 "How is Sheikh Hasina's ouster hurting India-Bangladesh trade already?")
Many people worried that the ouster of Sheikh Hasina in Bangladesh would hurt India.
Now, it seems that the exit of Hasina, a close ally, is already having an impact on India.
Trade between the two nations, which have generally been on an upswing since Hasina took power in 2008, is being affected.
But what is happening? How is her ouster hurting trade between New Delhi and Dhaka?
Let’s take a closer look:
By the numbers
First, let’s take a closer look at trade relations between the two nations.
Bangladesh is India’s largest trading partner in Asia and its 25th largest overall.
Meanwhile, India is Bangladesh’s second-largest trading partner – after China.
According to Business Standard, bilateral trade between the two nations stands at $12.9 billion.
New Delhi currently has a trade surplus of $9.2 billion with Dhaka, as per India Today.
According to GTRI, India’s exports to Bangladesh are highly diversified, covering sectors like agriculture, textiles, machinery, electronics, auto parts, iron and steel, electricity and plastics.
Notably, most of these exports to Bangladesh are subject to full tariffs and fall outside the South Asian Free Trade Area (SAFTA) agreement.
Impact Shorts
More ShortsAs per Indian Express, New Delhi sends around 34.9 per cent of its cotton exports – worth around 2.4 billion this financial year) to Dhaka.
India’s top import from Bangladesh are readymade garments, amounting to $391 million in FY24.
In contrast, Bangladesh’s exports to India are concentrated in a few categories, with textiles, garments, and made-ups making up 56 per cent of their exports.
These items benefit from zero tariffs under the SAFTA agreement, extended by India.
India’s exports to Bangladesh fell to $11 billion in 2023-24 from $12.21 billion in 2022-23, while imports decreased to $1.84 billion from $2 billion in the same period.
This, experts say, is mainly down to economic issues in Bangladesh.
Think tank Global Trade Research Initiative (GTRI) said Bangladesh has been facing a severe dollar shortage, which has limited its ability to import goods, including those from India.
Rising inflation in the country has also reduced domestic demand, leading to lower consumption of local and imported products.
“Bangladesh has been facing a severe dollar shortage, which has limited its ability to import goods, including those from India. The rising inflation in the country has also reduced domestic demand, leading to lower consumption of both local and imported products,” GTRI said as per Business Standard.
According to India Today, Hasina leaving could even halt a potential Free Trade Agreement (FTA) between the two nations.
The two nations began negotiating an FTA in October 2023.
The idea was to do away with customs duties on goods
The outlet quoted a World Bank paper as saying such an agreement could have increased Bangladesh’s exports to India by up nearly 300 per cent.
India’s exports to Bangladesh, meanwhile, could have shot up as much as 172 per cent.
What is happening?
NDTV reported that goods trucks have halted at the Changrabandha in West Bengal’s Cooch Behar.
“We estimate that about $300 million worth of export trade has been affected due to the political crisis in Bangladesh. We export about $30 million to Bangladesh every day,” Ajay Sahai, the Director-General of the Federation of Indian Export Organizations (FIEO) told the outlet.
“Export has come to a standstill. Many trucks are stuck and even the movement of people with visas has minimised now,” exporter Dhiraj Guha said.
“Indian import is happening but export is completely stalled and many of our trucks are stuck,” another businessman added.
India’s exports of perishable goods are facing major challenges at the border.
The Akhurah-Agartala border check post in Tripura is also shut, as per NDTV.
“Earlier, we used to receive 15 trucks of fish imports daily. Other items would range from about 35 trucks. But today, only one truck of fish and two trucks of other items have entered. There is almost no trade happening and it is hurting us financially,” goods handler Titan Das told the outlet.
West Bengal Exporters Coordination Committee secretary Ujjal Saha said trade through land ports in the state has been halted due to “non-clearance of goods by Bangladesh customs, resulting in hundreds of trucks being lined up in parking lots”.
Trade between the two countries through land ports at Petrapole, Gojadanga, Mahadipur, and Fulbari in West Bengal has been affected, while some passenger movement has been reported but turnout remains low, sources said.
Saha noted that a Bangladesh government notification issued on Sunday declared a three-day holiday till Wednesday, except for essential services.
Trade through Petrapole in North 24 Parganas district, the largest land port, remains halted as the Benapole customs in Bangladesh remained non-functional.
Security at the land ports has been increased in response to the situation, he added.
Exporters say they are facing disruptions in exports to Bangladesh due to a shortage of foreign exchange in that country.
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), emphasised the need to protect factories in Bangladesh and maintain supply lines to sustain trade and economic activities.
“As Bangladesh is experiencing political turmoil, it is essential for all political factions to protect garment and other factories and keep supply lines open across the border,” he said.
Engineering Export Promotion Council chairman Arun Kumar Garodia expressed concern over the political developments in Bangladesh, noting the significant impact on Indian exporters.
Mohit Singla, chairman of the Trade Promotion Council of India, told the Economic Times, “With the kharif harvest very near, the agri export basket of over $1.8 billion could be impacted, with soybean, soya bean meal, animal feed such as wheat residues, onion, and rapeseed being the worst hit.”
Sahai, director general of the Federation of Indian Export Organisations, added, “Internet disruptions have hurt banking transactions, and commodity exporters are worried about exports to Bangladesh through the land border. The next 7-10 days will be crucial.”
Arpita Mukherjee, professor, Indian Council for Research on International Economic Relations (ICRIER) told Business Standard the scenario is creating uncertainty for exporters.
“In fact, there will be greater risk for investors,” said Mukherjee.
“As Bangladesh experiences political turmoil, it is essential for all political factions to protect garment and other factories and keep supply lines open across the border to sustain trade and economic activity,” Global Trade Research Initiative (GTRI) founder Ajay Srivastava said.
West Bengal-based exporter and Managing Director of PATTON Sanjay Budhia said that as the two countries have close economic and geographic ties, the crisis can have a significant impact on India’s trade.
Budhia said that supply disruptions can affect these sectors, and any crisis leading to border closures or increased security can disrupt the flow of goods, affecting the bilateral trade.
“While the crisis in Bangladesh poses several risks to India’s trade, proactive measures and regional cooperation can help mitigate these impacts and ensure continued economic stability and growth. The need of the hour is to have a balanced approach, keeping the geopolitical and economic considerations in mind,” he noted.
‘Well-diversified’
But S&P Global Ratings on Tuesday said that India is a well-diversified exporter and a blip in its exports to Bangladesh is unlikely to have any meaningful impact on India’s overall trade position for the full year.
S&P Global Ratings, Director, Sovereign and International Public Finance Ratings (Asia-Pacific), Andrew Wood said that S&P expects domestic demand conditions in Bangladesh in this period of time to be weak and probably going to entail less support for exports from other countries, including India, into Bangladesh.
“India is a well-diversified exporter to the entire world and its trade profile is significantly larger than bilateral trade relationships with economies like Bangladesh.”
“Whatever the impact is going to be on directly is really quite unlikely to have a meaningful impact on its overall trade position for the fiscal year… its external position is quite strong in the country and is a net creditor to the world by our calculation,” Wood said in a webinar.
With inputs from agencies
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