India’s Informal Trade with Bangladesh and Nepal: A Qualitative Assessment

Informal trade within countries of South Asia continues to thrive despite unilateral trade liberalisation in these countries and regional trade liberalisation under the South Asian Preferential Trading Arrangement. This calls for an in-depth analysis of the underlying factors that cause such trade and the institutional framework which supports it. This study of informal trade flows between India, Bangladesh and Nepal by Nisha Taneja and Sanjib Pohit focuses on the nature of markets in informal trade, the types of mechanisms supporting information flows as well as the issues with respect to governance of contractual relations in these markets. The study also analyses the nature of differences between participants in formal and informal trade both in terms of institutional arrangements and firm attributes. The basic framework for the study is drawn from new institutional economics. An extensive primary survey was conducted in the three countries to get the empirical data base for the analysis.