Bangladesh to have little benefits by trading with India in rupee
From Tuesday, Bangladesh’s trade with India is going to start in Indian rupee, instead of the usual US dollar, the dominant currency in international trade, with an apparent motive to overcome the present dollar crisis as well as dependence on the greenback. Noted economists have expressed doubt, and rightly at that, whether Bangladesh will have any benefit from this step.
Reportedly, trade settlement through Indian rupee will only apply to exports from Bangladesh, but imports from India will be settled in dollars. This has been taken supposedly to enable Bangladeshi exporters to receive export proceeds in rupees, and the rupees will be preserved for import bill settlement later.
Though when Bangladesh will have sufficient rupees to pay the export bill remains unsure, the fact is the country’s dollar reserves will continue to plummet. The present dollar crisis facing Bangladesh will not be solved by trading with the rupee. By using rupee for trade, Bangladesh will not have any benefit, but India will be able to show that its economic influence has grown. It will give an impression that it has become a superpower of sorts using the advantage of Bangladesh’s politically weak government.
Since the announcement of the US’s new visa policy for Bangladesh, the incumbent government is under severe pressure on the subject of holding the next general election in a free and fair manner. The government in Bangladesh through trade with rupee will also be able to show a kind of defiance to the US government.
Though there will be little or no benefits with trade with rupee, economists say, Bangladeshi businesses may face additional risks. The point here is that since Bangladeshi businesses made export earnings through dollars, they could simply pay in dollars while importing goods.
The experts have also pointed out the risk of currency conversion and pricing when invoicing will be made in dollars but payment will be made in rupee. Even more than that, conducting trade in Indian rupee may also increase Bangladesh’s dependence on India’s monetary policy, fluctuations in the rupee exchange rate and overall economic conditions. Any depreciation of the rupee against the taka could negatively impact the profitability of Bangladeshi exporters which is not desirable.
It has also been pointed out that Bangladesh’s dependency on India for imports and the use of Indian rupee in trade settlement can place Bangladesh in the receiving end with less bargaining power and limited ability to influence trade terms and conditions. The decision to trade with rupee is, therefore, like buying electricity from India’s Adani Power, more to serve India’s interests than for addressing Bangladesh’s present needs.
