Increased availability of letters of credit (L/Cs) appears to have contributed to a very significant rise in exports from Bangladesh to India.

Exports to India shot up by 68 per cent to US$241.96 million in the fiscal year 2005-06 from US$143.66 million in the preceding year, according to Bangladesh's Export Promotion Bureau (EPB) statistics.

Narrowing deficit

Partially as a result of more exports to India's north-eastern region, Bangladesh's trade deficit with India narrowed by around 14% in the last financial year.

The trade deficit was also narrowed in Bangladesh's favour by falling imports from India, which dropped by around 8 per cent to US$1.8 billion in 2005-06 compared with the previous year.

L/Cs credited

Vice-chairman of EPB, Mir Sahabuddin Mohamed, is in no doubt that improved availability of L/Cs for importers in north-eastern India is one reason for the substantial increase in exports from Bangladesh to India.

He told local media that banks in north-eastern India had been reluctant to open L/Cs for imports from Bangladesh, hence discouraging potential importers. But now Mohamed says they can open L/Cs, which he sees as a step forward in facilitating trade between the two countries.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.