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India's Informal Trade with Bangladesh: A Qualitative Assessment

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  • Sanjib Pohit
  • Nisha Taneja

Abstract

The large and vibrant informal trade between India, and Bangladesh continues to thrive despite unilateral/regional/multilateral trade liberalisation in these two countries. This calls for an in‐depth analysis of India's informal trade with Bangladesh. Using insights from the New Institutional Economics informal and formal institutions engaged in cross‐border trade are contrasted to examine whether informal trading arrangements provide better institutional solutions. The analysis, carried out on the basis of an extensive survey conducted in India and Bangladesh reveals that informal traders in India and Bangladesh have developed efficient mechanisms for contract enforcement, information flows, risk sharing and risk mitigation. Further, informal traders prefer to trade through the informal channel because the transaction costs of trading in the informal channel are significantly lower than the formal channel implying that informal trade takes place due to the inefficient institutional set up in the formal channel. The principal policy implication from the study is that unless the transacting environment of formal traders improves, informal trade will continue to coexist with formal trade, even if free trade is established in the SAARC region.

Suggested Citation

  • Sanjib Pohit & Nisha Taneja, 2003. "India's Informal Trade with Bangladesh: A Qualitative Assessment," The World Economy, Wiley Blackwell, vol. 26(8), pages 1187-1214, August.
    • Handle: RePEc:bla:worlde:v:26:y:2003:i:8:p:1187-1214
    DOI: 10.1111/1467-9701.00568
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Kumar, Sushil & Ahmed, Shahid, 2014. "Growth and Pattern of Intra-Industry Trade between India and Bangladesh: 1975–2010," MPRA Paper 61113, University Library of Munich, Germany, revised 29 Dec 2014.
    2. Raihan, Selim, 2011. "Economic Corridors in South Asia: Exploring the Benefits of Market Access and Trade Facilitation," MPRA Paper 37883, University Library of Munich, Germany.
    3. Nisha Taneja, 2007. "India's Informal Trade With SriLanka," Working Papers id:953, eSocialSciences.
    4. Anisul M. Islam, 2019. "Bangladesh Trade with India: Trends and Patterns," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 5(2), pages 123-140, April.
    5. Sajeda Amin & Alaka Basu & Rob Stephenson, 2002. "Spatial variation in contraceptive use in Bangladesh: Looking Beyond the borders," Demography, Springer;Population Association of America (PAA), vol. 39(2), pages 251-267, May.
    6. Andreas Buehn & Mohammad Reza Farzanegan, 2012. "Smuggling around the world: evidence from a structural equation model," Applied Economics, Taylor & Francis Journals, vol. 44(23), pages 3047-3064, August.
    7. Hossain, Sharif M., 2009. "South Asian Free Trade Area: Implications for Bangladesh," MPRA Paper 18517, University Library of Munich, Germany.
    8. M.Govinda Rao, 2007. "Peace, Progress and Prosperity in the Northeastern Region: Vision 2020: Volume I," Working Papers id:1211, eSocialSciences.
    9. Anisul M. Islam, 2018. "Inter- and Intra-industry Trade Relations between Bangladesh and India: Empirical Results," FIIB Business Review, , vol. 7(4), pages 280-292, December.
    10. Rahman, Mohammad Mafizur, 2005. "Bangladesh-India Bilateral Trade: Causes of Imbalance and Measures for Improvement," Working Papers 1, University of Sydney, School of Economics.
    11. Kubo, Koji, 2016. "Myanmar's cross-border trade with China : beyond informal trade," IDE Discussion Papers 625, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    12. Raihan, Selim, 2012. "SAFTA and the South Asian Countries: Quantitative Assessments of Potential Implications," MPRA Paper 37884, University Library of Munich, Germany.
    13. Zahoor A. Rather, 2013. "India–Bangladesh Border Issues," International Studies, , vol. 50(1-2), pages 130-144, January.
    14. Suresh Moktan, 2008. "Evaluating the Intra–regional Exports and Trade Creation and Trade Diversion Effects of Trade Agreements in SAARC Countries," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 9(2), pages 233-260, September.
    15. United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) South and South-West (ed.), 2012. "Regional Cooperation for Inclusive and Sustainable Development: South and South-West Asia Development Report 2012-2013," SSWA Books and Research Reports, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) South and South-West Asia Office, number brr4, May.
    16. Selim Raihan, 2015. "South Asian Economic Union," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 16(2_suppl), pages 3-18, September.
    17. Rafat MAHMOOD & Eatzaz AHMAD, 2015. "Measurement Of Import Smuggling In Pakistan," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 25(2), pages 135-159.
    18. Patricia Sourdin & Richard Pomfret, 2012. "Trade Facilitation," Books, Edward Elgar Publishing, number 14596.
    19. Nisha Taneja & Samridhi Bimal & Isha Dayal, 2016. "India’s Informal Trade with Pakistan," Working Papers id:11076, eSocialSciences.

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