Economic slowdown in India and China may hit Bangladesh: Analysts

The economies of China and India are considered as the two wheels of the Bangladesh economy, but their slowdown could affect Bangladesh with regard to import, export, project support and many other indicators.

The Indian economy reached its peak with 8.2 percent in 2016 but dropped to 6.8 percent in 2018. In the September quarter last, the rate decelerated to 4.5 percent, according to a report of Mint.

Meanwhile, China's economy, after maintaining a sustained growth averaging above 10 percent for three decades, began receding in 2011 and came down to 6.6 percent last year. It may fall further to 5.5 percent in the next two years, forecast an International Monetary Fund.

Economic slump in the two neighbourly countries will decrease their purchasing capacities, resulting to a decline in Bangladesh's export volume in these destinations, while inflation may raise the prices of products, capital machineries and intermediate goods, experts fear.

Dr Zahid Hussain, former lead economist of the World Bank's Dhaka office, said the socio-economic scenario of Bangladesh is almost similar to that of India and factors shrinking the Indian economy may hit Bangladesh hard.

"The crisis of the Indian economy began in the early 1990s when the economy shifted its focus to the service sector. It invested huge amount in the service sector and achieved a high growth in information and communication sector but neglected the manufacturing sector," he said.

Bangladesh has a comparatively better base in the manufacturing sector. But the country is facing more problems than India in other indicators such as banking, infrastructure, environment of doing business and reforms, he explained.

"India is not a significant export market of Bangladesh. That's why any slowdown in Indian economy may not impact our overall export earning," he said, adding, "But, our consumers may have to pay more for Indian products because it is one of the largest import sources."

According to the Export Promotion Bureau, Bangladesh's export earnings from India last fiscal reached $1.25 billion for the first time. But the export value to China has been fluctuating between $694.97 million and $949.41 million for the last four fiscal years.

Downturn in the Chinese economy may impact the economy of Bangladesh both positively and negatively, said Dr Ahsan H Mansur, the executive director of the Policy Research Institute of Bangladesh.

Despite being a huge market, China imports products worth less than $1 billion from Bangladesh. Decreasing competitiveness of the country could open the door for Bangladeshi products in China and other countries.

"China is the largest source of raw materials and capital machineries of garment and many other manufacturing industries of Bangladesh," he said, expressing concerns that costs of industrialisation and production may rise further due to the slowdown in the Chinese economy.