Bangladesh Trade Data
21-Jul-2023
Big news from the neighbourhood! India and Bangladesh have jointly taken a step towards enhancing their economic ties and streamlining trade transactions. Both countries have agreed to adopt the rupee as their preferred currency for trade, signalling a departure from their traditional reliance on the US dollar. This move aims to strengthen regional currencies, promote bilateral trade, and foster economic integration.
Bangladesh and India have introduced a new trading system to facilitate trade in rupees. This is an important move that will strengthen regional currencies and trade while reducing the dependency of the two nations on the US dollar.
Bangladesh and India have typically used the US dollar for their bilateral trade. By doing so, they eliminate the complexities associated with currency conversions, transaction fees, and other hindrances often experienced by using different currencies. The central banks of both nations have officially announced this new approach.
The mechanism allows designated banks in each country to establish nostro accounts in each other's currencies, enabling trade transactions to be conducted directly in rupees without converting into dollars.
Abdur Rouf Talukder, governor of the Bangladesh Bank, declared that this represented a historic time for trade between Bangladesh and India. Based on Bangladesh Import Data, bilateral trade between the two nations in 2022 was valued at over $10 billion. This number is anticipated to increase even more thanks to the new trade system.
This shift to the rupee for mutual trade holds numerous advantages for both countries:
Enhanced Efficiency: The new trade mechanism streamlines trade between Bangladesh and India by reducing transaction costs, making it more efficient.
Regional Economic Integration: Adopting the rupee fosters stronger bilateral trade between the nations, promoting regional economic integration.
Increased Export Competitiveness: With decreased dependence on the US dollar, Bangladesh's exports become more competitive in the international market.
Positive Growth Prospects: The new trade mechanism is projected to bolster economic growth for both Bangladesh and India, providing mutual benefits.
Now, gain some other benefits of a new trade mechanism:
Lower-cost transactions with a card with two currencies:
Trade between the two nations will be made even easier with introduction of the Taka-Rupee dual currency card, which is anticipated to be available starting in September 2023.
The dual currency card would improve trader convenience and promote economic linkages by lowering transaction costs when conducting business with India.
Formalising the Rupee Trade:
Although border trading has always occurred between Bangladesh and India in places known as "border huts," official transactions will now be carried out in rupees.
The trading will be conducted in rupees at first before gradually switching to the Bangladesh currency, the taka when the trade gap narrows.
Nostro Accounts and Exchange Rates Based on the Market:
Banks in both Bangladesh and India can now open Nostro accounts for foreign currency operations.
Market demand will decide the exchange rate, ensuring efficiency and openness in the trade process.
Consumer Benefits and Convenience:
The benefits of this new structure extend beyond the dealers. Additionally, the impact of this trade shift extends to consumers as well.
The price of products usually falls as trade becomes more convenient. The cost of basic goods like clothing, electronics, and food will be lower.
Conclusion:
By adopting the rupee as the preferred currency for mutual trade transactions, Bangladesh and India embarked on a promising journey towards increased economic cooperation. This move promises both nations convenience, affordability, and growth, making it a win-win situation. While some adjustments may be needed during the transition, the long-term benefits are expected to outweigh any initial challenges. As this transformation occurs, businesses and consumers can anticipate a more seamless trading environment.
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