Bangladesh dollar trade to be hit by India’s port restrictions, may lose $770 million

New Delhi: India’s decision to impose port restrictions on Bangladeshi goods may hurt Dhaka’s dollar-earning trade, especially in garments and processed goods, at a time when the country is already navigating a tricky economic and geopolitical shift.

According to the Global Trade Research Initiative (GTRI), a trade think tank, New Delhi’s move may restrict imports worth $770 million from Bangladesh—nearly 42% of total inbound shipments—by barring several goods from land routes and limiting them to a few seaports.

India’s move, which affects key items like readymade garments, processed food, and plastics, comes against the backdrop of Dhaka’s growing closeness to China and a series of recent trade restrictions targeting Indian exports, GTRI said in a report on Sunday.

The biggest blow would be to Bangladesh’s main export—garments, which earned $618 million between April 2024 to February 2025.

India will now allow such shipments only through the seaports of Nhava Sheva and Kolkata, cutting off overland trade that had long supported this corridor, according to a government notification issued on 17 May by the Directorate General of Foreign Trade (DGFT).

Several other goods, including flavoured drinks, plastic items, cotton waste, and wooden furniture—worth about $153 million—have been completely blocked from entering India via land routes, especially through West Bengal and northeastern states.

However, the import of fish, edible oils, liquefied petroleum gas, and crushed stone has not been restricted. In addition, exports of Bangladeshi goods to Nepal and Bhutan, which transit through India, will also remain unaffected.

Also read | Bangladesh calls for integrated economic plan including India’s northeast states in talks with Nepal

A retaliation?

While the Indian government has not officially stated a geopolitical reason for its decision, the trade action closely follows Bangladesh’s restrictions on Indian exports. These include a ban on yarn through five key land ports, curbs on rice, and limits on items like paper, tobacco, and milk powder, said Ajay Srivastava, co-founder of GTRI.

Dhaka has also introduced a transit fee on Indian cargo passing through its territory, ending years of zero-fee movement under regional cooperation frameworks.

For Indian exporters already facing delays, inspections, and market barriers, the port restrictions appear to be a calculated response, Srivastava said.

Indian textile manufacturers have long raised concerns about unfair competition. While Indian firms pay a 5% goods and sales tax on locally sourced fabric, Bangladeshi exporters benefit from duty-free Chinese fabric and export incentives, allowing them to undercut Indian prices by 10-15%, according to the GTRI report.

With top global retailers such as H&M, Zara, Primark, Uniqlo, and Walmart sourcing from Bangladesh, some of that stock finds its way into the Indian market, hurting domestic manufacturers, the report added.

Also read | Bangladesh set to receive $1.3 billion from IMF next month after exchange rate agreement

Chinese influence

The larger story lies in the India-Bangladesh relationship lies in Dhaka’s shifting political and economic alignment. Since the fall of Sheikh Hasina’s pro-India government in mid-2024, Bangladesh has moved closer to China. Bangladesh’s Interim Prime Minister Muhammad Yunus signed deals worth $2.1 billion during a visit to Beijing in March. 

China has since taken up sensitive projects like the Teesta River development, an area of long-standing India-Bangladesh cooperation, raising concerns in New Delhi over China’s growing role in the region.

“While Bangladesh has not openly supported Pakistan during the recent India-Pakistan escalation, its silence and growing tilt towards China are being watched closely in Indian policy circles,” said Abhash Kumar, trade expert and assistant professor of economics at Delhi University. 

“The latest trade curbs are not being seen in isolation but as part of a broader strategic recalibration, where India is using economic levers to signal its discontent,” Kumar added.

Also read | India halts ₹5,000-crore cross-border rail projects amid Bangladesh unrest

Hope for reconciliation

Despite the current tensions between India and Bangladesh, experts believe the relationship is not beyond repair. Bangladesh remains India’s largest trading partner in South Asia, and both countries have gained from years of connectivity and cooperat

Commerce ministry data shows that bilateral trade between the two nations stood at $14.24 billion in 2022-23, with $12.22 billion in exports and $2.02 billion in imports. In FY24, total trade fell to $12.91 billion, with exports at $11.07 billion and imports at $1.85 billion. 

In FY25, up to February, India exported goods worth $10.40 billion to Bangladesh and imported $1.83 billion, bringing total trade during the period to $12.23 billion.

Mint reported on 9 April that India had withdrawn a key transit facility that allowed Bangladesh to move export cargo through Indian territory to third countries, amid rising global trade tensions following US President Donald Trump's reciprocal tariffs announcement on 2 April. That move disrupted a system that had enabled Bangladesh to send exports to neighbouring countries quickly and at low cost for years.