Inter- and Intra-industry Trade Relations between Bangladesh and India: Empirical Results

Abstract

Bangladesh and India are two neighbouring countries in South Asia having strong political, diplomatic, trade and economic ties with each other. This article reviews and updates on the inter- and intra-industry trade relationship between these two countries using more recent data. More specifically, it examines the relative position of the two countries in global trade followed by trends and patters of bilateral trade using aggregative data. At a disaggregate level, the commodity composition of Bangladesh exports to and imports from India by major product categories is examined focusing on the revealed comparative advantage (RCA) to review and update the degree of inter-industry trade. Further, the Grubel–Lloyd index (GLI; Grubel & Lloyd, 1975) is examined to measure the degree of intra-industry trade by major commodity groups. The article finds that India has a much stronger relative position in the global trade vis-à-vis Bangladesh. India is also found to dominate Bangladesh in bilateral trade, resulting in a very large and persistent trade deficit of Bangladesh with India. At a disaggregated level, the article finds that India has a comparative advantage in more products than Bangladesh and that the GLI shows that the degree of intra-industry trade is almost negligible between the two countries.