At the outset, let me thank the President of the Chittagong Chamber for inviting me for this interaction with the business community of Chittagong. This is my first visit to this beautiful city and I was particularly keen to meet all of you given that Chittagong is in many respects the commercial capital of Bangladesh.

2. Bangladesh is one of the most important trade and economic partners of India, and the strengthening of our friendly and cooperative ties with Bangladesh is of paramount importance. There is a very simple logic in this objective. In today’s environment of economic liberalization and globalization, economic cooperation between neighbouring countries is particularly vital in ensuring economic growth and development in both countries. The one cannot be isolated from the other. Our multifarious links are such that if India is to maintain relatively high rates of growth, then it is in India’s interest that Bangladesh enjoys similar rates of growth and economic stability.

3. The prospect for trade and economic cooperation between India and Bangladesh are particularly promising at present. Both our countries enjoy a high degree of macro-economic stability. This was amply demonstrated during the two years of global economic downturn during which India and Bangladesh continued to enjoy good rates of growth. But the most significant recent development was the historic visit of Prime Minister Sheikh Hasina to India in January 2010. The Joint Communiqué signed at the end of the visit not only lays down multifarious areas of economic cooperation, but also sets a bold and ambitious vision of economic cooperation between our two countries. I am more than confident that the promises in the Joint Communiqué will be fully realized.
4. Let me talk now of some specific issues. Bilateral trade has crossed the $ 3 billion mark in 2008-2009. India is presently Bangladesh’s largest export destination in the developing world, with exports of over $ 280 million in 2008-2009. Although the figure is still relatively small, it is encouraging to note that Bangladesh’s exports to India have expanded nearly 5 times from $ 62 million in 2000-2001 to US $ 280 million in 2008-09. Further at a recent economic seminar which I attended, a Bangladeshi economist showed how the recent growth is largely made up of non-traditional items. This is a clear sign that Bangladeshi businessmen are increasingly paying attention to the Indian market and tapping into the growth opportunities there.

5. The large trade imbalance is of course something that is often talked about. Let me try and clarify. The imbalance is partly the result of the forces of globalization whereby companies aim to source the most competitive inputs. If one analysis India’s export market to Bangladesh, it will be seen that these comprises mainly raw materials and primary goods – cotton, cotton yarn, coal, limestone, food, chemicals, steel and machinery. These raw materials and inputs are used by Bangladesh, not only to meet its own requirements, but also to export to other countries. Thus Bangladesh has a trade deficit with India, but a trade surplus with the EU and the US. Very few finished consumer goods come to Bangladesh from India. Automobiles is probably one exception, but here too in most cases final assembly is being done here and value is being added in Bangladesh.

6. Having said this, let me say quite categorically that India would like to see a sustained growth in Bangladesh exports to India. India is now one of the largest economies in the world and set to resume an annual growth rate of 8.5 – 9%. The Indian economy now imports a huge variety of production and services from all over the world. India has historically had a large global trade deficit in the region of $ 150 billion in recent years. Much of the economy is now private sector driven. If Bangladesh has competitive production and services to offer, there is absolutely no reason why the Indian private sector will not seek to import these.

7. In looking at the Indian market, two factors need to be kept in mind. One is the sub-regional market of North-East India. The Government of India spending 10% of its development budget in the North East. This will amount to some 14 lakh crore rupees by 2023. There is going to be a phenomenal increase in the purchasing power if the people of the North-East. You would have noticed that delegations of Chief Ministers and Ministers from the North Eastern States have been visiting Bangladesh, looking for economic cooperation and partnership with Bangladesh. Similarly, many delegations from Bangladesh have been visiting to the North East, including by Foreign Minister Dr. Dipu Moni to Tripura and Commerce Minister Mr. Faruk Khan to Assam and Meghalaya. What has clearly emerged is the enormous interest in the North East for close cooperation with Bangladesh on issues of trade, investment, connectivity and people to people contacts. One senior political leader from the North East told me that while India has a Look East policy, the States of North East India have a Look South policy. It goes without saying that it would be much cheaper to supply goods to the North East from Bangladesh than from Chennai and Bangalore. When I visited Agartala with the Bangladesh Foreign Minister, I found that the State Government has built a new Secretariat, State Guest House, High Court etc. and I was happy to see that the entire furniture for these new buildings have been supplied by Bangladesh. The East and Northeast of India is the natural hinterland of Bangladesh.

8. The second factor that also needs to be considered is the broader economic linkages that are being forged. We already have SAFTA, and BIMSTEC is being negotiated which would link India, Sri Lanka and Bangladesh with ASEAN. India has separate Freed Trade Agreements with Singapore, ASEAN, and Korea. Others are under negotiation. ASEAN has its own set of FTAs with China, Japan, Korea and Australia. Throughout the Asian region, intricate supply chains, trade and investment links are being forged. India and Bangladesh need to work together to tap into these opportunities.

9. What are the actual practical issues that need to be looked into to boost India- Bangladesh economic links, and in particular Bangladesh’s export to India? Let me elaborate a few points. Firstly, I think the Bangladeshi business community has not yet fully explored the opportunities arising out of SAFTA. India advanced by one year in the implementation of non-reciprocal duty free preferences on some 4800 tariff lines in January 2008. The last round of liberalization included over 100 tariff lines of export interest to Bangladesh. There is thus a huge scope to manufacture non-traditional items in Bangladesh for export to India. To facilitate this we have encouraged at least 5 major business delegations to visit Bangladesh in the last few months, and I am grateful to the Bangladeshi business community for their enthusiastic response. It is only through direct contact between businessmen, and the setting up of joint ventures, that new products can be found for export to India. There are already some encouraging results with reports coming in of new joint ventures agreements in such areas as bicycles, auto-components, leather and leather products, and food processing.

10. The second area that needs attention is services, particularly the IT sector. You are all aware of the boom in the Indian IT sector, while Indian IT companies having multiple locations all over the world. Multinational IT companies also have multiple locations, including in India. In think there is a huge untapped potential of adding Dhaka and Chittagong as new locations for the IT industry.

11. Thirdly, we have to work on various trade facilitation issues, particularly the Land Customs Stations which definitely need to be upgraded. This issue was discussed at the recent meeting of the Joint Working Group on Trade, and work is going on in both counties. India has committed to spend $ 125 million in improving facilities at 7 LCSs.

12. The fourth big issue arising out of the Joint Communiqué is one of connectivity and good progress has been achieved in implementing the various understandings. Ashuganj has been notified as a Port of Call for multi-modal connectivity and the Protocol on Inland Water Transit and Trade, in operation since 1972, has been further extended. I am happy to report that yesterday the first four consignments of over dimensional cargos for the Palatana Power Project in Tripura were successfully moved first by river to Ashuganj and then by road to Agartala. In other developments, for the Akhaura-Agartala rail link, to be financed by an Indian grant, the satellite survey has been completed, a new alignment has been jointly agreed and work has begun on preparing the Detailed Project Report. A joint preliminary survey has also been completed for a bridge over the river Feni which will make more effective the proposed new Land Customs Station at Subroom-Ramgarh. Draft modalities for the use of Chittagong and Mongla ports by India are under discussion. 

13. Elements in increased connectivity between our two countries must not be looked at as a zero sum game since it is quite obvious that huge benefits will accrue to both with this enhanced interaction. While these new avenues of increased connectivity are being discussed and implemented, it must be borne in mind that the new routes would need to be nurtured and promoted for both countries to derive maximum benefit from them. For instance, Chittagong and Mongla Ports have never been used by the North Eastern States since 1947 and would need to be promoted as viable routes with the business community. Similarly, the Inland Waterways routes need to be popularized since the figures of recent years show a decline in the volume of cargo traffic. For instance transit trade by waterways fell to 5,000 tonnes last year from 10,000 tonnes the year before. This is of particular importance not only because the river route is the most environmentally friendly mode of transportation in this region but also because over 95% of the cargo is being carried by Bangladesh barges. The spin off benefits of increased interaction through enhanced connectivity is obvious in terms of logistics, warehousing, transportation and ultimate investment through Public-Private Partnerships in the development of infrastructure. Chittagong has much to gain from the promise of increased connectivity. 

14. Finally, let me mention that the $ one billion line of credit extended by India was finalized during the visit of Indian Finance Minister to Dhaka in August 2010. This is the largest single line of credit extended by India to any country. The Bangladesh side has already formulated 11 projects for coverage under the LoC in the areas of supply of railway rolling stock, supply of dredgers and railway and inland port infrastructural development. Technical level discussions have also been held for most of these projects and we now expect early finalization of the specific contracts. 

15. As I mentioned in the beginning, India is fully committed to implement the Joint Communiqué, and as I have outlined steady progress is being made. We securely look to forge strong and mutually beneficial trade and investment links with Bangladesh, and this endeavour I look forward to the support and partnership of Bangladesh business community.