India-Bangladesh Trade War: David vs. Goliath Showdown Unveils
PM Narendra Modi, Chief Advisor of Bangladesh Interim Government Muhammad Yunus (Image credit Social media)
Bangladesh’s Vulnerabilities in a Trade War with India: Sectors at Risk and Economic Fallout
By Manish Anand
New Delhi, April 18, 2025: After August 8 last year toppling of Sheikh Hasina-led regime, Bangladesh is not missing opportunities to punch India on nose. Bangladesh’s banning of imports of key raw materials in several sectors came after India withdrew 2020 circular to allow transshipment of goods through Indian territory for Dhaka.
Bangladesh quickly retaliated with ban on yarn imports through land ports. Dhaka Tribune in a report gave full details of ban on imports from India. It quoted notifications issued by the National Board of Revenue (NBR) which banned imports from India for Yarn (through all land ports (e.g., Benapole, Bhomra, Sonamasjid, Banglabandha, Burimari). Imports via sea or other routes are still permitted.
Other items which came under the ban list include Duplex board, Newsprint, Kraft paper, Cigarette paper, Fish, Potatoes, Powdered milk, Tobacco, Radio and TV parts, Bicycle and motor parts, Formica sheets, Ceramicware, Sanitaryware, Stainless steelware, Marble slabs and tiles, Mixed fabrics, Jaggery, Dairy items (unspecified), and Fruit juice.
India’s export to Bangladesh stood at $11.06 billion in FY24 and $12.21 billion in FY23, said IBEF in a report. Bangladesh’s export to India has been averaging one-tenth of total bilateral trade.
Worryingly for Dhaka, Bangladesh has an excessive trade deficit with China also. Bangladesh’s $25 billion trade with China constitutes a mere $1 billion of exports from the Islamic nation. Cumulatively, Bangladesh averages a net annual trade deficits with India and China to almost $33 billion.
More worrisome for Dhaka is the fact that the US wants to cut textile dependency on other nations. Bangladesh’s economic buoyancy before the breakout of the Covid-19 pandemic was solely because of the textile sector,
But Bangladesh is yet to recover from the Pandemic losses. In contrast, Tirupur in India is buzzing with textile export businesses. By banning imports from Yarn, experts stated that Bangladesh is setting out on path of self-destruction of the economy.
Ajay Srivastava of the Global Trade Research Initiative told PTI: “The previous mechanism had offered a streamlined route through India, cutting transit time and cost. Now, Bangladeshi exporters may face delays, higher costs, and uncertainty.”
The Federation of Indian Export Organisations (FIEO) is boasting of increased air capacity for Indian cargo. @Indian_Analyzer in a post on X said that Indian withdrawal of transshipment permission for Bangladesh is a “strong geopolitical signal” that India’s borders and interests will not be compromised
Bangladesh’s $47 billion garment industry, which accounts for over 80 per cent of its export earnings and 10 per cent of GDP, is at a tipping point. Months of unabated violence has already hurt the factories.
India supplies 45.9 per cent of Bangladesh’s cotton yarn imports, valued at $1.64 billion in 2024. Experts noted that Bangladesh will have to burn pocket to replace Indian imports with China due to much higher costs.
Aroonim Bhuyan in a report for ETV Bharat said that “India’s revocation of the transshipment facility for Bangladesh has disrupted $462 million in garment exports to 36 countries from January 2024 to March 2025”. He added that Bangladeshi exporters now have to rely on expensive air freight or longer sea routes, raising costs and delaying shipments.
Besides, the Muhammad Yunus-led regime in Bangladesh had consistently been telling India after taking over the power for uninterrupted shipment of essential supplies. But Bangladesh now on own has banned imports of items such as dry milk powder and potatoes.
Yunus may be frightened to the cost of his action, for West Bengal with Mamata Banerjee at helm also had banned movement of potatoes for Odisha a few years ago. The action had locked West Bengal and Odisha in a unique battle for months.
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