On May 17, 2025, India imposed restrictions on Bangladeshi imports, banning ready-made garments (RMG) and other goods from entering via land ports, allowing entry only through Kolkata and Nhava Sheva seaports. This retaliatory move, announced by the Directorate General of Foreign Trade (DGFT), responds to Bangladesh’s April 2025 curbs on Indian yarn and rice exports. With Bangladesh’s $700 million annual RMG exports to India—93% via land routes—severely impacted, the restrictions threaten Bangladesh’s economy.
In This Article:
Economic Impact on Bangladesh
Bangladesh, the world’s second-largest garment exporter, relies heavily on its $38 billion RMG industry, which constitutes 80% of its export revenue. India, absorbing $700 million in RMG annually, is a key market, with 93% of these goods entering via cost-effective land ports. The shift to seaports increases logistics costs by 15–25% and delays shipments due to higher traffic. Small exporters, like Shams Mahmud, told The Business Standard that longer lead times could disrupt retail supply chains, hitting smaller players hardest.
The restrictions affect $770–800 million of Bangladesh’s $1.8 billion exports to India, covering 42% of bilateral trade, including processed foods, fruits, and plastics. Mohammad Hatem of the Bangladesh Knitwear Manufacturers Association downplayed RMG export damage, arguing seaport access remains, but fears significant losses for other sectors. Kamruzzaman Kamal of Pran-RFL Group noted the setback for processed food exports, given substantial investments in India.
Context: Tit-for-Tat Trade Barriers
The restrictions follow Bangladesh’s April 13 ban on Indian yarn imports via land ports, impacting 45% of India’s $1.89 billion cotton yarn exports, and rice curbs at Hili and Benapole. India’s earlier April 9 withdrawal of a transshipment facility, which allowed Bangladesh to export $1 billion in garments to third countries via Indian ports, cited “congestion” but reflected souring ties. Bangladesh’s interim government under Muhammad Yunus, in power since Sheikh Hasina’s August 2024 ousting, has tilted toward China, with Yunus inviting Beijing to establish an economic base, prompting India’s response.
Indian officials, quoted by Business Today, argue Bangladesh’s land port curbs on Indian exports, especially to the Northeast, create an “unhealthy dependency,” stifling local manufacturing. The DGFT’s move supports India’s Atmanirbhar Bharat initiative, aiming to replace $117–234 million of Bangladeshi RMG with domestic production, per Sanjay Jain of ICC Textiles.
Challenges for Bangladesh
The restrictions exacerbate Bangladesh’s economic woes as it prepares to graduate from Least Developed Country (LDC) status in 2026, losing duty-free access to markets like the EU. The transshipment loss already extended export times to the West from one week to eight. Limited air freight and underdeveloped ports like Chattogram hinder direct exports, making India’s routes critical.Bangladesh’s growing anti-India sentiment, fueled by India’s support for Hasina and media reports of minority attacks, complicates dialogue. Economists like Debapriya Bhattacharya warn that further trade barriers could prompt Bangladesh to reassess transit facilities for India’s Northeast, risking regional connectivity like the BBIN Corridor, per ORF.
Opportunities and Mitigation
While the restrictions boost Indian manufacturers, Bangladesh could pivot to alternative markets or negotiate with India. Dialogue, as urged by Hatem, is key, given Bangladesh’s $11.06 billion imports from India in FY24. Redirecting yarn supplies domestically, as suggested by Rakesh Mehra of CITI, could offset losses. However, Bangladesh’s reliance on Chinese fabric and export subsidies, which gives it a 10–15% price edge, may face scrutiny, per The Indian Express.
The trade friction, driven by geopolitics and economic rivalry, threatens South Asia’s integration, with intra-regional trade at just 5%, per ORF. Bangladesh must balance its China pivot with India’s market access to sustain its RMG dominance. For now, the restrictions signal a challenging road ahead for its economy.
-By Manoj H
