India has always enjoyed close ties with Bangladesh and under New Dellhi’s flagship ‘Neighbourhood First’ policy, the relationship between the two countries has further improved in all sectors—from trade and investment to security and strategy

As I pendown this article, I need to mention that I was in Dhaka, capital city of Bangladesh last week for the Indian Ocean Conference, May 2023 jointly organised by Ministry of External Affairs (MEA), India and Ministry of Foreign Affairs (MoFA), Bangladesh on the theme “Peace, Prosperity and Partnership for the Resilient future in the Indian Ocean." The event marked meaningful discussions and thoughtful presentations by senior government officials, experts and scholars on the relevant developmental and security issues in the region.

More importantly, I could sense the warmth, cultural richness and linguistic solidarity between India and Bangladesh during my interactions with the locals while visiting the historical Dhakeshwari temple and exploring the city's famous textile markets. The return from Dhaka to Kolkata by the famous ‘Maitree Express’ train in a much more comfortable way, is in itself an example of extraordinary connectivity between both the countries.

Historical Context

Indo-Bangladesh relations have been impacted by the various dynamic forces in the past. However, given their shared historical, social and cultural links, the two countries enjoy a unique camaraderie and friendship between them.

In 2021, both countries celebrated the ‘golden jubilee of the Bangladesh Liberation War’ and 50 years of diplomatic relations. Despite many limitations and challenges in the bilateral relations, a common historical legacy and geographical proximity has driven Indo-Bangladesh relations in the changing geo-political context of Southeast Asia and India ocean region.

In the 1990s, the restoration of democracy in Bangladesh heralded a new era in the country's ‘economic resurgence,’ and with this, a new phase in Indo-Bangladesh engagement. This coincided with new economic reforms in India, and a more economically outward policy based on comparative advantage and pragmatic market economy considerations.

India’s ‘Look East Policy’ in 1991, which aimed to integrate supply chains in South Asian region and which was later revised as ‘Act East Policy’ in 2016, makes Bangladesh as India’s most important ‘economic and strategic neighbour’ and critical to realise the policy potential based on five pillars of better transport connectivity, digital linkages, trade and commerce, investment promotion and energy cooperation.

In the year 2015, the Land Border Agreement (LBA) was signed between both. The historic agreement facilitated the transfer of 111 enclaves, to Bangladesh ending historic indecisiveness, adding robustness to the bilateral relations.

India’s assistance to Dhaka during Liberation War, 1971 and logistical aid during Cyclone ‘Bhola’ in the same year is still cherished fondly by the Bangladeshi nationals. The mutual ties have always been marked by the salient values of openness, mutual trust, cooperation, and mutual respect.

Economic Partnership

The economic relations between India and Bangladesh are the outcomes of a diverse commonalities, historical legacy, and geographical proximity. They too faced the challenges of power politics in the South Asian neighbourhood.

In recent years, much like advanced economies, the very idea of ‘economic security’ has propelled emerging economies to foster and deepen economic cooperation. The Indo-Bangladesh relationship is not immune to this logic, and in recent years has witnessed new levels of economic engagements with supply chain links, enhanced physical and border connectivity, investment partnerships and mitigating climate risks.

In the recent past, bilateral economic relations have seen an upswing with bilateral trade witnessing a consistent rise, growing from US$ 9.69 billion in FY 2020-21 to US$ 16.15 billion in FY 2021-22. This happened despite the adverse impact of the COVID-19 pandemic.

There are three key aspects of India-Bangladesh economic relations. Firstly, in the last decade, we have seen Asia emerging as a ‘leading region’ of the global foreign investment growth destinations. Despite economic contraction, Asia was the largest foreign direct investment (FDI) recipient in the world in 2019. South and Southeast Asia attracted US$57 billion and US$156 billion investments, respectively. Much of these investments were in the manufacturing sector and related activities, preferably in electronics.

FDI has been a key factor to drive export-led growth in Southeast Asia. At the time when several companies are leaving China’s shore, can India and Bangladesh lure them to invest in their countries? These are relevant questions which need to be addressed by both the countries.

Secondly, enhanced connectivity will boost trade and commerce. The multimodal road-rail link between Agartala to Akhaura, reopening of an old rail link between Chilahati and Haldibari, bus connectivity from Dhaka to Shillong are steps in the right direction. In waterways connectivity as well, several new routes have been activated as well. The delivery of services, products and welfare benefits must remain a focus, without any disruption or crisis. A well-structured functional framework can be built and expanded to boast the objectives.

India is Bangladesh's biggest development and trade partner, and both the countries have signed more than 90 MoUs in areas like space, IT, shipping, electronics, energy, tourism and the civil nuclear programme. India has also extended three Credit Limits amounting to US$8 billion to Dhaka for the development of physical infrastructure and better connectivity in the region.

Thirdly, during PM Sheikh Hasina’s last visit to India, Dhaka invited Indian investors to set up industries in Bangladesh and reserved three Special Economic Zones for them. To further economic ties, a sustained effort is required towards ‘developmental partnership’ through new trade routes, improved connectivity, shared water management models, industry engagements, transfer of knowledge and skill training, medical education and digitalization. There are also ample investment opportunities in consumer products, manufacturing, health care and energy sectors.

Moreover, while expanding their mutual economic engagements both countries must ensure that sufficient investments are made in improving the quality of human resource. Leveraging the demographic dividend as the world moves towards digitisation is extremely important to promote innovation and change in both the economies. Sectors for enhanced cooperation should also include scientific research, software and hardware development and IT in which India has predominantly global strengths and competence.

Additionally, the long coastal line between the two countries allows a framework for ‘sustainable cooperation’ in sectors such as aquaculture and submarine mining. Bangladesh has a well-devised Blue Economy (BE) policy, which sets a framework for it. There is a scope for cross-border collaboration in these areas of trade and commerce and security.

Way Ahead

There is great potential for a ‘strong and sustained economic cooperation’ between the two countries. As echoed during the just concluded Indian Ocean Conference, 2023 in Dhaka. Given the climate vulnerabilities, India and Bangladesh have an opportunity to build climate-resilient infrastructure and an effective integrated emergency surveillance system to better analyze and prepare for climate disasters.

Even the possibility of ‘Indo-Bangladesh-Japan Economic Cooperation’ within a structured framework could be a better and more feasible way to achieve common goals. All these three countries have ties marked by their salient values to democracy, openness, mutual trust and cooperation.

India’s G20 Presidency is a timely opportunity for Bangladesh, invited as a guest country to the group’s outreach programme in September this year, to engage with the top nations of the world. It is high time bilateral relationship between India and Bangladesh must be focused to create regional responses on economic stability and national security in the post-pandemic world.

To this, multilateral organizations like Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), South Asian Association for Regional Cooperation (SAARC) and the Bangladesh, Bhutan, India, Nepal initiative (BBIN) could play a catalyzing role in shaping regional prosperity and providing ‘added space’ to address emerging concerns and build long term confidence in relations.

***Author holds PhD from JNU in East Asian Studies, and teaches at Deshbandhu College, University of Delhi; views expressed are his own