Bangladesh Unrest: Ever since Sheikh Hasina became prime minister in 2009, Bangladesh has been an indispensable ally of India, greatly improving commercial and economic ties between the two countries. Nonetheless, questions over this partnership’s survival and its possible effects on India are raised by the continuing turmoil in Bangladesh.
Strong Trade Relations Under Hasina’s Leadership
Trade between India and Bangladesh has increased significantly under Sheikh Hasina’s leadership, with India continuing to maintain a trade surplus. Trade reached $13 billion between the two nations in the fiscal year 2023–2024. India now exports a significant amount of cotton to Bangladesh, which also buys a sizable amount of cereals and petroleum goods. On the other hand, India buys $391 million worth of ready-made clothing from Bangladesh, offsetting their trade deficit.
Potential Disruption of Free Trade Agreement Talks
Talks over a possible free trade agreement (FTA) to lower or do away with customs taxes on products transported between Bangladesh and India started in October 2023. A World Bank report estimates that this deal might increase India’s exports by 172% and Bangladesh’s exports to India by up to 297%. But the future of these conversations is dubious given Bangladesh’s present political unrest.
Concerns from Indian Exporters
Indian exporters are growing more concerned about possible disruptions resulting from the upheaval in Bangladesh. Concerns about the effects on the agri-export basket, which is valued at over $1.8 billion and consists of goods including soybean, soya bean meal, animal feed, wheat residues, onions, and rapeseed,.
Infrastructure and Connectivity Projects at Risk
To improve bilateral ties, India has made large investments in connectivity and infrastructure projects in Bangladesh. India has provided $8 billion in financing since 2016 for the construction of port, rail, road, and maritime infrastructure. The November 2023 opening of the Khulna-Mongla Port rail line and the Akhaura-Agartala cross-border rail link are two notable projects.
The Northeast region of India is connected by a network of small land corridors, therefore any disruption in these linkages could restrict India’s access to that area. There could be dangers associated with agreements to use the ports in Mongla and Chittagong as well as existing bus routes.
Economic Implications of the Unrest
India and Bangladesh had a $9.2 billion trade surplus in the 2024 fiscal year. Cotton, coffee, tea, vegetables, automobiles, and electrical machinery were among the top exports. The ongoing upheaval has already resulted in issues that have alarmed exporters, especially in Kolkata: internet outages that impact banking operations and challenges obtaining letters of credit.
Given that a significant portion of exports to Bangladesh falls outside the South Asian Free Trade Area (SAFTA) agreement and most imports from Bangladesh benefit from zero tariffs, the ongoing unrest poses a serious risk to trade dynamics between the two countries. The coming days will be critical in assessing the impact on trade and economic stability in the region.
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