Effects of Proposed Free Trade Agreement between India and Bangladesh

Abstract

There have been substantial efforts to intensify economic interactions between India and Bangladesh in recent times. Despite these, trade imbalance remains a key feature in their bilateral trade. India maintains a huge trade surplus against Bangladesh and the trade policy negotiators are hopeful that a free trade agreement (FTA) between the two countries may address this issue. For instance, Indian investment in Bangladesh can enhance new supply and export capacities under free trade arrangements. This article examines the possible effects of proposed FTA between India and Bangladesh using the GTAP model. The analysis highlights the possible costs and benefits to the two nations in the event that the FTA is negotiated.