The Deteriorating India-Bangladesh Relationship: A Look At Recent Trade Actions

Hugo van Dijk

5 min read

Post on May 19, 2025

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H2: Rising Trade Deficit and Protectionist Measures by India

The widening trade deficit between India and Bangladesh has become a major point of contention, significantly impacting India-Bangladesh trade relations. India's implementation of protectionist measures has exacerbated this issue, hindering Bangladesh's export potential.

H3: Impact of Indian Tariffs on Bangladeshi Exports

India's imposition of tariffs and non-tariff barriers on Bangladeshi goods, particularly in the textile and ready-made garment (RMG) sectors, has severely impacted Bangladesh's economy.

• Increased tariffs on Bangladeshi textiles: In recent years, India has increased tariffs on various textile products from Bangladesh, leading to a significant reduction in exports and impacting thousands of jobs within the Bangladeshi RMG industry. Specific examples include increased duties on cotton yarn and fabrics.
• Non-tariff barriers: Besides tariffs, non-tariff barriers such as stringent quality checks and lengthy customs procedures further impede Bangladeshi exports to India. These bureaucratic hurdles add significant costs and delays, making Bangladeshi products less competitive in the Indian market.
• Loss of revenue and jobs: The combined effect of tariffs and non-tariff barriers has resulted in substantial losses of revenue and employment opportunities in Bangladesh, particularly within the RMG sector, which is a vital component of the Bangladeshi economy. Estimates suggest job losses in the tens of thousands.

This competitive disadvantage faced by Bangladesh underscores the need for a more equitable and balanced trade relationship between the two countries.

H3: India's Domestic Market Protection Strategies

India's focus on protecting its domestic industries through various strategies has further constrained Bangladesh's access to the Indian market.

• Subsidies to domestic producers: Government subsidies provided to Indian producers of competing goods, such as textiles and agricultural products, create an uneven playing field for Bangladeshi exporters. This undermines Bangladesh's competitiveness and limits its market share within India.
• Import substitution policies: India's policies aimed at promoting domestic production and reducing reliance on imports directly impact Bangladesh's export opportunities. These policies often favor Indian manufacturers over their Bangladeshi counterparts.
• Implications for bilateral trade balance: These protectionist measures contribute to the already significant trade imbalance between India and Bangladesh, creating further tension and hindering the development of a mutually beneficial trade relationship.

H2: Cross-Border Water Sharing Disputes

Disputes over the sharing of water resources from the Ganges and Brahmaputra rivers are another significant factor contributing to the strained India-Bangladesh relationship.

H3: The Ganges and Brahmaputra River Water Issues

The equitable sharing of water from these transboundary rivers is crucial for agriculture, hydropower generation, and overall economic development in both countries. However, ongoing disagreements regarding water allocation have led to significant tension.

• Farakka Barrage: The operation of the Farakka Barrage on the Ganges River has been a long-standing source of contention, with Bangladesh alleging that it negatively impacts the flow of water to its territories.
• Brahmaputra River dams: The construction of dams on the Brahmaputra River in India also raises concerns in Bangladesh regarding water availability and potential ecological impacts.
• Lack of comprehensive agreements: The absence of robust, legally binding agreements on water sharing has fueled distrust and hampered collaborative efforts to manage these vital resources effectively.

H3: Impact on Regional Cooperation and Development

Water disputes significantly hinder regional cooperation and sustainable development initiatives involving India and Bangladesh.

• Stalled joint projects: Disagreements over water sharing often lead to delays or cancellations of joint projects in areas such as irrigation, hydropower, and flood control.
• Reduced trust and cooperation: The lack of resolution in water disputes erodes trust and cooperation between the two countries, making it more challenging to address other shared challenges.
• Threat to regional stability: Protracted water disputes can escalate into larger conflicts, threatening regional peace and security.

H2: Non-Tariff Barriers and Border Management Challenges

Besides tariffs and water disputes, non-tariff barriers and border management inefficiencies significantly hamper India-Bangladesh trade relations.

H3: Delays and Bureaucracy at the Border

Bangladeshi exporters face numerous challenges at the border, leading to delays, increased costs, and reduced competitiveness.

• Lengthy customs procedures: Complex customs procedures and documentation requirements create significant delays for Bangladeshi goods entering the Indian market.
• Port congestion and transportation difficulties: Inefficient infrastructure and inadequate transportation networks further exacerbate the challenges faced by Bangladeshi exporters.
• High transaction costs: The delays and complexities associated with border crossings result in high financial and time costs for Bangladeshi businesses.

H3: Impact on Trade Facilitation and Logistics

These inefficiencies hinder the overall efficiency and competitiveness of trade between India and Bangladesh.

• Improved infrastructure: Investing in modern infrastructure, including improved port facilities and transportation networks, is crucial for enhancing trade facilitation.
• Streamlined customs procedures: Simplifying customs procedures and reducing bureaucratic hurdles can significantly reduce transaction costs and improve the efficiency of cross-border trade.
• Enhanced cooperation: Increased cooperation between the two countries in areas such as border management and customs procedures is essential for improving the overall flow of goods.

3. Conclusion:

The deteriorating India-Bangladesh trade relationship, characterized by rising trade deficits, protectionist measures, water disputes, and border management challenges, poses significant risks to both nations' economic growth and regional stability. Addressing these issues requires a multifaceted approach including open dialogue, a commitment to fair trade practices, and collaborative efforts to improve trade facilitation and resolve water resource disputes. Strengthening India-Bangladesh trade relations through effective diplomacy and pragmatic solutions is crucial for fostering sustainable economic development and ensuring a mutually beneficial partnership. Continued monitoring of India-Bangladesh trade relations and a proactive approach to addressing emerging challenges are essential for navigating this complex and crucial relationship. A renewed focus on improving India-Bangladesh trade relations is vital for the future prosperity of both nations.