India-Bangladesh Economic Ties Boosted by Sheikh Hasina Visit

By Bradley Dunseith

Bangladesh Prime Minister Sheikh Hasina was on a four day visit to India from April 7 to April 10; her first bilateral visit in seven years. Bangladesh goes to elections next year and market watchers expect stronger bilateral economic and strategic engagement in the meantime.

Investments in building trade and connectivity with Bangladesh holds many objectives. It is highly beneficial to the development of India’s northeast states and serves India’s foreign policy goal of balancing China’s presence in the region. 

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Sphere of Indian influence

India is investing an approximate US$9 billion into Bangladesh, securing a strong economic and political partner while showcasing the country’s ability to lend assistance.

The two countries signed 22 agreements in various areas that saw the participation of both private and public sectors in India – in defense cooperation, hydrocarbon sector, civil nuclear cooperation, cyber security, power cooperation, skill development, and developmental cooperation, among others. India is avidly trying to maintain its sphere of influence from an encroaching China who, last year, promised Bangladesh US$20 billion in investments.

The promised investments will also increase India’s presence in Bangladesh’s energy sector and foster stronger connectivity between the two countries – adding to greater business and development opportunities in India’s northeastern states.

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India Bangladesh MoUs

Over the course of Hasina’s visit to India, the two countries signed a total of 16 Memorandums of Agreement (MoUs) and six other agreements.

The pacts focus on the following areas of cooperation:

Infrastructure

• India has extended Bangladesh US$4.5 billion in credit for the development of infrastructure, and 17 infrastructure projects have already been identified by Delhi and Dhaka;
• India has committed to financing a diesel pipeline from Numaligarh (Assam state, India) to Parbatipur (Bangladesh).

Connectivity

• India and Bangladesh have agreed to develop an inland waterway from Sirajganj (Bangladesh) to Daikhowa (India) and Ashuganj (Bangladesh) to Zakiganj (Bangladesh) on the Indo-Bangladesh river protocol route;
• India and Bangladesh will establish train and bus links between West Bengal’s capital Kolkata and Dhaka via Khulna (Bangladesh);
• India and Bangladesh will establish a goods train between Kolkata and Khulna via Petrapole (India) and Benapole (Bangladesh);
• India and Bangladesh agree to ‘border markets’ (haats) on the Indo-Bangladesh border.

Defense

• India has committed to a US$500 million credit for Dhaka’s defense procurement;
• MoUs have been signed between Defense Colleges in India and Bangladesh to enhance cooperation on strategic, defense, and operational studies;
• Pact on Defense Cooperation Framework between India and Bangladesh.

Joint cooperation

India and Bangladesh agree to enhance cooperation on:

• Peaceful uses of outer space;
• Nuclear safety;
• Information technology and electronics;
• Aides (i.e. lighthouses) to sea navigation;
• Earth science and development;
• Passenger and cruise services;
• Mass media and audiovisual development;
• Cyber security.

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Where will these developments be felt?

The most important outcome of Hasina’s visit is India’s offer of US$4.5 billion for various infrastructure and development projects, which also marks the largest single line of credit India has ever extended to another country. India is strengthening its commitments to Bangladesh while attempting to reassert its role as a frontier power in South Asia in the backdrop of China’s increasing reach.

Stronger regional connectivity and infrastructure growth will encourage the flow of more people, resources, and goods between the two countries, and is sure to have a positive impact on the Indian states that border with Bangladesh.

The diesel pipeline going from Numaligarh in Assam state to Parbatipur in Bangladesh, for instance, will help develop a promising yet underdeveloped region. Assam is one of the ‘seven sister states’ that makes up northeast India – a small yet resource rich region. The northeast acts as India’s ‘gateway’ to the ASEAN states, and India is already working to increase the region’s connectivity with these states through Thailand and Myanmar.

Further links to Bangladesh will help establish the northeast region as an economic hub, providing channels for the development of its many untapped resources. The agreement to build a navigable inland waterway (fairway) on the Ashuganj-Zakiganj stretch of the Kushiyara river and the Sirajganj-Daikhawa stretch of the Jamuna river on the India Bangladesh protocol route will reduce the logistics cost of cargo movement to northeast India. This in turn will lessen the present congestion along the Siliguri ‘Chicken Neck’ corridor that connects Bhutan, Nepal, Bangladesh, Sikkim, Darjeeling hills, northeast India, and the rest of India.

Stronger relations between the two countries also means increased stability across borders and more commercial movement on India’s trade routes with Bangladesh. Watch the northeast states of India as well as frontier cities in West Bengal as commercial activity and new opportunities for regional trade continue to improve.

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