India-Bangladesh : Line of Credit

  • India operationalized a $4.5 billion line of credit to Bangladesh.
  • It is seen as part of India’s larger strategic move to wean Dhaka away from China, the biggest supplier of defence equipment to Bangladesh for many years now.
  • The signing of the third line of credit agreement will enable the implementation of 17 pre-identified projects of developmental priority to Bangladesh in key sectors such as power, railways, roads, shipping, ports, etc.
  • Line of credit will be provided at a concessional interest rate of 1% per annum, with repayment over a period of 20 years including a five-year moratorium.
Why this is important?
  • China has been making inroads into countries in India’s neighbourhood—with major infrastructure projects, development aid and financial assistance.
  • India’s ties with Bangladesh have improved dramatically in recent years after India signed the land boundary agreement in June 2015—hanging fire since 1974. The conclusion of the pact was seen as a major confidence-building measure between the two neighbours.
  • India sees Bangladesh and Myanmar as important neighbours, sharing borders with both countries. Insurgents operating in India’s northeast have taken shelter in both countries in the past, using bases there for hit-and-run operations.
  • India has viewed with concern increasing Chinese aid and infrastructure assistance to both countries—fearing a heightening of Beijing’s profile and a waning of its own influence in its periphery.

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