India signed an agreement with Bangladesh providing $4.5 billion credit line for infrastructure projects. The loan was announced during Bangladesh’s Prime Minister Sheikh Hasina’s visit to India in April and is perhaps the biggest Line of Credit (LoC) provided by India to any country. After the meeting, the agreement was signed in the presence of Indian Finance Minister Arun Jaitley and his Bangladeshi counterpart, A. M. A. Muhith.
The deal was signed by Economic Relations Division Secretary Kazi Shofiqul Azam on behalf of Bangladesh and David Rasquinha, Managing Director of the Export-Import Bank of India (Exim) who represented India.
According to Finance Minister, Arun Jaitley, this was the largest quantum of credit India has extended to any other country and comes with a highly concessional rate of interest. Seventeen major projects in Bangladesh will be funded by the third line of credit including electricity, railroads, roads, shipping and ports.
India is Bangladesh’s second biggest trade partner after China, which last year pledged around $24 billion in loans for the South Asian country. It is important to note that initially granting of foreign aid was only the prerogative of the developed countries like the U.S. or western European countries. Although South-South Development Cooperation (SSDC) is not a recent phenomenon in international politics the term has gained greater momentum in the development assistance paradigm with the increasing role assumed by the emerging powers of the Global South in the international aid architecture. Of the BRICS economies, Brazil, Russia, India and China account for 40% of the world’s population and 25% of the global gross domestic product (GDP). The ninth BRICS summit, which was held this year in Xiamen, China, discussed issues of trade and cooperation and placed a special emphasis on countering western protectionism. According to Goldman Sachs, “...these four emerging economies could collectively surpass the output of the Group of Seven wealthy nations by 2032, with China becoming the world’s largest economy before 2030.”
This is not the first time that India has granted aid to other southern countries. It is a well recorded fact of history that India’s development assistance programme dates back to the 1950s when it began to provide aid to Nepal. It established the Indian Technical and Economic Cooperation (ITEC) programme in 1964 through which India has provided over $2 billion worth of technical assistance to other developing countries. According to a report prepared by Partnership and Business Development Division, India focuses its development assistance particularly on Bhutan, Nepal, Afghanistan and other developing countries of Africa. It is widely assumed that India’s sudden growing interest towards Bangladesh is a tool to counter the Chinese influence in South Asia.
China is a strong emerging power in the Global South. Chinese aid is substantial and has increased in recent years, especially in Africa. China reportedly planned to double aid to Africa by 2019. In May 2017, China announced it would provide roughly $20 billion in infrastructure and trade financing to Africa in the next three years. The recent dispute in Doklam- a territorial dispute between China and Bhutan where India intervened in support of Bhutan and justified its intervention on the basis of its bilateral agreement with it- shows efforts to counter China’s regional hegemonic aspirations.
Bangladesh is a strategic factor on China’s geopolitical agenda. Chinese aid to Bangladesh’s infrastructural projects demonstrates China’s growing influence in the Bangladeshi economy. China is currently Bangladesh’s biggest trade partner with an annual turnover of around $10 billion, which is in favour of Beijing. India’s emergence as a loan giver strengthens its economic clout, bolstering its political standing
in the Global South.