India – Myanmar Trade Relationship – An Overview
India Myanmar share a 1,643 km land border has a long history of economic linkages. Currently, India wants to cooperate with Myanmar as part of its "Act East" policy to gain influence and market share in ASEAN, while Myanmar want to have improved economic ties with India to gain its economic clout and end its isolationist policy.
Notwithstanding the facts, the two countries’ trade relationship remains largely underdeveloped. India Myanmar trade is only $1.3 billion and India is only the 9th biggest FDI investor in Myanmar, representing only 1.36% of total FDI invested into Myanmar.
The economic relationship between two countries, especially border trade, has suffered from the lack of clear and consistent policy on both sides. High tariffs from the Indian side also make the country an unattractive market for Myanmar exporters.
Logistical challenges are daunting due to lack of physical linkages and poor infrastructure between the two countries. Both countries score poorly on the ease of trading across border index by the World Bank.
Air and sea linkages between the two countries are limited. Only two Indian cities New Delhi and Kolkata are connected by air to Myanmar. The number of Indians visiting Myanmar and people of Myanmar visiting India are very few.
It requires two pronged strategy to overcome these challenges. Frist, India and Myanmar should put huge emphasis in building road, rail, and sea and air connectivity.
The second approach to strengthen institutional support for bilateral trade. This involves preferential trade agreement with Myanmar with an emphasis on agricultural and border trade.
Beyond this, logistics, processing, and manufacturing facilities can be developed in the northeast region of India to give a new fillip to serve bilateral trade. India and Myanmar are considering series of initiatives for expansion of border trade. Indian has agreed for avoidance of double taxation and prevention of fiscal evasion with respect to Income taxes with Myanmar.
The agreement is to stimulate the flow of investment, technology and personnel from India to Myanmar and vice versa. It is also expected to provide tax stability and facilitate mutual economic cooperation between the two countries.
Another important step is the linking of United Bank of India (UBI) at Moreh post in Manipur with Myanmar’s Economic Bank at Tamu. The two banks would avail the Letter of Credit (LoC) facilities and Indian rupees and Myanmar’s kyats can be legally converted into foreign currency at these banks.
To make banking facilities still easier, the two banks are even connected by telephone. As a result the volume of trade is expected to increase significantly.
India and Myanmar are negotiating to increase the number of tradable commodities that at present is confined to only 22 items. New Delhi is considering items like life-saving drugs, bicycle parts, fertilizers, cosmetic items, garments, motorcycle parts, X-ray papers, and imitation jewellery items to be included in the tradable list.
There are also talks to allow free movement of people beyond Moreh in India and Tamu in Myanmar. The central government has approved the construction of a composite check-post and other infrastructure facilities at Moreh. This would include ‘Border Haat’, and other such concepts.
Finally, only better communication between the trading partners could alone help in increasing bilateral trade. The importance of business delegations, special promotion campaigns is much needed to create awareness between the two countries to promote trade relationship.
More than the government it is the involvement of the Indian business community to take a lead in helping in increasing the volume of the trade with Myanmar is very much needed.
For India, Myanmar is a test-case of an opportunity to truly implement its "Act East" policy.