India-Bangladesh Trade Relations: Recent Developments

India recently imposed restrictions on readymade garments and other specified commodities from Bangladesh, escalating bilateral trade tensions. This action primarily affects Bangladesh's crucial apparel sector, indicating a spillover of political tensions into economic realms.

Background and Political Context

• Bangladesh’s interim leader, Mohammed Yunus, invited Chinese access to India’s northeast, describing it as landlocked during his visit to China in March 2025.
• India's trade restrictions send a message of disapproval regarding Bangladesh-China discussions.
• Bangladesh is experiencing political turmoil due to protests against its former government and the interim leadership's struggles.
• The Yunus administration is warming up to Pakistan, banning the Awami League, which has strained relations with India.

Strategic Implications

• The trade restrictions are unlikely to significantly advance India's strategic interests but may harm Bangladeshi businesses reliant on garment exports.
• New Delhi needs to engage with other political parties in Bangladesh as they prepare for elections, which are announced but lack a specified date.
• India, along with the international community, should advise Bangladesh to conduct elections promptly.

Recommended Actions for India

• Adopt a political gesture by engaging with multiple stakeholders in Bangladesh's polity rather than using trade restrictions.
• Aim to reduce anti-India sentiment and prevent security issues in the northeast by avoiding radical measures.
• Maintain working relations with the Yunus government until a popularly elected government is established in Dhaka.