Dhaka Crisis and Impact on India-Bangladesh Ties

The recent downfall of the government in Dhaka and the resignation of Prime Minister Sheikh Hasina will affect growing trade ties, restricting the movement of people and goods, and stalling a potential free trade agreement (FTA) between the two countries.

What is the matter behind Bangladesh Protests?

• The student protests, initially focused on abolishing quotas in civil service jobs, have now grown into a broader anti-government movement.
• The mass protests in Bangladesh began as student demonstrations demanding reforms to the civil service quota system.
• A Supreme Court ruling against reintroducing job quotas did not fully satisfy the protesters, who continue to demand the abolition of all job reservations for children of "freedom fighters”.
• The situation intensified when former army chief General Ikbal Karim Bhuiyan criticized the government’s handling of the protests and called for troop withdrawal.

About India-Bangladesh recent developments:

• In Trade: In October 2023, India and Bangladesh began discussions on an FTA during a meeting of the Joint Working Group on Trade in Dhaka.
• FTA would reduce or eliminate customs duties on goods traded between India and Bangladesh, and ease norms to help promote further trade and investments.
• Export-Import data: A 2012 working paper published by the World Bank estimated that a full FTA for goods would increase Bangladesh’s exports to India by 182%, whereas a partial FTA could lead to a 134% increase.
• Infrastructure and connectivity: Infrastructure and connectivity has been a growing part of India-Bangladesh ties, according to the Minister of External Affairs.
• India has extended three lines of credit to Bangladesh since 2016 amounting to $8 billion for the development of road, rail, shipping and port infrastructure.
• In November 2023, two joint projects – the Akhaura-Agartala cross-border rail link and Khulna-Mongla Port rail line – were inaugurated.
• Ports and Marine connectivity: In 2023, the countries had agreed to operationalise the agreement for the usage of the Chittagong and Mongla ports to ease the movement of cargo between mainland India and the Northeast.

India-Bangladesh Trade Relations:

• Bangladesh is India’s biggest trade partner in the subcontinent, and India is Bangladesh’s second biggest partner in Asia after China.
• Their total bilateral trade amounted to 13 billion dollars in the financial year 2023-24, according to the Union Ministry of Commerce.
• India exports a variety of goods to Bangladesh, including cotton, machinery and food products, while imports goods like jute and fish.
• Bangladesh is the biggest export destination for India’s cotton, accounting for 34.9% of India’s total cotton exports (some $2.4 billion in FY24).
• Other major Indian exports to Bangladesh are Petroleum products and cereals.
• India’s top imports from Bangladesh are readymade garments, amounting to $391 million in FY24. In recent years, Bangladesh has emerged as a major global hub for textiles.

Concerns related to downfall in Bangladesh

• Long border sharing with North-east India: A disruption in Indo-Bangladesh ties could thus restrict India’s access to the Northeast, which will be connected to mainland India only through the narrow “Chicken’s Neck” Between West Bengal and Assam.
• Trade disruptions: According to exporters, they are already facing disruptions in exports to Bangladesh due to a shortage of foreign exchange in that country.
• India's exports of perishable goods are facing challenges at the border.
• Impacts on Global Economy: Bangladesh poses several risks to India's trade, proactive measures and regional cooperation can help mitigate these impacts and ensure continued economic stability and growth.