India has finally given Bangladesh an opportunity to reduce the trade deficit of more than $4.5 billion by allowing 46 Bangladeshi apparel items duty-free access to the Indian market.

The decision came after a summit of the prime ministers of the two countries in Dhaka yesterday.

“Our export to India will double in a few years, if it resolves the issue of non-tariff barriers,” Commerce Minister Faruk Khan told reporters.

Bangladesh, which presently enjoys duty-free access for exporting 10 million pieces of garments to India a year, had sought duty-free entry of 61 items, including 47 apparel products, from India.

The items that got excluded are mostly fruits and vegetables. With this, India's negative list of products will come down to 434 from 480.

Analysts and exporters predict that this would expand Bangladesh's export beyond the traditional western market. They also believe the non-tariff barriers imposed by India could deprive Bangladesh of its potential exports.

Prof Mustafizur Rahman, executive director of Centre for Policy Dialogue, said Bangladesh could cash in on the duty-free access of its products to India provided that the supply-side capacity is increased and the non-tariff barriers are removed.

“It won't be easy to enter the Indian market, which is highly competitive. They have their own yarn and raw materials, and also the energy required,” said Rahman.

Another analyst Ahsan H Mansur said it is a small start for tapping into a huge potential.

“It will help us become part of the production chain of a major economy,” said Mansur, executive director of Policy Research Institute (PRI) and a former top official of International Monetary Fund.

Bangladesh is a major apparel exporter in the world and apparel exports accounted for nearly $18 billion or more than 80 percent of the country's total export of $22.92 billion in fiscal 2010-11.

Bangladesh enjoys duty-free access of its apparel products to the European Union, Canada, Australia and some Asian countries including Japan, Korea and China. It, however, could not reap the full benefit in some countries such as Canada, Japan and Australia.

But exporters believe that things would be different with India, as it is a next-door neighbour with a population of 120 crore. India's annual retail apparel market is estimated at $25 billion.

“We are competitive enough to enter the Indian market. We will be able to reduce the trade gap in three years,” said Abdus Salam Murshedy, former president of Bangladesh Garment Manufacturers and Exporters Association.

According to him, India could be Bangladesh's third biggest export destination after Europe and the USA.

“We can easily raise apparel export to 100 million pieces in the next year from present 10 million pieces,” said Mansur, executive director of the PRI.

He said it is a big opportunity to diversify Bangladesh's export markets and will help get more foreign investments in the future.

Source : The Daily Star