​Trade diplomacy: on India-Bangladesh trade-related tensions

In an escalation of bilateral trade-related tensions, India recently announced restrictions on readymade garments and other specified commodities from Bangladesh. The Directorate General of Foreign Trade’s announcement targeting Bangladesh’s vital apparel sector sent an unmistakable signal that deteriorating political relations have now spilled over into economic ties. By specifically denying Bangladeshi goods access to India’s northeast market, New Delhi has delivered a pointed message to Mohammed Yunus, Bangladesh’s interim leader, who during his visit to China in March 2025 had invited Chinese access to India’s northeast through Bangladesh, describing the northeast as landlocked. While India’s discomfiture about Bangladesh-China discussions regarding India’s northeast is understandable, this trade restriction may hurt Bangladeshi businesses, largely dependent on garment export, but will do little to aid New Delhi’s strategic interests. Bangladesh’s recent political turmoil stems from protests against its former elected government, and the interim leadership — struggling with resistant bureaucracy and ongoing instability — has blamed New Delhi due to its perceived close ties with the previous administration led by Sheikh Hasina. The Yunus-led administration’s warming up to Pakistan, and its ban on the Awami League — actions that go against its promises to the international community — have worsened relations. The imperative for New Delhi must be to come up with a deft outreach to other political parties in Bangladesh as they prepare for elections. While Mr. Yunus had announced that elections will be held later this year, there is still no clarity on the date.

New Delhi must, in consonance with the rest of the international community, advise the regime to conduct elections quickly. A political gesture of this nature while engaging with multiple stakeholders in Bangladesh’s polity is more appropriate than using restrictive moves related to trade, as this would only heighten the anti-India sentiment being fanned by some elements in Bangladesh after the Awami League government’s exit. Such radical elements, many of whom have little investment in the restoration of democratic processes, could also create fresh law and order problems that could lead to security issues in the northeast. India should carefully lay out its response keeping in mind that while it has to communicate its displeasure to the Yunus government, it also has to maintain working relations with this administration till a popularly elected government takes charge in Dhaka.