Event ReportsPublished on Nov 11, 2013
Noting that India, Bangladesh and Nepal are transiting poor economies, Jayshree Sengupta, Senior Fellow, ORF, says there is an urgent need to focus on holistic development in these countries and enhanced connectivity between them to improve economic relations.
India's economic relations with Bangladesh and Nepal
Noting that India, Bangladesh and Nepal are transiting poor economies, Jayshree Sengupta, Senior Fellow, Observer Research Foundation, said there is an urgent need to focus on holistic development in these countries and enhanced connectivity between them. Delivering a lecture on "India’s economic relations with Bangladesh and Nepal: Two neighbours, similar problems, different challenges" at the Kolkata Chapter on October 5, Sengupta looked at a broad overview of the economic problems as well as commonalities among these countries. She said all three countries were economies in transition and as with any transitioning entity, there were bound to be challenges. Moving onto these challenges, she pointed out that the vital ones for all three was that of slow economic growth, water and power supply, poverty, and political flux. Another major issue is that of non-tariff barriers being compounded by inadequate border infrastructure. Since all three countries are among the world’s poorer nations, these challenges confront them most severely. There is also a significant amount of young population in these nations, which can on the one hand provide demographic dividend, but on the other can pose serious problems if there is lack of jobs. Sengupta also looked at the question of women’s empowerment. On India-Bangladesh relations, Sengupta said issues in the bilateral relations, such as, exchange of enclaves, migration, and so on, need to be addressed urgently and areas of cooperation need to be highlighted to take the bilateral relations to the next level. She said Bangladesh should also contribute to clearing the air a bit and encourage Indian investment. She also stressed on the need to focus on capacity building in both the countries. Sengupta emphasised that with regard to water issues, Nepal has been and is suspicious of India and hence confidence building procedures need to be in place. The lecture was followed by comments and observations by the discussants. It was observed that India would have to tap the potential of Bangladesh in the garments sector in order to increase trade between the two countries. The discussant said that the ready-made garment sector accounted for 79.5 percent (US$ 21.52 billion) of the total export earnings of Bangladesh, which was US$ 27.07 billion in the fiscal year 2012-2013. Bangladesh is also cooperating with India in the area of power and it was pointed out that today itself (5 October) a project linking the grid between Bheramara in Bangladesh to Beherampore in India has been flagged off by the Prime Ministers of the two countries. This is one major area of cooperation. The grid with a capacity of 1,000 MW will not be a one way grid transmitting electricity from India to Bangladesh. For, whenever Bangladesh has surplus electricity, it would sell it to India as well by the same grid. It was also commented that India should behave with her neighbours as an ’elder brother’, not as a ’big brother’. Talking about the non-tariff constraints in Indo-Nepal relations, another discussant mentioned how perishable goods are held back at the borders in unpreserved conditions for too long. He added that in the years following 2002, Nepal grew significantly in few sectors, but owing to quantitative restrictions from India, those sectors are fast dwindling. In a recent survey conducted of traders of Nepal, 27 percent of the respondents said that they want Nepal to trade with India, 13 percent said no, while the rest 30 percent were indifferent. Why were the 30 percent of the traders indifferent? The reason for the indifference of 30% traders is, according to the commentator, tariff and non-tariff barriers was imposed by India on Nepal whenever Nepal has tried to grow economically. Hence, it is not just tariff barriers but non-tariff barriers that are affecting Indo-Nepal economic relations. The fact that Nepal is land-locked is another constraint and it has to depend on India for transit routes. Nepal being a small country has to import raw materials and semi-finished goods and often transit becomes costly and time consuming via India. He identified a few areas of cooperation - energy, simplification of visa norms and customs. India being a big country in terms of size, population, civilization and economy, it must behave like a responsible neighbour. The final discussant said that international relations is all about perception as people perceive reality differently. In response to an earlier discussant’s plea that India, being big, should be generous to her smaller neighbours, this discussant pointed out that generosity in inter-state relations is not a sustainable proposition. She further clarified that deficit is hardly a marker of trade relations. This is because the flow of goods and services is driven by consumer demands rather than government decisions. Moreover, the South Asian countries produce similar goods and India by virtue of the economies of scale has an edge over others. India despite the many arm twists with Nepal or Bangladesh, has moved into a bigger picture -- from a bilateral to a regional trader. The lecture and comments of the discussants were followed by a stimulating debate on the factors and questions raised. Among the distinguished participants were Mr. Mahbub Hasan Saleh, Deputy High Commissioner of Bangladesh to India (New Delhi); Ms. Abida Islam, Deputy High Commissioner of Bangladesh to India (Kolkata), Mr. Chandra Kumar Ghimire, Consul General, Nepal and Dr. Sreeradha Dutta, Director, Maulana Abul Kalam Azad Institute for Asian Studies.
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