Bangladesh's exports to South Asian nations reached a new high in the last fiscal year of 2021-22 for having grown steadily over the past three years, according to Export Promotion Bureau (EPB).

India's zero-duty benefit for most Bangladeshi items aided the growth, particularly in the last fiscal year, when overall exports to eight countries in the region grew 53 per cent year-on-year to $2.28 billion.

The demand for garments made in Bangladesh has been growing in Indian and Nepalese markets on the back of their expanding middle-income population.

Moreover, sourcing is on the rise by foreign retailers and brands like Walmart for Indian markets and by the neighbouring country's domestic retailers and brands such as Reliance and Aditya Birla, said exporters.

India alone accounted for $1.99 billion or 87 per cent of the total exports receipts from the South Asian Association for Regional Cooperation (Saarc) in fiscal year 2021-22, showed data from the EPB.

Delhi provided the zero-duty access to Dhaka in 2011 for all products, except 25 alcoholic and beverage items.

"It is encouraging that our export is growing in the Saarc region. We have long expected our trade in the region to grow," said Asif Ibrahim, vice-chairman of Newage Group, a garment exporter.

Asian countries such as India, Japan and China are the next target markets for Bangladesh as the country is set to lose its preferential market access in 2026 following its graduation from the group of least-developed countries, he said.

Previously, the country's exports to the region were mainly confined to formal woven shirts.

Now, garment manufacturers send inner garments, denim and causal knitwear products apart from other consumer goods.

With the buoyancy in export growth to the region, the Saarc region's share in Bangladesh's total export of $52 billion grew by one percentage point to 4 per cent, said the EPB.

Nearly three-fourths of Bangladesh's exports are destined for the European Union and North America, particularly the United States.

From basic to polo shirts, casual and formal dresses are the main export items to the Saarc nations.

Ibrahim thinks jackets are going to be the next major export item to Nepal because of the relatively colder weather and lengthy winter season in the Himalayan nation.

Shipments to Nepal and Pakistan were also encouraging. Bangladesh exported goods worth more than $105 million each to Nepal and Pakistan in FY22.

 "We are receiving a lot of responses from our Indian customers as we enjoy the zero-duty benefit in the country," said Sharif Zahir, managing director of Ananta Group, another garment exporter.

 "The exports to the Indian market are really encouraging for Bangladesh," he said.

Bangladesh's exports to India can potentially rise by 300 per cent, he added.

Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM), said earlier the Saarc region accounted for less than 2 per cent of Bangladesh's overall exports.

"We have seen that there has been progress in exports in the last two years. That is very encouraging. Our exporters have started realising that they will have to diversify markets," he said.

"This shows success of Bangladesh's exporters in market diversification but they are yet to diversify products," he pointed out.

He said garments dominate exports to the Saarc region as to other destinations for their global acclaim, which also shielded apparel products from the challenges of entry.

"There is an opportunity for Bangladesh to increase exports of other products to India," said Raihan, also a professor of economics at the University of Dhaka.

He said improving product quality through capacity enhancements not only of exporters but also of the Bangladesh Standards and Testing Institution in testing and certification are required for boosting exports.

Besides, improvement of facilities and connectivity of the ports will reduce trade costs and thereby facilitate shipments, he said.

 "There have been improvements on the Indian side as the country has developed a system of integrated check-posts at borders. But there are deficits on the Bangladesh side," he said.

South Asia is the least-integrated region in the world and despite being one of the most populous regions, intra-regional trade sits at less than 5 per cent of their total trade, according to a World Bank study.

Border challenges mean it is about 20 per cent cheaper for a company in India to trade with Brazil instead of a neighbouring South Asian country, it said.

Trade has been limited by several factors, such as inadequate roads and marine and air transport, protective tariffs, real and perceived non-tariff barriers, restrictions on investments and a broad trust deficit throughout the region, it added.

Inter-regional trade stands at 35 per cent in East Asia and 60 per cent in Europe.