Integrating their economies will help Bangladesh and India rise up global and regional value chains
The Covid-19 pandemic has not only emerged as a global health crisis, leading to the loss of lives and livelihoods, but its ramifications can be felt across issues ranging from deepening inequality to declining food security.
The intensity of this catastrophe also needs to take into account the consequences of the acute financial crisis that will ensue after the pandemic is somewhat brought under control. Among those most significantly affected are the developing economies, such as India and Bangladesh.
With post-pandemic economic recovery being the focus for both the countries, turning towards regionalism via organizations like the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and the Bangladesh, Bhutan, India, Nepal Initiative (BBIN) may be mutually beneficial in the medium and long term in order to strengthen their domestic economies.
This is mainly for three broad reasons: First, a financial crisis in the major economies of the US or China will not have an extreme positive correlation with the domestic markets in India and Bangladesh. Second, both India and Bangladesh should be able to sustain the supply chain disruptions that are most likely to arise from China in the current scenario. Third and most importantly, both the nations should strive towards increasing the efficacy of domestic production and consumption processes.
Bangladesh is India’s biggest development partner in South Asia, and bilateral trade has been growing steadily over the last decade. Indian exports to Bangladesh in FY 2018-19 were estimated to be $9.21 billion, and imports from Bangladesh during the same period were $1.04 billion.
Connectivity has also been crucial for India-Bangladesh trade relations with repeated efforts to develop corridors from India’s northeastern states. India and Bangladesh were recently among the countries discussing modalities of the BBIN Motor Vehicle Agreement (MVA), which is touted to be a game-changer for neighbourhood cooperation.
With the recent flagging off of the first consignment from the Kolkata port headed towards Agartala and Assam via the Chittagong seaport in Bangladesh, a new beginning of trade connectivity has been initiated between the Bay of Bengal region and Northeast India. Along with this, India’s recent transfer of 10 railway locomotives to Bangladesh signals a clear intent to improve economic engagement.
If there is one thing the pandemic has taught us, it’s the heavy reliance of citizens as well as governments on social security and welfare schemes which help in mitigating economic damage. With around 90% of the workforce in India and Bangladesh working in the informal sector, the expansion of work days, coverage under the MGNREGS, increased entitlements and universalization under the PDS, expansion of community kitchens, etc can help stabilize the conditions of those who are poor and those who have been brought to the brink of poverty due to pandemic-induced stress.
Increasingly, with reverse migration of labour returning to their home states, there is a severe need to look at financial access. To that measure, it becomes imperative to look at the role of rural credit markets and microfinance institutions (MFI), especially in a country like Bangladesh where more than half the population rely on the same.
The pandemic has also hurried the arrival of “future of work” with increasing automation and wide-scale remote work setups, and has also displayed a lack of protection for workers in the gig economy.
With a global shift towards digitization and both India and Bangladesh having similar priorities within each country respectively, a young workforce will be key in driving innovation and change. Leveraging the youth in this transformative state becomes extremely important as the youth are drivers of innovation and change -- investing in skills and vocational training geared for the digital world, and improving digital and financial access (especially in rural populations). Creating avenues for research, collaboration, and development of new technologies within and between the two countries will be extremely important.
There is immense scope for both Bangladesh and India to rise up global and regional value chains by further integrating the economies -- improving trade connectivity, converting transport corridors into economic corridors, and most importantly, creating a platform for knowledge-sharing, transfer of technology, and the opportunity to conduct joint research and innovation through initiatives such as the South Asian university reformation.
The pandemic also coincides with Mujib Borsho (the centennial birth anniversary year of Bangabandhu Sheikh Mujibur Rahman), which provides a strong opportunity to strengthen ties between India and Bangladesh that are steeped in economic vision, cultural similarities, and Bangabandhu’s legacy.
In conclusion, it must be noted that the Covid-19 pandemic has had disastrous effects on both global and local economies, but at the same time, has opened an opportunity for India and Bangladesh to restructure the development and growth trajectories to become more resilient regional economies in the near future.
Soumya Bhowmick is Junior Fellow, Observer Research Foundation, Kolkata. Apoorv Somanchi is an MA in Economics candidate, Delhi School of Economics, New Delhi.