Context:

  • Prime Minister Sheikh Hasina has returned to power in Bangladesh for a historic fourth straight term earlier this month after her party, the Awami League, secured two­thirds of the seats in the recently held national elections.
  • Prime Minister Narendra Modi was among the first world leaders to congratulate Ms. Hasina showcasing the close bilateral relationship between the two countries.

Historical background:

  • The foundation of India’s relationship with Bangladesh was laid down in the 1971 Bangladesh Liberation War.
  • India provided critical military and also material support to assist Bangladesh in its fight for independence from Pakistan.
  • Despite this, relations worsened within a few years as military regimes took control.
  • There was a rise in anti­India sentiment in the mid­1970s over issues ranging from boundary disputes and insurgency to the sharing of water.
  • The instability continued for a few decades until Sheikh Hasina came to power in 1996 and scripted a new chapter in bilateral ties with a treaty on the sharing of waters of Ganga.
  • Since then, India and Bangladesh have built cooperation in trade, energy, infrastructure, connectivity and defence.

Economic cooperation:

  • Bilateral trade between India and Bangladesh has grown significantly over the last decade.
  • Bangladesh has emerged as India’s largest trade partner in South Asia with bilateral trade reaching $18 billion in 2021­2022 from $10.8 billion in 2020­21.
  • India is also the second biggest trade partner of Bangladesh, with exports amounting to $2 billion in Indian markets.
  • In 2022, both nations concluded a joint feasibility study on a Comprehensive Economic Partnership Agreement (CEPA) between two nations.
  • The agreement which is designed to reduce or eliminate customs duties on traded goods and simplify trade norms, is anticipated to open up broader social and economic opportunities.
  • The CEPA gains additional significance as Bangladesh is set to lose its Least Developed Country (LDC) status after 2026, thereby losing its duty­free and quota­free market access in India.
  • Bangladesh will be eager to finalise a Free Trade Agreement (FTA) with New Delhi.

Ties in infrastructure:

  • As a “major development partner” of Bangladesh, India is funding several infrastructure and connectivity projects in Bangladesh.
  • India has extended Lines of Credits worth over $7 billion to Bangladesh since 2010.
  • PM Modi and Sheikh Hasina made history last year when they inaugurated the Akhaura­Agartala rail link which connects Bangladesh and the northeast through Tripura.
  • The link has given India access to Chattogram and Mongla ports in Bangladesh for the movement of cargo.
  • It is likely to boost small­scale industries and develop the states of Assam and Tripura.
  • Bangladesh imports nearly 2,000 megawatts of electricity from India.
  • The BIMSTEC Master Plan for Transport Connectivity focuses on connecting major transport projects in India, Bangladesh, Myanmar and Thailand, thereby establishing a shipping network between the respective countries.