Responding to creeping restrictions by Bangladesh on Indian goods, Delhi has fired a warning salvo. It has banned imports of a slew of goods including readymade garments, processed food and plastic items through land ports. The annual trade in these categories is worth around $770 million to Bangladesh, according to an estimate by the Global Trade Research Initiative. Bangladeshi goods can continue to be routed through the sea ports of Kolkata and Nhava Sheva. The logistics of these roundabout shipments may price many Bangladeshi goods out of the Indian market. Perhaps that is the intent.
Ever since Sheikh Hasina was removed as prime minister of Bangladesh last August, relations between the neighbours have worsened. Bangladesh first blocked yarn and rice imports from India, and increased scrutiny on the borders; it followed up by delaying India’s goods transit to the Northeast. The trade standoff is a fallout of the deteriorating political relations. The interim regime in Dhaka, headed by former banker Mohammad Yunus, has taken exception at Delhi giving Hasina political asylum and demanded her extradition. India, on the other hand, has voiced concern at the increasing attacks on Bangladeshi Hindus by Islamist groups and watched with concern as Dhaka has strengthened its links with Beijing. A new spoiler is the gradual mending of Bangladesh’s relations with its historical foe Pakistan.
India is Bangladesh’s second largest trading partner. Bangladesh imported Indian goods worth $11.4 billion during 2024-25, and exported just around $2 billion. Bangladesh’s booming $47-billion garment industry substantially depends on India for raw cotton supplies. If these stop, alternative sources can be found; but then Bangladesh would lose its competitive edge. Perishable food like vegetables and fruits is another segment for which Bangladesh relies on India because of the proximity provided by land routes. On the other hand, while the Indian consumer may lose out on inexpensive Bangladeshi garments, it is also a window of opportunity for the robust Indian textile industry. Bangladesh currently holds an upper hand in providing the shortest overland route to the Northeast, but the alternative connector to Kolkata via the proposed Shillong-Silchar-Sittwe (in Myanmar) route may render the Bangladesh passage inessential. The current trade restrictions by India could be seen as a teaser; things could get worse if relations are not settled across the table soon.