Bangladesh Defense
Saif
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Bangladesh-India trade needs a boost
Despite strained relations for more than the last two years, bilateral trade between Bangladesh and India is very much on, if not growing. The visit of a delegation from the Confederation of Indian Industry (CII) last week signalled that businesses in both countries want to move ahead as far as tra
Bangladesh-India trade needs a boost
Despite strained relations for more than the last two years, bilateral trade between Bangladesh and India is very much on, if not growing. The visit of a delegation from the Confederation of Indian Industry (CII) last week signalled that businesses in both countries want to move ahead as far as trade is concerned. Business leaders of both countries have agreed to form business-to-business (B2B) task forces to address trade and investment barriers and strengthen bilateral economic ties. It is for the first time since the fall of Hasina's autocratic regime on August 5 2024, a high-level Indian business delegation visited Bangladesh.
CII is one of the premier apex trade bodies in India. Established in 1895 as the Engineering and Iron Trades Association (EITA) by five firms, it became CII in 1992. The CII delegation met senior ministers and policymakers of Bangladesh, as well as counterparts. To some observers, it is an effort to break the ice so that businesses of both countries can resume reciprocal exchanges and work together to remove trade barriers.
Since the ouster of Hasina regime in a student-led mass uprising two years ago, bilateral relations deteriorated significantly. New Delhi imposed several trade barriers during the Yunus-led interim regime. Dhaka also retaliated on a limited scale. India was reluctant to accept the changed reality in Bangladesh and began exerting various forms of pressure on the interim government. For example, India cancelled the transhipment facility granted to Bangladesh for third-country exports using Indian sea routes and airports. It also imposed restrictions on imports of certain products, including ready-made garments (RMG) from Bangladesh, primarily to India's north-eastern states via land routes. India has also moved to impose anti-dumping duties on more Bangladeshi products.
All the Indian moves to impose non-tariff barriers (NTBs) are mostly linked to the ouster of the Hasina regime, New Delhi's closest ally for more than 15 years. During that period, she gradually turned Bangladesh into a subservient country by compromising foreign and trade policies in favour of New Delhi. At the same time, anti-Indian sentiment intensified, which was a critical factor in the July mass uprising. To suppress the movement, the autocratic regime used brutal force, killing 1,400 people in three weeks. More than 20,000 were injured. Nevertheless, Hasina was forced to resign on August 5 2024 and flee to New Delhi for shelter. Since then, the two countries have passed through a series of diplomatic and trade rows.
Despite all these negative developments, bilateral trade in goods increased modestly in the last fiscal year (FY26) by 13 per cent after a small growth of 6.35 per cent in FY25. Official statistics showed bilateral trade reached its highest level of $15.68 billion in FY22, then dropped sharply by 26 per cent to $11.62 billion in FY23. It declined by a further 9 per cent to $10.60 billion in FY24. Thus, the decline in bilateral trade was evident before the July mass uprising.
Exports to India were almost stagnant at $1.76 billion in the last fiscal year, down from $1.77 billion in FY25. Imports from India jumped 15 per cent to $10.96 billion in FY26 from $9.47 billion in FY25, widening the trade gap with India to $9.20 billion from $7.70 billion.
The bilateral trade gap is nothing new, as Bangladesh imports more products from India as raw materials, intermediate goods, and consumer products. As the next-door neighbour with extensive road, rail, and water networks, sourcing from India is generally less expensive. For Indian exporters, Bangladesh is a lucrative market with increasing consumer demand, and it is the seventh-largest export destination for India.
Investment from India declined significantly, reflecting the strained bilateral relations. Net inflow of Indian FDI increased to $132.83 million in FY23 from $72.34 million in FY22, then declined to $105.81 million in FY24. During the first nine months of FY26, net FDI from India stood at $87.60 million. Bangladesh's internal condition was also not adequately supportive of foreign investment as the country had to allow the dust of July 2024 uprising to settle. In the context of CII delegation's visit, a few trade analysts [www.fashionunited.uk] pointed out that for Bangladesh the challenge is less about becoming cheaper than about remaining attractive enough to clothing manufacturers who will be willing to continue investing there. For India, it is about deciding whether its neighbour should remain primarily a deficit market or become more of an extension of its own textile industrial base.
As India stopped issuing tourist visas for almost two years, tourist arrivals from Bangladesh to India declined sharply. According to the Indian Tourism Ministry, about 2.12 million Bangladeshi tourists visited India in 2023. It declined by 17 per cent to 1.75 million in 2024 and dropped further by 73 per cent to 0.43 million in 2025, causing a significant loss of revenue for the Indian tourism industry. The tourist visa is finally opened two months back.
All these statistics show that the two countries are strongly linked economically. Disruption of this link by imposing trade restrictions will not work. Instead, it is better to accept the changed reality and enhance trade cooperation. India needs to respect the verdict of the people of Bangladesh and should not interfere in the latter's internal affairs. It must clearly acknowledge that no 'vassal state' type bilateral relationship is possible. Despite having strong leverage to put Bangladesh in geo-political trouble, it is not a good option for New Delhi to ignore the ground reality. There should be a win-win bilateral trade relationship.
India Brand Equity Foundation (IBEF), an entity established by the Indian commerce and industry ministry, noted recently that bilateral ties 'today reflect a more mature and diversified partnership that goes well beyond conventional areas of engagement.' It added that though tourism, healthcare, and education continue to anchor people-centric cooperation, with Bangladesh remaining a key source of inbound tourists for India, bilateral collaboration is increasingly shaped by technology and sustainability-led priorities. To what extent this cooperation will be extended in the near future largely depends on New Delhi's goodwill.
Despite strained relations for more than the last two years, bilateral trade between Bangladesh and India is very much on, if not growing. The visit of a delegation from the Confederation of Indian Industry (CII) last week signalled that businesses in both countries want to move ahead as far as trade is concerned. Business leaders of both countries have agreed to form business-to-business (B2B) task forces to address trade and investment barriers and strengthen bilateral economic ties. It is for the first time since the fall of Hasina's autocratic regime on August 5 2024, a high-level Indian business delegation visited Bangladesh.
CII is one of the premier apex trade bodies in India. Established in 1895 as the Engineering and Iron Trades Association (EITA) by five firms, it became CII in 1992. The CII delegation met senior ministers and policymakers of Bangladesh, as well as counterparts. To some observers, it is an effort to break the ice so that businesses of both countries can resume reciprocal exchanges and work together to remove trade barriers.
Since the ouster of Hasina regime in a student-led mass uprising two years ago, bilateral relations deteriorated significantly. New Delhi imposed several trade barriers during the Yunus-led interim regime. Dhaka also retaliated on a limited scale. India was reluctant to accept the changed reality in Bangladesh and began exerting various forms of pressure on the interim government. For example, India cancelled the transhipment facility granted to Bangladesh for third-country exports using Indian sea routes and airports. It also imposed restrictions on imports of certain products, including ready-made garments (RMG) from Bangladesh, primarily to India's north-eastern states via land routes. India has also moved to impose anti-dumping duties on more Bangladeshi products.
All the Indian moves to impose non-tariff barriers (NTBs) are mostly linked to the ouster of the Hasina regime, New Delhi's closest ally for more than 15 years. During that period, she gradually turned Bangladesh into a subservient country by compromising foreign and trade policies in favour of New Delhi. At the same time, anti-Indian sentiment intensified, which was a critical factor in the July mass uprising. To suppress the movement, the autocratic regime used brutal force, killing 1,400 people in three weeks. More than 20,000 were injured. Nevertheless, Hasina was forced to resign on August 5 2024 and flee to New Delhi for shelter. Since then, the two countries have passed through a series of diplomatic and trade rows.
Despite all these negative developments, bilateral trade in goods increased modestly in the last fiscal year (FY26) by 13 per cent after a small growth of 6.35 per cent in FY25. Official statistics showed bilateral trade reached its highest level of $15.68 billion in FY22, then dropped sharply by 26 per cent to $11.62 billion in FY23. It declined by a further 9 per cent to $10.60 billion in FY24. Thus, the decline in bilateral trade was evident before the July mass uprising.
Exports to India were almost stagnant at $1.76 billion in the last fiscal year, down from $1.77 billion in FY25. Imports from India jumped 15 per cent to $10.96 billion in FY26 from $9.47 billion in FY25, widening the trade gap with India to $9.20 billion from $7.70 billion.
The bilateral trade gap is nothing new, as Bangladesh imports more products from India as raw materials, intermediate goods, and consumer products. As the next-door neighbour with extensive road, rail, and water networks, sourcing from India is generally less expensive. For Indian exporters, Bangladesh is a lucrative market with increasing consumer demand, and it is the seventh-largest export destination for India.
Investment from India declined significantly, reflecting the strained bilateral relations. Net inflow of Indian FDI increased to $132.83 million in FY23 from $72.34 million in FY22, then declined to $105.81 million in FY24. During the first nine months of FY26, net FDI from India stood at $87.60 million. Bangladesh's internal condition was also not adequately supportive of foreign investment as the country had to allow the dust of July 2024 uprising to settle. In the context of CII delegation's visit, a few trade analysts [www.fashionunited.uk] pointed out that for Bangladesh the challenge is less about becoming cheaper than about remaining attractive enough to clothing manufacturers who will be willing to continue investing there. For India, it is about deciding whether its neighbour should remain primarily a deficit market or become more of an extension of its own textile industrial base.
As India stopped issuing tourist visas for almost two years, tourist arrivals from Bangladesh to India declined sharply. According to the Indian Tourism Ministry, about 2.12 million Bangladeshi tourists visited India in 2023. It declined by 17 per cent to 1.75 million in 2024 and dropped further by 73 per cent to 0.43 million in 2025, causing a significant loss of revenue for the Indian tourism industry. The tourist visa is finally opened two months back.
All these statistics show that the two countries are strongly linked economically. Disruption of this link by imposing trade restrictions will not work. Instead, it is better to accept the changed reality and enhance trade cooperation. India needs to respect the verdict of the people of Bangladesh and should not interfere in the latter's internal affairs. It must clearly acknowledge that no 'vassal state' type bilateral relationship is possible. Despite having strong leverage to put Bangladesh in geo-political trouble, it is not a good option for New Delhi to ignore the ground reality. There should be a win-win bilateral trade relationship.
India Brand Equity Foundation (IBEF), an entity established by the Indian commerce and industry ministry, noted recently that bilateral ties 'today reflect a more mature and diversified partnership that goes well beyond conventional areas of engagement.' It added that though tourism, healthcare, and education continue to anchor people-centric cooperation, with Bangladesh remaining a key source of inbound tourists for India, bilateral collaboration is increasingly shaped by technology and sustainability-led priorities. To what extent this cooperation will be extended in the near future largely depends on New Delhi's goodwill.
