The Asiapost News

Dhaka, Bangladesh – On a crisp morning in New Delhi, India’s Directorate General of Foreign Trade dropped a bombshell: Bangladeshi goods, long flowing freely across land borders, would face sweeping restrictions. Announced on May 17, 2025, the measures choke off roughly USD 770 million in trade—42% of Bangladesh’s exports to its largest regional market. Ready-made garments, the lifeblood of Bangladesh’s economy, are now confined to two Indian seaports, while a slew of consumer goods face curbs at land ports in India’s northeastern states and West Bengal. This isn’t just a trade spat; it’s a seismic shift in a relationship already strained by politics and geopolitics, with Dhaka facing an economic reckoning.

India’s decision targets the heart of Bangladesh’s export machine. Garments, worth USD 700 million annually, previously zipped through 11 land ports in Assam, Meghalaya, Tripura, Mizoram, and West Bengal. Now, they’re rerouted to Kolkata and Nhava Sheva, seaports that promise higher costs and longer delays. Consumer goods—fruits, carbonated drinks, snacks, cotton waste, plastics, and wooden furniture—valued at USD 153 million, are barred from key land routes in India’s northeast and two West Bengal posts, Changrabandha and Fulbari. Yet, India’s move isn’t indiscriminate: fish, edible oil, LPG, and crushed stone skate through, as do goods transiting to Nepal and Bhutan, a nod to regional trade ties.

The roots of this decision trace back to a tit-for-tat spiral. Since late 2024, Bangladesh has tightened the screws on Indian exports, hitting India’s northeastern states hardest. Yarn imports were shunted to seaports on April 13, 2025, inflating costs for Indian exporters. Two days later, rice was barred from Hili and Benapole ports. Paper, tobacco, fish, and powdered milk faced bans, while a steep transit fee—1.8 taka per tonne per kilometer—made Indian goods crossing Bangladesh’s territory prohibitively expensive. Indian officials, speaking anonymously, call it a “triple jeopardy” for the northeast: high costs, blocked markets, and choked supply chains. India, they argue, had no choice but to retaliate.

But this is about more than trade balances. It’s about geopolitics and pride. The ouster of Bangladesh’s former Prime Minister Sheikh Hasina in August 2024, a steadfast Indian ally now in exile in New Delhi, marked a turning point. Her replacement, interim chief adviser Muhammad Yunus, has stirred the pot. His remarks casting India’s northeastern states as “landlocked” and pitching Bangladesh as a conduit for Chinese economic expansion didn’t sit well in New Delhi. Add to that India’s earlier move in April 2025 to scrap a transshipment facility that let Bangladesh export to third countries via Indian ports, and the stage was set for escalation.

For Bangladesh, the fallout is immediate and brutal. Garments, employing over 4 million workers and fueling 16% of GDP, face a logistical nightmare. Rerouting to seaports could hike costs by 20-30%, eroding the razor-thin margins that make Bangladeshi apparel competitive. The Bangladesh Garment Manufacturers and Exporters Association insists the sector can adapt, but the mood is grim. “This is a big threat to our economy,” warns Kamruzzaman Kamal, director of Pran-RFL Group, which exports USD 60 million in processed foods, plastics, and furniture to India. With 93% of garment exports to India reliant on land routes, the shift risks factory slowdowns, job cuts, and dwindling foreign exchange.

The consumer goods sector is no less vulnerable. Bangladesh’s snacks, drinks, and furniture have long found eager buyers in India’s northeastern states, a USD 153 million market now largely cut off. Companies like Pran-RFL face disrupted supply chains and the specter of losing shelf space to Indian rivals. The broader economic picture is bleaker still. Bangladesh’s trade deficit with India—USD 9 billion in imports versus USD 1.51 billion in exports in 2024’s last 10 months—was already a sore point. With dollar reserves under pressure and inflation biting, the restrictions threaten to destabilize an economy still reeling from Hasina’s exit.

India, meanwhile, sees this as a win for its own backyard. The northeastern states, long hamstrung by geography and dependence on Bangladeshi trade routes, stand to gain. By curbing cheap imports, India hopes to spark local manufacturing, especially in textiles and consumer goods. Micro, small, and medium enterprises, battered by Bangladeshi garments priced 10-15% lower thanks to duty-free Chinese fabric, are cheering. “This levels the playing field,” says Ajay Srivastava of the Global Trade Research Initiative. In West Bengal, where two land ports face restrictions, officials echo the sentiment, framing the move as a boost for domestic industry.

Yet, the risks for Bangladesh extend beyond economics. The restrictions could nudge Dhaka closer to China, already a major supplier of 34% of its imports. Yunus’ overtures to Beijing, coupled with India’s hardball tactics, might accelerate this shift, reshaping South Asia’s geopolitical chessboard. But leaning too heavily on China could alienate other partners and complicate Bangladesh’s delicate regional balancing act. Diversifying export markets—to Southeast Asia or the Middle East—sounds appealing, but Bangladesh’s port capacity and cargo infrastructure are woefully unprepared, and building them up will take years.

Public sentiment reflects the divide. On X, Indian users like @MumbaichaDon hail the restrictions as a slap to Yunus’ “anti-India” stance, while Bangladeshi voices decry “economic coercion” and urge defiance. Industry leaders in Dhaka, from garment exporters to food conglomerates, are pushing for talks to salvage access to Indian markets. Indian officials, for their part, say they’re open to dialogue—but only if Bangladesh dismantles its own barriers. The DGFT’s promise of periodic reviews offers a glimmer of hope, but for now, the border is a battleground.

The stakes couldn’t be higher. For Bangladesh, this is a test of resilience in a post-Hasina era, with an economy tethered to exports and a government under pressure to deliver stability. For India, it’s a gamble to assert dominance while fostering growth in its neglected northeast. As trucks idle at land ports and ships crowd Kolkata’s docks, the India-Bangladesh relationship hangs in the balance. Without swift diplomacy, this trade war could redefine South Asia’s economic and political landscape for years to come.

Sources: Hindustan Times, The Economic Times, The Indian Express, Business Today, The Hindu, NDTV, France24, News18, X posts, and industry statements.