Bangladesh is to receive subsidised credit to the tune of US$2bn from the Export-Import Bank of India, as the countries’ respective leaders came to a number of historic agreements.

As the Indian Prime Minister Narendra Modi travelled to Dhaka to sign a land pact that will give around 50,000 people their choice of statehood, trade officials inked documents that should help unlock some of the potential along one of the world’s most populated trade routes.

Permanent contours are now affixed along the 4,000km of India’s Eastern flank, as Modi continues his internationalist policy which, Pakistan aside, has seen him seeking stronger ties with India’s neighbours. The deal was initially agreed in 1974, but not formally ratified until now, with Modi and his Bangladeshi counterpart Sheikh Hasina agreeing to exchange more than 150 disputed and – until now, economically isolated territories.

The agreement states that 75% of the line of credit will be used to purchase Indian goods and services for projects in Bangladesh – a country whose economic potential has been talked up, but for which the infrastructure deficit has been stifling. Political unrest has also plagued Bangladesh’s trade sector, with activists taking physical action to disrupt trade routes.

“Trade in the first quarter of 2015 was down due to the political unrest faced in the country, including due to the fact that goods could not be moved due to road blockades,” Ed Faber, a relationship manager at the Asian Development Bank told GTR upon returning from Dhaka this week. “But now the environment has improved and there are expectations of continued growth in trade and trade finance in Bangladesh. In particular the garments sector, which constitutes around 85% of exports and an important component of overall growth, remains buoyant.”

India was keen to talk up the potential benefit to its exports sector, as Modi continues to roll out his ambitious “Made in India” initiative, which has seen him pass laws to cut red tape in order to encourage manufacturing in the world’s second most populous nation.

More specifically, the agreement is an advancement of Modi’s “Look East” programme which has thus far seen India lend upward of US$6bn to Bangladesh, Nepal, Sri Lanka and the Maldives.

Speaking to local press, India Exim’s Chairman Yaduvendra Mathur said: “We have already provided a US$862mn line of credit to Bangladesh and this US$2bn is going to provide a big boost to project exports from India and help Indian companies. It is a big boost to manufacturing and projects but also will create jobs.”

It’s expected that the primary benefit will be to Indian firms associated with the construction materials sector, such as cement and steel.