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The recent visit of Bangladesh Prime Minister, Khaleda Zia, made a definite attempt to salvage India-Bangladesh relations. The visit is important considering the current downturn in bilateral relations, marked by rhetorical anti-India statements. However, this visit has altered the atmospherics of the bilateral relationship despite not adding any new substance to it. The political atmosphere matters in asymmetrical relations because its psychological dimension is immense. India-Bangladesh relations should be analyzed in this perspective where there is an asymmetry in power and size. This explains the apprehensions and hopes in Dhaka.

India looms large in Bangladesh's economic and political life, impinging on its discourse on governance. The India factor is all pervasive in Bangladesh's calculus. A substantial quantity of vegetables, fruits, consumer items, poultry, and meat in the Dhaka market originates in India. Therefore, India-Bangladesh relations have many dimensions touching upon the emotional chords of the people. This is where their core relationship lies and explains why the India factor generates such strong emotions in Bangladesh. These strong emotions are then manipulated by the political interests.

Two issues gained prominence during Khaleda Zia's visit. First, the economic dimension of the relationship, secondly, the trafficking of narcotic substances. Bangladesh has a huge trade deficit with India amounting to $2 billion and it has been pressing for duty free access for its good into the Indian market. Indian investment in Bangladesh is only $12.5 million. Though Bangladesh is reluctant to enter a bilateral FTA at present, the Bangladesh finance minister said that it can think of a "micro-FTA" between the two countries. The Indian finance minister indicated that India would allow free access to certain Bangladeshi products into its market. Bangladesh has assured that it would examine the possibility of greater trade by creating scope for Indian investment in Bangladesh. It also suggested a strategic business partnership between the two countries that would help businessmen from both the countries. In fact, India could invest in specific manufacturing industries that could export to other SAARC countries. The ministry of commerce has conducted a study that identifies some sectors in which Indian investment can take place.

The trade agreement clearly states that both "countries agree to make mutually beneficial arrangements for the use of their waterways, railways and roadways for commerce between the two countries and for passage of goods between two places in one country through the territory of the other." After reaching Dhaka, however, the Bangladesh foreign secretary assured that Bangladesh had not granted transit rights to India, but would allow transport of its goods through its waterways. This issue is linked to the sovereignty issue and has acquired a security dimension. Given the political sensitivity in providing road transit, both major political parties, the BNP and the Awami League, have not been able to take a decision on this issue. In fact, a study conducted by the Dhaka Metropolitan Chamber of Commerce and Industry in 1997 recommended transit facilities being accorded to India with certain safeguards. It is important to note that India had road transit facilities within the former East Pakistan till 1965. Given the political dynamics in Bangladesh, both countries are discussing a trans-shipment facility that would allow Bangladeshi transporters to carry Indian goods within Bangladesh territory from one point to the other. The shortest Bangladesh-India rail link will be functional by reopening the link from Chilahati in Nilphamari district to Holdibari in India. This route would also give access to the Mongla port, and awaits a political nod from Dhaka.

Khaleda's visit signalled a definite thaw in the bilateral relations. Whether this would sustain itself from the barrage of anti-India rhetoric that is likely to follow the countdown to the impending national elections is difficult to say. Controversial issues like illegal immigration, border skirmishes and the issue of militant camps in Bangladesh would remain thorny issues and will prevent any meaningful improvement in relations. Similarly, the rise of the religious right would impinge on India-Bangladesh relations in the long run. In terms of future relations, a high level visit was long overdue. It is likely, however, that bilateral relations will remain in flux till a new government assumes office in Dhaka in January next year.