After a Joint Study Group (JSG) for examining the feasibility of the CEPA submitted its recommendations, India and Bangladesh are expected to start the process of negotiations for a Comprehensive Economic Partnership Agreement (CEPA) to deepen trade and economic ties during the visit of a high-level team from Bangladesh from March 1-4, 2022.
Over the next several days, the JSG, which includes negotiators and trade experts from both sides, is expected to begin negotiations toward finishing a report that would analyze the treaty’s prospects and make suggestions.
One of the agreements that India prioritizes is the CEPA with Bangladesh. The two sides committed to improve trade during Prime Minister Narendra Modi’s March 2021 visit to Bangladesh, and the joint declaration emphasized the need to remove non-tariff obstacles and the need for predictability in trade policies, laws, and processes.
Given the rapidly developing commercial connection, India has a strong economic motivation to pursue the CEPA. India’s Commerce and Industry Minister Piyush Goyal stated in November 2021 that the country was aiming to develop a CEPA with Bangladesh.
Foreign Secretary Harsh Vardhan Shringla recently stated that two-way trade has increased dramatically, with exports from Bangladesh projected to surpass USD 2 billion for the first time this year.
During a discussion with a Bangladesh team at the 10th India-Bangladesh Friendship Dialogue, he said, “Early completion of a CEPA is crucial to strengthening this momentum in trade.”
“For the first time, Bangladesh’s exports to India crossed the USD 1 billion mark in 2018-19, a record 52 percent increase over 2017-18,” said Prabir De, Professor, Research and Information System for Developing Countries (RIS), as part of a build-up to increasingly multifaceted cooperation in recent years. Over the previous decade, bilateral trade between India and Bangladesh has gradually increased, propelling Bangladesh to become India’s largest economic partner in South Asia. The potential bilateral commerce is about USD 40 billion.
Both stand to benefit greatly from the CEPA. Under the auspices of the 2006 South Asian Free Trade Area (SAFTA) accord, India and Bangladesh already have a goods agreement that governs trade tariff regimes.
Except for alcohol and tobacco, India has provided Bangladesh duty-free and quota-free access under SAFTA. The missing middle is a services trade deal, and Bangladesh, with its economy based mostly on agriculture and services, would welcome one that included the services component as well as investment.
During Bangladesh Prime Minister Sheikh Hasina’s visit in October 2019, a number of pacts and projects were signed and finalized, paving the way for the growth of bilateral ties and the prompt commissioning of a joint study on the chances of entering into a bilateral CEPA. Experts say that a rising and developing Bangladesh and a prosperous India have significant synergy and are beneficial to each other.
Bangladesh’s impending graduation from Least Developed Country classification, as well as India’s strong economic foundations and demonstrated credentials as Bangladesh’s largest development partner, have created a slew of economic dynamics.
Three Special Economic Zones have already been established in Bangladesh for Indian investors, and Indian firms are investing in a variety of industries in Bangladesh, including telecommunications, pharmaceuticals, FMCG, and autos. These are considered as providing a key backdrop to India and Bangladesh’s more active bilateral trade and investment activities outlined in the CEPA.