AN EMPIRICAL INVESTIGATION INTO THE CAUSALITY AND IMPLICATIONS OF BANGLADESH'S RAPID IMPORT GROWTH WITH INDIA

This article provides an empirical investigation into the causes and implications of the rapid growth of Bangladesh's imports from India and the resulting massive bilateral trade imbalance. The study uses trade data from the 1980s and 1990s to analyze the trends and composition of these imports. The research employs econometric analysis to investigate the key causal factors, including trade liberalization in Bangladesh, the price and quality competitiveness of Indian goods, geographical proximity, and the role of informal or unrecorded trade. The paper then assesses the implications of this import surge and trade deficit for the Bangladeshi economy, particularly its manufacturing sector. The analysis concludes that while some of this import growth is a natural consequence of geography and economics, its scale and speed pose significant policy challenges for Bangladesh, highlighting the need for a more proactive strategy to boost its own export competitiveness.

The large and growing trade deficit with India has been a central and contentious issue in Bangladesh's external economic relations. This paper moves beyond the political rhetoric to provide a rigorous empirical investigation into the causes and implications of this phenomenon. The study begins by presenting a detailed statistical overview of the bilateral trade data, which clearly illustrates the exponential growth of imports from India compared to the sluggish growth of exports from Bangladesh. The core of the article is an econometric analysis that seeks to identify the primary drivers of this import growth. The findings suggest that a combination of factors is at play. Trade liberalization under structural adjustment programs in Bangladesh is identified as a significant factor, as it reduced tariffs and made imports cheaper. The inherent price competitiveness of Indian products, due to economies of scale and lower transportation costs, is also found to be a major driver. The paper also discusses the important, though difficult to measure, role of large-scale informal trade across the porous land border, which further exacerbates the recorded deficit. In the final section, the paper analyzes the implications of this trend. It discusses the negative impact of import competition on certain domestic industries in Bangladesh, while also acknowledging the benefits for consumers in terms of lower prices. The study concludes that addressing the trade imbalance requires a two-pronged strategy: at the bilateral level, a focus on removing the non-tariff barriers that impede Bangladesh's exports to India; and at the domestic level, a concerted effort to improve the competitiveness of Bangladeshi industries.