Abstract:
India is an important trade partner of Bangladesh. Trade relation in consideration to value and
volume is increasing gradually at a sustained rate. Official trade gap between Bangladesh and India
is also widening. At present it is almost ten times higher in favour of India. But the most important
issue is the informal trade practices between the two countries. According to different studies
including this study the informal trade figure is almost equal to official trade. Interestingly the gap of
informal trade is also in favour of India. Study shows that two items dominate the informal trade
sector that is cattle and Textile. Demand supply gap along with official restrictions on cattle trade
from the Indian side initiated informal cattle trade between the two countries. On the other hand
demand for Indian textile the price quality relationship along with non tariff barriers initiated huge
scope of informal trade. Though the trade is both way but like official trade gap informal trade gap is
infavour of India. Large numbers of people in the border areas are involved in informal trade
practices. The study focused on the impact of informal trade on macroeconomic aspects of
Bangladesh. The study found that impact of informal trade is significantly high for the economy of
Bangladesh. Study also highlighted that informal trade of cattle influencing different areas of
economy such as employment, balance of trade, food inflation, export oriented leather and dairy
industry as well. The informal trade has got both positive and negative impact on the economy. But
in the long run the negative aspects outweigh the positive impacts f informal trade. The study
suggests that reducing the magnitude of informal trade and diverting the informal trade through
official channels will benefit both the countries.
