BANGLADESH INSTITUTE OF INTERNATIONAL AND STRATEGIC STUDIES

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

Author: A.K.M. Atiqur Rahman, Shamsur Rahman

DOI Link: https://www.doi.org/10.56888/BIISSj2001v22n1a2

ABSTRACT

The paper makes an empirical analysis of the causality and implications of rapid growth for Bangladesh's import intensity with· India during the last two decades. It argues that rapid import growth from India is basically associated with diversion of the country's import sources. Major factors behind the phenomenal growth of import from India are the real appreciation of Bangladesh's domestic currency in relation to that of India along with real devaluation with most of its other import sources, growth of land trade due to improvement in road infrastructure, and increase in import of cereals from India following the government relaxation on private import of food-grain. Diversion of import source in favor of India has enabled the country to import intermediate, capital and consumer goods at a relatively cheaper cost, and enhanced country's food security. The paper also argues that despite the country's growing bilateral trade deficit, overall trade deficit is well stabilized within a sustainable range. If, however, bilateral trade deficit with India is of any concern, measures should be undertaken to enhance Bangladesh's export to India. In this regard, harmonisation of exchange rates, among other measures, merits active consideration.