Bangladesh Faces Economic Shake-Up Under India’s Reciprocal Trade Curbs

Bangladesh is confronting a new economic reality as India’s trade restrictions, enacted on May 17, disrupt $770 million in exports, reshaping bilateral ties.

Targeting 42% of Bangladesh’s exports to India, the measures limit readymade garments—worth $618 million—to Kolkata and Nhava Sheva seaports, barring land routes in Assam, Meghalaya, Tripura, Mizoram, and parts of West Bengal.

Other goods, valued at $153 million, including processed foods and plastics, face similar curbs, hiking costs and delays for Bangladesh’s garment-driven economy.

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The restrictions counter Bangladesh’s April 2025 ban on Indian yarn and rice via land ports and new transit fees, seen as retaliatory by New Delhi. India’s earlier withdrawal of trans-shipment facilities further strained Dhaka’s global trade.

“Bangladesh’s garment exporters, leveraging duty-free Chinese fabrics and subsidies, held a 10-15% price edge in India,” said Ajay Srivastava of the Global Trade Research Initiative. “These curbs boost India’s MSMEs but hit Bangladesh’s core industry.”

Bangladesh’s shift toward China under interim leader Muhammad Yunus, following Sheikh Hasina’s ouster in 2024, has fueled tensions. Yunus’s pro-China stance and trade deals worth $2.1 billion prompted India to rethink concessions.

With reserves at $21.8 billion and failed IMF talks, Bangladesh faces mounting pressure, especially as it nears the loss of LDC status in 2026, ending tariff benefits.

The garment sector, reliant on land routes like Petrapole, faces higher logistics costs, threatening 85% of export revenue. Bangladesh’s dependence on Indian yarn and limited port capacity complicates diversification. Experts urge Dhaka to explore Southeast Asian and Middle Eastern markets while mending ties with India.

“Dialogue is key, but Bangladesh must ensure fair trade,” Srivastava noted. Without swift action, Bangladesh risks economic isolation as India’s reciprocal policies expose its vulnerabilities.

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