With Bangladesh set to graduate from the United Nations’ Least Developed Nation (LDC) class in November 2026 — a transfer that may finish its duty-free entry to export markets such because the European Union, posing recent challenges — the nation has begun a pointy financial pivot away from New Delhi in the direction of Beijing, thereby straining commerce ties with India.
Political and financial tensions between India and its largest commerce accomplice in South Asia are rising, because the union authorities on Saturday determined to impose a lot of import restrictions on items from Bangladesh — significantly ready-made clothes, the nation’s largest export merchandise and a key supply of international trade.
This follows early indicators of deteriorating ties between two nations, when New Delhi in April determined to terminate the five-year-old transhipment facility for Bangladesh’s export cargo — a mechanism that helped Dhaka easily ship its items to a number of Western nations utilizing Indian land routes and airports.
Whereas authorities sources say that Saturday’s import restrictions and the termination of the transhipment facility are a results of comparable restrictions imposed by Dhaka and port congestion attributable to items from Dhaka respectively, Bangladesh’s Chief Adviser Muhammad Yunus — an economist and Nobel laureate who has steered increasing the affect of the Chinese language economic system round India’s strategically necessary Northeast area — has contributed to worsening India–Bangladesh commerce relations.
Nonetheless, this matches squarely into China’s broader technique to restrict India’s affect, as India selected to not be a part of the China-led Regional Complete Financial Partnership (RCEP) settlement and is positioning itself instead manufacturing vacation spot by pursuing nearer financial integration with the US, UK, EU, and the European Free Commerce Affiliation (EFTA) area.
India’s strategic transfer on garment imports
New Delhi has determined to limit garment imports from Bangladesh as it’s seeking to entice labour-intensive jobs within the sector. This comes as India’s textile sector might see a push as a result of free commerce agreements. India has already obtained duty-free entry to the UK marketplace for its garment exports and has sought comparable entry in its commerce offers with the EU and US.
Suppose tank World Commerce Analysis Initiative (GTRI) mentioned that Indian textile corporations have lengthy protested the aggressive edge loved by Bangladeshi exporters — who profit from duty-free Chinese language material imports and export subsidies — giving them a ten–15 per cent worth benefit within the Indian market.
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“Prime world manufacturers like H&M, Zara, Primark, Uniqlo, and Walmart supply attire from Bangladesh, a few of which enters India’s home market. Indian producers have lengthy expressed concern over the uneven enjoying subject: they pay a 5 per cent GST on regionally sourced material, whereas Bangladeshi corporations import material duty-free from China and obtain export incentives for gross sales to India — giving them an estimated 10–15 per cent worth benefit,” GTRI mentioned.
Restrictions imposed by Bangladesh
A authorities official mentioned that Bangladesh has lately imposed port restrictions on exports of Indian yarn by way of land ports, permitting Indian yarn exports solely by way of seaports. This has ostensibly been finished in response to demand by Bangladeshi textile mills, despite the fact that the land route gives the quickest and most cost-effective yarn provide to the ready-made clothes business in Bangladesh, the official mentioned.
Notably, yarn exports to Bangladesh comprise 20 per cent of India’s whole exports to Bangladesh value $11.38 billion in FY25. Official information confirmed that cotton yarn and handloom product exports to Dhaka stood at $2.39 billion over the past monetary 12 months. India imports ready-made clothes from Bangladesh valued at over $700 million yearly.
“Bangladesh can not cherry-pick phrases of bilateral engagement solely to profit itself or take India’s market entry as a right. India is keen to interact in dialogue however it’s Bangladesh’s accountability to create an surroundings freed from rancour,” the official quoted above mentioned.
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China’s rising financial, geo-political clout
China has been quickly rising its affect on South Asian nations, significantly Bangladesh. For example, China has allowed 97 per cent of Bangladeshi items duty-free entry to its home market since June 2020. Extra importantly, it’s serving to the nation diversify its export base and transfer its business up the worth chain.
In keeping with the Carnegie Endowment for Worldwide Peace, the most important variety of infrastructure tasks developed with Chinese language assist in South Asia are in Bangladesh. Bangladesh is China’s second-largest purchaser of army {hardware} globally, accounting for nearly one-fifth of China’s whole exports between 2016 and 2020. Chinese language arms make up over 70 per cent of Bangladesh’s main arms purchases, in keeping with a 2020 report by the Stockholm Worldwide Peace Analysis Institute.
“The autumn of Sheikh Hasina’s pro-India authorities in mid-2024 and the rise of an interim administration underneath Muhammad Yunus have introduced a willingness to align with Beijing. Yunus’s go to to China in March 2025 yielded $2.1 billion in new investments and cooperation agreements. China’s involvement in delicate infrastructure tasks just like the Teesta River improvement marks a rising strategic footprint — posing a direct problem to India’s affect within the area,” mentioned former commerce officer and head of GTRI Ajay Srivastava.