fillip to the bilateral trade and investment exchange, which till now has been hampered by an inordinately stiff, even unfriendly, attitude on the part of the authorities concerned. In fact, the present Government in Dhaka, which has provided enough indications of its resolve to do fruitful business with India, should now take the initiative to get the mammoth Tata investment projects in Bangladesh — worth around $3 billion — going. A green signal for this project would not only lead to growth in the country’s power, steel and fertiliser sectors, but would also indicate strongly to the Indian investment community that funds can invested gainfully in the neighbouring economy.

However, the scale of Dhaka’s response to New Delhi’s gesture remains uncertain because of the likely persistence of the huge trade deficit Bangladesh suffers in its trade with India, even after the zero-import-duty initiative. But instead of harping on it, as it has over the past decades, Dhaka could gain more by pursuing the joint-venture investment route with Indian companies, which would, among other things, improve efficiency levels in Bangladesh. As far as New Delhi is concerned, transit facilities through Bangladesh for the transport sector and for gas pipelines would be of immense value, as also clamping down on illegal border trade, which forms a substantial part of the actual trade between the two countries.

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Tatas to benefit from removal of ban on Bangladesh FDI
Ban on FDI from Bangladesh lifted

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