Abul Kamar, Sunil Saroj, and Shalini Gupta
Informal cross-border trade is a global phenomenon that is most common in developing countries. In Bangladesh, India, and Nepal, this trade is integral to the local economies and has broader economic and development impacts. As part of their work related to informal trade under the Regional Trade and Agricultural Transformation in the Bay of Bengal Countries and Cereal Systems Initiative for South Asia (CSISA), IFPRI researchers examine the intricacies of informal agrifood trade, including questions about how formal and informal trade coexist, how informal trade is organized, and how quality and prices are managed.
In 2023, IFPRI researchers Abul Kamar and Sunil Saroj, along with the Indian Council for Research on International Economic Relations (ICRIER) team, traveled to the Bangladesh–India border to explore different aspects of informal agrifood trade. For their work at the India–Nepal border, they were joined by researcher Shalini Gupta from the Institute for Integrated Development Studies (IIDS) and the South Asia Watch on Trade, Economics and Environment (SAWTEE) team.
We aimed to understand a range of topics, including why informal trade occurs, what are the factors that drive informal trade, how this type of trade is coordinated and maintained, how product quality and verbal contracts are ensured, and why some agrifood products are more likely to be traded informally. This work builds on previous research that assesses major informally traded commodities and drivers of informal trade along the India–Nepal border and the Bangladesh–India border. In this essay, we share observations from our travels and compare how the logistics of informal trade differ between the Bangladesh–India and India–Nepal borders.
Our approach
To better understand informal agrifood trade, we conducted stakeholder consultations and comprehensive primary surveys across both international border areas. Studying informal trade is challenging, mainly because it occurs outside of official channels and lacks formal documentation. Any exploration of informal trade must rely on primary research, which is difficult to obtain and can be unreliable. We gathered qualitative data through interviews and questionnaires administered to a wide range of stakeholders, including local traders, customs officers, leaders of the business community and the village council, members of the district council, and wholesalers and retailers. This methodical approach allowed us to explore the structure of informal trade, identify key challenges, and understand the economic significance of these cross-border transactions, providing important insights into informal agrifood trade in the region.
Observations from our trips
Informal trade is carried out in very different ways across the Bangladesh–India and India–Nepal borders. On the Bangladesh–India side, the border is fenced and monitored by surveillance personnel, though this monitoring is limited. Most informal trade happens at night, with traders finding ways to exchange products discreetly. During the day, women carry small packages of agrifood products across the shallow Mahananda River near the border, often hiding these bundles in their sarees. Workers at tea gardens are allowed to freely cross the border, and, along with local villagers, they also carry small packages from one country to the other. Informal trade is also facilitated by the annual Milan Mela fair, which is organized by the Indian and Bangladeshi governments and allows relatives living across the border to reunite in person.
In contrast, the large border between India and Nepal is open, and trade occurs freely throughout the day and night. Local middlemen, known as Blackia, make multiple trips each day to transport products across the India–Nepal border. These middlemen pay commissions to border agents at checkpoints in each country. The team learned about a bicycle rental business in Nepal that has operated for more than five decades, with multiple generations of family members working as Blackia to transport goods. As communication systems have improved and become less expensive, they have helped boost informal trade along both borders. Trading partners and the carriers who transport goods use SIM cards to communicate, and many traders use WhatsApp to pay for goods.
On the Bangladesh–India border, both governments are working to revive border haats, which are trading posts that served as hubs for commercial activity in Phansidewa in the 1970s. After India built fencing on its side of the border in the 1980s, the haats eventually closed due to the lack of free movement. Under the current initiative to revive the haats, five are now in operation as weekly markets, with plans to open 16 more. The haats have been quite successful at generating livelihood and income opportunities for local communities. In addition, a study by the ICRIER on trade facilitation measures to enhance women’s participation found that Indian women made up more than one-third of traders licensed to operate at the border haats. In contrast, India and Nepal do not have any border haats, and Nepali traders were unfamiliar with the concept.
Along both borders, women make up the majority of “carriers” transporting agrifood products. In Phansidewa, along the Bangladesh–India border, about 80 percent of carriers are women, as most of the border points do not have any female security personnel, and women are thus less likely to be searched. Small packages, such as spices, are typically transported by women here, while men transport larger agrifood packages. On the India–Nepal side, women carriers are also preferred because security personnel are more lenient with them than male travelers.
Moving forward
As next steps, we will continue to work with our partners to expand data collection and analysis of informal agrifood trade along the Bangladesh–India and India–Nepal borders. To understand how formal and informal trade coexist across these borders, IFPRI is examining formal trade, with a focus on diverse tariff and agricultural trade databases, and analyzing high-frequency disaggregated agrifood trade data. This approach will help us comprehensively explore trade timing and costs, and will enhance our analysis of agricultural trade patterns and policies.
Bangladesh–India
India–Nepal
Interaction with former panchayat (village council) member, local traders, wholesalers, and retailers in Phansidewa
Meeting with Gram Panchayat Head, Phansidewa, West Bengal in India
Interaction with traders at the local market in Phansidewa
Fencing at Phansidewa
Fencing at closed Tetulia Corridor, Phansidewa
The transboundary Mahananda river is the backdrop to women’s participation in informal trade
A tea garden worker walks past a gate in the border fence at Phansidewa
The open gate on India’s border toward Nepal allows for unrestricted crossings
Random border check at Birgunj
Blackia crossing the border with sacks of rice in Birgunj, Madhesh Province, Nepal
People moving freely at the Krishnanagar border
The border gate in Krishnanagar, Nepal, is also open
Police checking the local crossing at Krishnanagar in Lumbini Province
People crossing the porous border at Taulihawa, Lumbini Province, Nepal
Acknowledgments
IFPRI partnered with the ICRIER in India, as part of the Regional Trade and Agricultural Transformation in the Bay of Bengal Countries project, and the SAWTEE in Nepal, as part of the Cereal Systems Initiative for South Asia project. This partnership helped facilitate the networks needed to conduct field work related to informal trade, where language and trust are critical to collecting information. We specially thank Nisha Taneja, Sanya Dua from ICRIER and Dikshya Singh, Roopali Bista, and Sita Adhikari from SAWTEE for arranging the meetings with stakeholders and providing their valuable inputs. We would also like to express our gratitude to Devesh Roy, Mamata Pradhan, and Shahidur Rashid of IFPRI for their unwavering support and guidance.
A tale of two borders
Informal agrifood trade along the Bangladesh–India and India–Nepal borders
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