Liberalisation preferable to India-Bangla FTA: World Bank study

New Delhi, Jan 11 (UNI) An India-Bangladesh free trade agreement, under consideration for sometime, will not confer any particular benefits, says a World Bank study.

Rather a broad-based liberalisation yielding much larger economic benefits while minimising risks would be preferable, the study on 'India-Bangladesh Trade, Trade Policies and Potential Free Trade Agreement' concludes.

Stating that such benefits as provided by a Free Trade Agreement (FTA) could be easily wiped out if the incentive schemes do not give the ''right signals'', it warns that by keeping out cheaper third-country imports, the FTA risks providing a captive, protected market where Indian producers might collude among themselves or with Bangladeshi importers to artificially jack up prices.

''This could also result in excluding cheaper goods from elsewhere forcing Bangladeshi consumers and businesses to overpay,'' says the study adding that the economic benefits for India will be modest since its trade with Bangladesh is small in comparison to India's overall trade.

The lopsided trade is in India's favour. Though more than 15 per cent of Bangladeshi imports come from India, there is a huge trade deficit with New Delhi that Dhaka offsets with surpluses with other countries.

In 2004, India's officially recorded exports to Bangladesh were about 1.7 billion dollars but its imports from Bangladesh were 78 million dollars.

According to the study, India will stand to profit more from the continuation of its policies of unilateral liberalisation especially paying attention to the removal of non-tariff barriers, specific duties on textiles and garments and prohibitive tariffs on agricultural products.

Bangladesh needs to bring down its protective tariffs to levels closer to those of its competitors in South Asia and elsewhere, the study adds.

Bangladesh exports to India receive tariff concessions under the South Asia Free Trade Agreement (SAFTA) but such trade accounts form less than 1 per cent of India's overall imports.

It calls for tackling illegal and informal trade that by some estimates could be as high as three quarters of recorded trade and is mostly from India to Bangladesh.

Instead India and Bangladesh could benefit from improvements in transport, storage and administrative infrastructure at land borders, greater harmonisation and cooperation in customs administration and banking relationships, the study says.

UNI