Mint Primer: Can Bangladesh afford to mix politics and trade?
Summary
While the interim government in Bangladesh has been imposing restrictions on Indian exports, India last week hit back with its own measures.
Following the souring of ties, the interim government in Bangladesh has been imposing restrictions on Indian exports. Last week, India hit back with its own measures. Mint looks at the impact on bilateral trade and which of the two stands to suffer more from this dispute.
What’s the latest in this trade war?
On Saturday, India announced major import route restrictions on goods from Bangladesh. These curbs target over $770 million or 42% of all exports from Bangladesh. The eastern neighbour can now export readymade garments (RMG) only through Kolkata and Nhava Sheva ports.
Almost 93% of its RMG exports came through 11 land border posts in the North-East which have been shut. Land posts have also been closed for other goods such as carbonated drinks, processed food, wooden furniture, PVC goods and cotton waste. The move is in response to import restriction Bangladesh has been imposing on Indian exports.
What are those restrictions?
Bangladesh has been imposing restrictions on Indian exports since late 2024. In April this year, it banned imports of Indian cotton yarn through five major land ports. It tightened curbs on rice shipments and banned dozens of Indian goods including paper, tobacco, fish and powdered milk. It also introduced a transit fee of 1.8 taka per tonne per kilometre on Indian goods moving through its territory. These signal a clear departure from past cooperation. That apart, Indian exports were subject to tighter port inspections causing operational delays. The moves will hurt the trade between the two nations.
Also read | Bangladesh dollar trade to be hit by India’s port restrictions, may lose $770 million
What is the state of bilateral trade?
It touched a high of $18.2 billion in 2021-22 but has since declined (see chart). In April-February 2024-25, it stood at $12.2 billion. Indian goods exports were worth $10.4 billion and imports were $1.8 billion. India exports cotton, cotton yarn, oilmeals, spices, engineering goods and chemical products. Bangladesh exports RMGs, home textiles, jute and jute products, etc.
What is the state of bilateral trade?
It touched a high of $18.2 billion in 2021-22 but has since declined (see chart). In April-February 2024-25, it stood at $12.2 billion. Indian goods exports were worth $10.4 billion and imports were $1.8 billion. India exports cotton, cotton yarn, oilmeals, spices, engineering goods and chemical products. Bangladesh exports RMGs, home textiles, jute and jute products, etc.
What happened to the friendly ties?
Things went pear-shaped with the resignation of Sheikh Hasina as prime minister of Bangladesh in August 2024. Her government had good ties with India. Bangladesh benefitted from generous trade terms, which allowed it to export everything barring alcohol and tobacco at zero duty into India. A strong anti-India sentiment dislodged her government and she took refuge in India. The interim government that replaced her has been seeking her extradition, and has moved closer to China in a bid to snub India.
Also read | India halts transit facility for Bangladesh exports as it reassesses trade and security
Who stands to lose in this dispute?
Experts say that by mixing politics and trade Bangladesh has shot itself in the foot. Having a large market like India next door is a big advantage. In April-February 2024-25, it exported garments worth $618 million to India and this demand will only grow. Bangladesh had an advantage as it could import fabrics from China at zero duty, which Indian companies cannot, and convert it to apparel and send to India at a competitive price. Recent measures will restrict its exports and open the market for domestic players.
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