"Bangladeshi exporters would have duty free access to the Indian market under FTA, while the present tariffs and other restrictions on imports into India from the rest of the world would remain the same", the bank observed recently in its latest study titled 'India-Bangladesh Trade, Trade Policies and FTA.'

The study on its executive summary on 'Bangladesh exports to India' highlighted potentialities of most of the Bangladeshi exportable products to India, especially RMG.

It said although the RMG market in India is far larger and more diversified than ready-made garments production in Bangladesh, Bangladeshi RMG products might be able to find market niches in India if they are able to link into strong Indian marketing organisations.

Under a pact on free trade with India, RMG exports from India to Bangladesh might, however, well exceed Bangladesh exports to India as the Indian items are considered advanced in terms of style, fashion and brands.

Citing an example, the bank said during the 2003-04 fiscal, Bangladesh RMG imports from India were just over $5million. These were mainly cotton trousers and shirts imported on over 85.5 percent tariff.

"If RMG imports from India were profitable despite such an extremely high tariff, they are likely to be expanded very substantially with a zero tariff under an FTA", the WB study further said.

It said this would be especially likely if the Bangladesh textile sector were excluded from the FTA by the use of a negative list, because Bangladesh garment producers selling domestically would then continue to be burdened by much higher textile input costs than their Indian competitors.

On the other hand, the potential Bangladeshi exporters would need to satisfy whatever rules of origin would be agreed upon under the FTA, the study added.

Under the South Asian Preferential Trading Arrangement (Sapta), the origin rule for Bangladesh is minimum domestic value added of 30 percent, but for many RMG products this could be difficult to meet unless some of the inputs are purchased in another Sapta member country like India. If that turns out to the FTA, it would be crucial to ensure fast and low cost transport and customs clearance of the textile inputs obtained from India, preferably over the land border.

The bank said there would be limited prospect for exports of agricultural products from Bangladesh to India within FTA, certainly not in the case of rice, wheat, coarse grains, sugar and onions which Bangladesh is importing from India on fairly large scale.

On the other hand, when Bangladesh's principal primary products are processed food, shrimps, raw jute, fish, tea, vegetables and tobacco and India itself exports those items on a much larger scale, probably leaving few opportunities for Bangladesh even if an FTA were to cut the Indian tariffs they face to zero.

The WB, however, said the very low level and slow growth of Bangladesh's exports to India is not primarily attributed to restrictive import policies in India.

Indian tariffs on industrial goods have fallen dramatically in the past three years and are now at historically low levels, and even lower on many products on which India has given substantial preference to Bangladesh under Sapta, they said.