India is likely to give Bangladesh a credit line of at least $3.5bn for infrastructure projects during Prime Minister Sheikh Hasina’s state visit in April, as Beijing and New Delhi jostle for geopolitical influence in South Asia.

The credit line, which would be India’s third to its neighbour, would go toward a variety of projects ranging from nuclear and liquefied natural gas power plants to ports, railways and the establishment of special economic zones, according to a Bangladesh government document seen by Bloomberg.

New Delhi and Dhaka will also sign a defence cooperation agreement and various memorandums of understanding relating to hydro projects in Bhutan, shipbuilding and upgrading border posts, according to a separate document.

India is trying to strengthen relationships with neighbouring states such as Bangladesh and Sri Lanka as China continues to court South Asian nations by pledging large sums of money for port and infrastructure projects that New Delhi views with suspicion. In a sign of its deepening ties with Beijing, Bangladesh bought two submarines from China last year.

The government of Indian Prime Minister Narendra Modi, who announced a second $2bn line of credit when he visited Bangladesh in 2015 after an earlier $800m credit line, has tried to integrate the region’s economies with road, rail and shipping routes.

India is trying to strengthen relationships with neighbouring states such as Bangladesh and Sri Lanka as China continues to court South Asian nations

But even as India seeks to unite its neighbours against its arch-rival Pakistan, New Delhi’s financial fire power still pales in comparison to the funds available to Chinese President Xi Jinping, who last year pledged $20bn in low-cost loans for infrastructure projects, in addition to existing large investments in Pakistan and Sri Lanka.

“Ideally, they would like to counter that, but the Chinese offer is such a huge amount, they can’t possibly match that,” said Harsh Pant, an international relations professor at King’s College London.

Hasina’s visit, starting April 7, is her first in seven years, according to India’s foreign ministry, and comes against the backdrop of a fresh surge in Islamic State-linked attacks across the country. Bangladesh’s growth is expected to increase to 7.2pc this fiscal year from 7.1pc last fiscal year, according to government estimates.

“India will give Bangladesh as much as $5bn, which is a new development,” Mashiur Rahman, economic affairs adviser to Hasina, said by phone. “There are many areas to look at, but economic cooperation is the most substantive. Joint investments and joint entrepreneurship will open up the new directions of cooperation.”

A spokesman for India’s Ministry for External Affairs, Gopal Baglay, said he could not comment on the issue. Oil minister Dharmendra Pradhan said he expects some agreements to be signed after the meeting between the two leaders. “We are discussing several energy projects with Bangladesh, such as LNG and supply of petroleum products.”

The credit line would include $940m for the development of a component of the Rooppur nuclear power plant, $350m for a multipurpose terminal at Bangladesh’s Payra port and $177m for a power transmission line between India’s Jharkhand and Bangladesh’s Bogra. It would also include $500m for a new railway line from Bogra to Sirajganj and $157m for a solar power project. It would also see India provide $550m for special economic zones, including at Bangladesh’s Mirsorai and Payra.

The two countries would agree to upgrade some customs posts, as well as establish border markets for vendors, along their 2,545-mile (4,096-kilometre) boundary, and will sign memorandums of understanding relating to shipping routes and the operation of satellites, according to the documents. The $3.57bn figure listed in the documents does not include funds related to upgrading the border posts.

India and Bangladesh were also expected to sign MoUs relating to shipbuilding and a joint investment in a hydro power project in Bhutan.

Seeking to make India a global power, Modi has made progress in boosting ties with Sri Lanka and Bangladesh, said Pant, the professor. Both countries joined India in boycotting a meeting of the South Asian Association for Regional Cooperation last year, which was set to be held in Pakistan. And on March 23, Bangladesh signed a deal to join a South Asian satellite project being launched by India — a project that includes all South Asian nations except Pakistan.

Bloomberg’s Debjit Chakraborty contributed.

Bloomberg/The Washington Post Service

Published in Dawn, Economic & Business, April 3rd, 2017