The recent global trade war between the United States and China has created a domino effect across regional trade relationships, and today, the tension between India and Bangladesh is boiling over. With the suspension of crucial shipping and land port facilities, the trade relationship between the neighboring nations seems to be under severe threat.
India Suspends Transshipment Facility
April witnessed two major developments that may have a disastrous effect on India-Bangladesh trade. New Delhi first suspended the transhipment facility for export cargo, and then Dhaka suspended the import of yarn via major land ports like Benapole, Bhomra, Sonamasjid, Banglabandha, and Burimari.
Shutting down this transhipment facility has far-reaching implications not just for Bangladesh but also for Bhutan. Nepal, because these countries have been using this route as a key outlet for trade. The suspension may result in the disruption of trade of goods from these landlocked countries to Bangladesh. Bhutan and Nepal would most likely complain about this shutdown since it will endanger their access to vital trade corridors.
Strained Relations Between India and Bangladesh
Relations between India and Bangladesh have taken a downward spiral since last year, following the political upheaval in Bangladesh that saw Prime Minister Sheikh Hasina ousted. Her departure fueled attacks on Hindus in Bangladesh, leading to widespread condemnation from India. This has undoubtedly worsened the already delicate ties between the two nations.
Although a meeting between Indian Prime Minister Narendra Modi and Bangladesh’s Chief Adviser Muhammad Yunus was conducted in an attempt to lessen tensions, it appeared that the talks contributed little towards resolution of the issues. The recent suspension of major trade facilities, such as the transhipment system and the yarn import suspension, came after their talks, citing that political differences still eclipsed trade relations.
Ban & Pak Building Stronger Ties
Bangladesh’s economic relations with Pakistan also seem to be strengthening as it extends direct shipping lines with Islamabad. Pakistan’s Foreign Secretary, Amna Baloch, is in Dhaka for the Foreign Office Consultation (FOC), where it is expected that strengthening trade relations between the two nations is a matter of discussion.
Pakistan, eager to boost its exports, is interested in exporting products like cotton, sugar, rice, and wheat. Bangladesh’s exports to Pakistan during the 2023–24 financial year, as per trade figures, amounted to $61.98 million. Imports from Pakistan to Bangladesh, however, were a much higher $627.8 million.
Bangladesh’s High Commissioner to Pakistan, Iqbal Hussain Khan, said, “Pakistan views potential for increasing exports to Bangladesh, particularly if their goods are price-competitive.” The development is significant as Bangladesh looks towards Pakistan while its relationship with India becomes more uncertain.
Ind-Ban Trade Statistics
India continues to be one of Bangladesh’s biggest trade partners. The India Brand Equity Foundation (IBEF) states that the bilateral trade between India and Bangladesh stood at $12.90 billion in FY24. India exported more than 5,620 products to Bangladesh in the last year, with key exports being cotton, mineral fuels, vehicles, machinery, and food industry residues.
However, Bangladesh’s export to India was much smaller, totaling just $1.8 billion. The disparity in trade volume highlights the importance of India as a major source of essential goods for this neighbouring country, particularly in sectors like textiles, food grains, and electronics.
High Stakes of Trade for Economy of Bangladesh
Bangladesh has a huge trade deficit with India, and hence the relationship is very vital to its economy and is dependent greatly on India for raw material and essential goods imports. The textile sector, being a key pillar of Bangladesh’s economy, contributes 11 percent to the GDP of the country.
India plays a key role in supplying cotton to Bangladesh, exporting 35 percent of its total cotton output to the country. Suspension of this trade would be disastrous to Bangladesh’s textile industry, and it would have severe economic consequences.
