Indian exporters have voiced concerns over the ongoing crisis in Bangladesh, highlighting potential implications for bilateral trade. The developments in the neighboring country have already led to disruptions in exports, primarily due to Bangladesh’s foreign exchange shortage. This situation has particularly impacted the export of perishable goods from India, facing challenges at the border.
The crisis in Bangladesh stems from widespread demonstrations against the controversial quota system that reserves 30% of government jobs for veterans of the 1971 liberation war. The protests, which have resulted in over 100 deaths in the past two days, led to the resignation of Prime Minister Sheikh Hasina and the establishment of an interim government.
Exporters, including Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai, express cautious optimism, anticipating a swift normalization of the situation and minimal disruption to trade. However, Sanjay Budhia, Managing Director of PATTON and a West Bengal-based exporter, emphasizes the potential impact of the crisis on India’s trade due to the close economic and geographic ties between the two countries.
India exports a diverse range of goods to Bangladesh, including cotton, machinery, and food products, while importing items like jute and fish. Budhia points out that supply disruptions, border closures, and heightened security measures could significantly impact the flow of goods, affecting bilateral trade. He underscores the need for proactive measures and regional cooperation to mitigate these risks and maintain economic stability.
Despite the challenging situation, Budhia emphasizes the importance of focusing on India’s competitiveness development to achieve the target of USD 1 trillion merchandise exports by 2030. FIEO Regional Chairman (Eastern Region) Yogesh Gupta and PSY Ltd owner Pravin Saraf share similar concerns, citing the potential for long-term impacts on bilateral trade. They point to existing payment delays in Bangladesh due to forex shortages, which are likely to worsen in light of the current crisis.
Think tank GTRI sheds light on Bangladesh’s economic challenges, highlighting a severe dollar shortage that restricts its import capacity, including goods from India. Rising inflation has further reduced domestic demand, impacting the consumption of both local and imported products. GTRI founder Ajay Srivastava emphasizes the need for political stability in Bangladesh to protect factories and maintain open supply lines across the border, crucial for sustaining trade and economic activity.
Bangladesh holds significant importance as India’s largest trade partner in South Asia, while India is the second largest trade partner for Bangladesh in Asia. However, India’s exports to Bangladesh have declined from USD 12.21 billion in 2022-23 to USD 11 billion in 2023-24. Similarly, imports from Bangladesh also decreased from USD 2 billion in 2022-23 to USD 1.84 billion in the last fiscal year.
India primarily exports vegetables, coffee, tea, spices, sugar, confectionary, refined petroleum oil, chemicals, cotton, iron and steel, and vehicles to Bangladesh. On the other hand, India imports fish, plastic, leather, and apparel from its neighboring country. Notably, a majority of India’s exports to Bangladesh are subject to full tariffs and fall outside the South Asian Free Trade Area (SAFTA) agreement. In contrast, Bangladesh’s exports to India are concentrated in a few categories, with textiles, garments, and made-ups accounting for 56% of their total exports. These items benefit from zero tariffs under the SAFTA agreement, extended by India.
