India remains crucial partner in Bangladesh’s development plans: Former B’desh Bank Guv

Amidst staunch criticism and controversies over the fairness of the polls, the Sheikh Hasina government has come back to power for a record fourth time with an emphatic victory in the neighbouring Bangladesh. The opposition-free new government may not have political problems, but it is faced with several critical economic and geo-political challenges in the tenure ahead. Bangladesh’s relationship with India, particularly in areas of trade, economy and business and geo-politics is going to play a crucial role in the days to come. Speaking to Bizz Buzz exclusively, Dr Atiur Rahman, famed economist, Emeritus Professor, Dhaka University and former Governor, Bangladesh Bank, decodes these challenges and attempts to find out solutions

What should be the economic (also trade and business) priorities of the new government in Bangladesh?

Achieving macroeconomic stability should be the number one priority of the new government. The taming of inflation remains the major thrust of that agenda. Besides containing inflation from the demand side through consistent raise of the policy rates, Bangladesh should also prioritize exchange rate stability to attract more remittances and repartition of export earnings from abroad. In addition, the victims of inflation, particularly the low income groups should be provided more fiscal support through expanded social safety net programs. The adjustment of prices of imported energies and electricity must be made gradually in alignment with the rate of inflation as and when it starts declining. Simultaneously, the support for agriculture must continue to enhance supply of food grains and other agricultural commodities to bolster supply chains to impact on inflation from the supply side.

How much of this would be just continuity and how much new initiatives? What would be the new initiatives/measures required to take the national economy to the next level?

There will be substantial continuity in the policy strategy as Bangladesh is already in a well-defined IMF program. IMF is a highly technical institution and Bangladesh has been benefiting from the policy outline provided by this institution. A serious attempt is afoot to recover macroeconomic stability and Bangladesh should remain engaged on this policy strategy. However, Bangladesh also has a rich experience of inclusive development along with innovative initiatives of financial inclusion. It should continue to keep those gains on board and add value to the macroeconomic stability. It is said there is a synergy between financial inclusion and financial stability. I hope the new set of policy makers keep this in mind and do the needful to stabilize the economy. In addition, Bangladesh should remain engaged in facing the challenges of climate change and develop further partnerships with local and international development partners to address the issues related to climate mitigation and adaptation focusing on climate finance opportunities. The international development agencies and institutions are willing to collaborate with Bangladesh on climate finance and Bangladesh should not miss this opportunity.

A substantial share of these measures will be continuation of the policy measures that the government has already been implementing. The government has been especially keen on managing inflation (especially safeguarding the households belonging to the lower income strata). New experimental safety net programs should be piloted to meet the needs of not only the poor but also those living vulnerably just over the poverty lines. Additionally, GoB should ensure renewed emphasis on developing digital databases of the poor and vulnerable. At the same time the new government must ensure digital transmission of financial benefits to these citizens. To that end, GoB must utilize the vast experience of the MFIs as well as the digital financial service providers including the banks and MFSs.

Most importantly, at the very beginning of the journey of the new government, policy makers must commit to further improved coordination between the monetary and fiscal policies in alignment with the prevailing macroeconomic realities (for the short-term), and considering the macroeconomic potential of the country (for the long-term). Of course, socio-political stability as well as good governance must be ensured. And for that policy makers must take on board all stakeholders including the civil society and the international development partners.

Where and how does India fit in, in Bangladesh' new economic scheme of things?

I have already mentioned that the policy directions of the new government will mostly be continuation and augmentation of the policy measures followed by the previous government. India has been a most valued partner in inclusive development for Bangladesh especially over the last 15 years. Therefore, for the economic plans of this new government in Bangladesh, India will remain equally (if not more) important. The two governments have been enjoying a high-level of mutual confidence during the last 15 years so. This has yielded into unprecedented level of cooperation in the area of developing connectivity infrastructure. In the next five years, policymakers ought to further consolidate this partnership to bolster trade cooperation between not only these two countries but also with the other two BBIN countries as well. We must strive to induce further investments from Indian investors to make the best use of the connectivity infrastructure that we have developed and will be developing in near future.

What should be the thrust areas in Indo-Bangla economic relationship?

Bangladesh’s IT sector have been growing rapidly over the last 10-12 years and the size of its IT industry is likely to go beyond $5 billion within the next 5 to 10 years. In fact, this sector has the potential to become the next RMG sector for Bangladesh. Given this context, and given the fact that India is one of the most important players in the global IT arena - Bangladesh must strive to ensure collaboration with India in the IT sector for at least next couple of decades. Bangladesh could also significantly benefit from Indian cooperation in the field of human resource development (especially in the context of the fourth industrial revolution).

Agriculture will also be among the most promising areas of collaboration between the two countries. Indian primary agricultural producers can benefit from collaboration with Bangladesh’s burgeoning agro-processing industry. This may be especially true for NE India. In general, Bangladesh should especially emphasize enhancing collaboration with economic stakeholders from NE India (to rip maximum benefits from India’s ‘Act East’ policy). This line of policy directive will also gain significant support from other Southeast Asian economic power houses.

Indo-Bangla economic partnership should also strive to bring in both Nepal and Bhutan into their umbrella as much as possible. Bolstering BBIN intra-regional trade and economic cooperation relies largely on how good the Indo-Bangladesh economic partnership works out. Energy trade between these countries should also be a top priority. And most importantly, these countries should work together regionally as well as in the international arena to combat effects of climate change.

Given the fact that India stood beside Bangladesh rock-solidly during the crucial poll process, do you think this should bring the two countries closer?

The fact that “India stood beside Bangladesh rock-solidly during the crucial poll process” is not surprising at all. India has been a crucial partner in inclusive development for this government for the last 15 years. Therefore, India’s recent support has come only as a continuation of its existing policy of mutual cooperation.

One must understand that the current regime in Bangladesh has been working relentlessly to ensure inclusive and sustainable development of all people of Bangladesh and maintain a mutually beneficial relationship all the other regional and sub-regional development partners especially India. Therefore, it is only natural that India has strongly supported Bangladesh in maintaining socio-political stability. And experts and commentators are confident that India will continue to do so in the foreseeable future.

How would a stronger Indo-Bangla relationship help both the countries in strengthening their positions at regional and global level?

Given the current geopolitical realities, it is likely that the global economic environment will continue to be tumultuous in the coming decade. This may be especially frustrating for stakeholders in economies such as India and Bangladesh because- such volatility is likely to hinder the realization of their macroeconomic potentials (e.g., becoming developed countries within the next 15 to 20 years). This means- in addition to the socio-cultural similarities that these two countries have, their macro-economic aspirations as well as the structural challenges they face also appear to have certain similarities. Therefore further bolstering this partnership/cooperation can ensure better coping strategies in an increasingly volatile global economic scenario.