Cabinet approves $4.5 billion Line of Credit to Bangladesh

Projects financed under the LoC will enhance regional connectivity

The Dollar Business Bureau 

A MoU (Memorandum of Understanding) that was signed between India and Bangladesh during a recent diplomatic visit made by Bangladeshi PM Sheikh Hasina enabled India to extend a $4.5 billion Line of Credit (LoC) to its eastern neighbour. 

This MoU, on Wednesday, received a final nod from the Union Cabinet chaired by Narendra Modi. The Cabinet’s ex-post facto approval has officially sealed India’s financial participation in the infrastructural development of Bangladesh, which will also enable India’s connectivity with its North Eastern neighbours. 

The projects to be financed by this LoC will also create new business opportunities for Indian companies in Bangladesh. The MoU has listed out projects which will be undertaken under this agreement. 

Providing for the strengthening of its bilateral strategic partnership with Bangladesh, this move is indicative of a big leap in India-Bangladesh cooperation towards the development of South Asia. 

The $4.5 billion LoC to Bangladesh, intended to finance around 17 infrastructural projects (including port upgradation), is an extension to the extant $2.8 billion line. 

Another remarkable agreement drawn between the two countries during Hasina’s visit involved a $500 million LoC to assist Bangladesh in defence procurement. India is also working on negotiations on the controversial Teesta water sharing pact it has with Bangladesh. Bangladesh-Bhutan-India-Nepal (BBIN) Motor Vehicles Agreement also tops the priority list in enhancing regional cooperation to increase connectivity. 

India’s cooperation in the economic growth of its regional allies is likely to bring about new synergies in the region – raising its overall growth rate. This is also being viewed as India’s attempt to counter China’s growing influence in the region, by consolidating its own power over the block.

The Dollar Business Bureau - May 04, 2017 12:00 IST