Benefits of cooperating with big neighbors : the case of Bangladesh and India

Bilateral cooperation between Bangladesh and India has been on the ascendant. On the economic front, Bangladesh-India trade has grown to become the largest bilateral trade relationship in South Asia. For Bangladesh, increased cooperation with India has resulted in economic gains through different channels including increased exports to India, inflow of Indian investment, and imports of electricity from neighboring Indian states. Further, mutual benefits could be realized through deepening cooperation. A Free Trade Agreement with India can unlock the trade potential of Bangladesh by improving its market access and providing cheaper and better-quality inputs for exporters. Bangladeshi firms could become key investors in the Northeastern region of India. Access to electricity generated in Nepal and Bhutan through India can open the opportunity for sub-regional energy trade and fulfill Bangladesh's rapidly growing demand for energy. Finally, expanding direct connectivity between India’s Northeastern region and the rest of India via Bangladesh can generate positive spillover effects through increased trade, investment, and people to people contact.