Bangladesh surged four places to become India's fifth-largest export destination on 31 March, as shipments to several of the country's usual customers fell due to the pandemic, but its eastern neighbour continued to expand.
According to official data, exports to Bangladesh increased by 11% in the preceding fiscal year, despite India's total exports falling by 7% due to the pandemic.
Over the last decade, Bangladesh has seen an extraordinary economic change, and it is on track to overtake India in terms of per capita GDP, reports Mint.
As the coronavirus pandemic disrupted supply chains, India's exports to most of its main markets fell. Among the country's top 20 export destinations, shipments grew only to China (27.5%), Indonesia (21.7%) and Brazil (7%), apart from Bangladesh.
While the United States ($51.6 billion) remained India's top export destination, China ($21.2 billion) surpassed the United Arab Emirates ($16.7 billion) to become the second-largest export market. Bangladesh, on the other hand, outperformed Singapore ($8.7 billion), the United Kingdom ($8.2 billion), Germany ($8.1 billion), and the Netherlands ($6.5 billion). Even Nepal ($6.8 billion) surpassed Pakistan as India's ninth-largest export market.
Cotton and cotton yarn ($1.5 billion), power ($517 million), gasoline ($496 million), rice ($354 million), and corn ($328 million) were India's major exports to Bangladesh in FY21.
Bangladesh, unlike India, avoided a recession in 2020, despite the fact that its GDP growth fell to 2.4% from 8.2% because of the pandemic. The World Bank expects the economy to gradually rebound to 3.6 % in 2021 to 5.1% in 2022, as normalised activity, moderate inflation and expanding readymade garments exports boost private spending, the major engine of development.
Sanjay Kathuria, senior visiting fellow at the Centre for Policy Research, said the rise of Bangladesh as a sub-regional economic power is unambiguously good for India. "Its growing middle-class provides a big market for Indian agriculture and manufactured goods, as well as for services. The FY21 trade data is proof of this. In addition, Bangladesh is already the biggest source of medical tourists to India."
"Significantly, its increasingly ambitious private sector can be a major source of foreign direct investment in India's North-East, and India's northeastern states, as well as the central government, should be paying attention to this aspect of Bangladesh's potential," he added.
India could immensely benefit from Bangladesh's growth, said Nisha Taneja, a professor at the Indian Council for Research on International Economic Relations (ICRIER).
"India has for several years been a major supplier of cotton and cotton fabric for Bangladesh's readymade garment industry. Bangladesh depends heavily on its readymade garments sector as it accounts for 45% of its manufacturing GDP and 85% of its exports. In 2021, Bangladesh's readymade garments exports are expected to overshoot pre-covid levels."
"This sector was allowed to continue its operations despite the lockdown and was also able to absorb a major stimulus package given by the government. As a result, the sector has been able to quickly respond to rising global demand since July 2020, which may well be one of the major reasons for a quick economic recovery," she added.
India should also pay special attention to help Bangladeshi firms access India's vast market, Kathuria said.