Arun Jaitley is in the house

Indian Minister of Finance and Corporate Affairs Arun Jaitley is visiting Bangladesh at the invitation of his Bangladeshi counterpart AMA Muhith. Apart from inaugurating the Indian Exim Bank Bangladesh representative office, he will also jointly inaugurate with his Bangladesh counterpart a new scheme for cashless transactions in visa services run by the State Bank of India. India’s finance minister is also going to sign an agreement with Bangladesh for a $4.5 billion line of credit (LOC) offered by India reportedly to help Dhaka build several crucial infrastructure projects. He is likely to inaugurate several projects on which the two neighbouring countries are cooperating. The $4.5bn line of credit was announced in April 2017 when Prime Minister Sheikh Hasina visited India against her counterpart Narendra Modi’s visit in 2015. A line of credit is a flexible form of a loan that allows a borrower -- in this case Dhaka -- to access funds anytime as long as it is within the limit. The planned one, once signed today, will be the third line of credit, taking the cumulative value to $8bn in six years. In addition, the “Joint interpretative notes on the agreement between India and Bangladesh for the promotion and protection of investments” is also planned to be signed in a meeting between the finance ministers of the two countries. Jaitley is also speaking at an event today on “macroeconomic initiatives of the government of India.”The man of the hourJaitley, a celebrity lawyer and known to be an opening batsman with premier Narendra Modi on Indian economic and banking sector reforms, is already loved and hated by many analysts home and abroad for his success in GST roll-out, in taming inflation, driving demonetisation, and now for restructuring stressed banking assets. Some say he is little subdued by Mr Modi himself, as premier is at the forefront of all reforms. Despite it, the union finance minister who had to fit into bigger shoes of the predecessors is reportedly doing a good job with regards to bringing in further discipline in the economic domain and in narrowing the gap between the centre and the states.

Despite very good government-to-government relationship, Indian private companies are yet to grab promising opportunities in Bangladesh

Jaitley was also a member of the Prime Minister Vajpayee cabinet and served as union commerce and industry minister. Jaitley’s visit is treated with significance in view of increasing tensions between China and India with regards to occupying a bigger piece of Bangladesh’s opportunity space. Analysts in India felt that India needed to do more and demonstrate more commitment to Bangladesh’s success in the global arena. Taking an undesirable stance on Rohingya influx into Bangladesh and ethnic cleansing in Myanmar reportedly has accentuated the situation.Positive spins Bangladesh has seen increasing synergy between its own business community and Indian business houses in recent years to the backdrop of a better political relationship between the two neighbours. India has seen the highest number of travellers from Bangladesh, apart from a high increase in placement of Indian professionals and industrial workers in Bangladesh in recent years. Bangladesh is increasingly sourcing capital machinery, industrial raw materials, even essential commodities from India. Indian public and private airlines treat Bangladesh as a worthy destination commercially. The LOC discussed is the third in the line that has helped India to further tie up its relationship with Bangladesh. Especially the India Exim loan for Bangladesh-India friendship power plant, popularly known as Rampal power plant, which has shown a direction for furthering Exim investment in Bangladesh capital projects provided the building and construction company are Indian entities.Not-so-impressive track recordBangladesh has been slow in using up the previous $3bn of Indian credit reportedly due to procedural flaws. Until August, India disbursed a little over the $1.06bn loan it sanctioned in August 2010. Incidentally, the disbursement of the second line of credit for $2bn approved in March 2016 is yet to begin. Bangladesh has been made responsible for this delay by Indian officials concerned, thanks to the lengthy process for finalising projects as well as complications related to land acquisition. Of the first loan, $200 million was channeled to the Padma bridge project as grant, while the government decided to finance the project on its own. New Delhi later provided another $62m to support cost increase in several projects. The total amount of credit finally stood at $862m, of which $353m has been disbursed. In addition to the latest $ 4.5bn LOC, $500m will be made available for defense procurement. The two countries have come up with 17 projects to be funded by the new credit. Around $1bn of this will be spent on the infrastructure development of Rooppur Nuclear Power Plant. Despite this $8bn line of credit and increasing political synergy between the countries, many analysts in India (and may be also in Bangladesh) feel that India is lagging behind China in tapping the business opportunities offered by Bangladesh. Many enterprises in China are moving fast to grab opportunities in Bangladesh textiles, infrastructure, and financial sectors -- while Indian enterprises are still in hibernation. Despite very good government-to-government relationship and support from Indian high commission in Dhaka, Indian private companies are yet to grab increasingly promising opportunities in Bangladesh. One visit by Mr Arun Jaitley can’t do much in this regard.Mamun Rashid is a leading banker and economic analyst in Bangladesh.