India has proposed a new free trade pact to Bangladesh as the current trade concessions are set to lapse under the World Trade Organisation rules.

A new trade pact has to be done because Bangladesh’s rising per capita income has elevated it to a Developing Country nation from a Least Developed Nation.

India’s concessions given earlier based on that status will lapse within three years.

Officials said commerce minister Suresh Prabhu, who is in Dhaka, has proposed “that India and Bangladesh may consider signing a Comprehensive Economic Partnership Agreement (CEPA) which would include an agreement for trade in both goods and services and investments”, officials said.

The CEPA is a free trade pact under which two countries eliminate basic customs duties on many items.

India has signed a number of such pacts with countries ranging from Thailand to South Korea and Japan and is negotiating deals with the EU, New Zealand among others.

New Delhi, however, did not sign any such pact during the Narendra Modi-government’s tenure as rightwing elements within the ruling party feel India has been too generous in giving away trade openings, leading to an ever widening trade deficit.

“Bangladesh’s per capita income is now $1,610, way higher than the $1,230-level set for defining a least developed country, this graduation means we will have to renegotiate a lot of trade arrangements, including with India from which we get duty free, quota free access on a host of items,” Bangladesh’s commerce minister Tofail Ahmed had told The Telegraph earlier this year.

Indian officials said that they would offer “very generous terms” to the Sheikh Hasina-led government.

India-Bangladesh trade stands at $7.5 billion with India’s exports accounting for $ 6.7 billion and Bangladesh’s exports at $800 million.

The Telegraph