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India Bangladesh trade agreement likely to be inked sooner than anticipated

Prime Minister Narendra Modi with his Bangladeshi counterpart Sheikh Hasina

India and Bangladesh are set to ink a comprehensive economic partnership agreement (CEPA) – a kind of a free trade deal — soon. Sources said that the contours of the prima facie deal are ready.

“It will be signed very soon, sooner than we had expected,” a person familiar with the development said, adding that the draft was ready two months ago.

Bangladesh, expected to graduate from the least developed countries (LDC) category by 2026, has already stepped-up efforts to protect its exports market by re-drawing its trade strategy especially with neighbouring countries including China and Sri Lanka.

Also read: India sends first coal consignment to Bangladesh from Kolkata port

Instead of going in for long drawn multilateral trade negotiations, the Sheikh Hasina government is aggressively looking for bilateral agreements, which are relatively less time consuming.

“We must keep in mind that Bangladesh has opted more for bilateral trade agreements as these are somewhat easier to chalk out. The country is already seriously looking at protecting its own exports sector, which has been one of the main pillars of the economy,” Bipul Chatterjee, Executive Director, CUTS International told India Narrative.

Chatterjee added that India and Bangladesh are also in discussions to further improve connectivity in the region. “We need to look at boosting connectivity through the waterways as well as railways. While local trade used to be primarily undertaken through the water route, once effectively revived, small haul waterways can be used to increase trade in local products,” he said.

Also read: Bangladesh needs to diversify its exports basket in post Covid phase

According to the Dhaka-based Daily Star, Bangladesh's new identity as a developing country indicates its strength and capacity. “A graduated country holds an improved image and branding in the global landscape. This helps to pull investors into the country. Global lending agencies feel reassured on the ability of the country to pay back loans,” it said.

Meanwhile, with the rapidly changing geopolitical dynamics in the post Covid 19 world, the Narendra Modi government is also now looking at more such trade deals. Though New Delhi pulled out from the Regional Comprehensive Economic Partnership (RCEP) it has resumed talks on the possible trade deal with the European Union. Besides, it is also looking to get into an agreement with African Continental Free Trade Area (AfCFTA).

Also read: Accessing South Asian Markets from India’s SAARC Free Trade Membership, Preferential Trade Agreements

According to India Briefing, the economies of Nepal, Bangladesh, and Sri Lanka are closely intertwined with that of India. “The trade between India and other South Asian countries is increasing, which is advantageous for businesses from Europe, US, Australia to access markets in South Asia from India,” it said.