India-Bangladesh trade war: Can Dhaka afford to jeopardise its $47B garment industry?

Can Bangladesh afford a trade war with India? How can it fight this war with its biggest trading partner? If it is not a trade war, why has the interim government's chief adviser, Muhammad Yunus, asked New Delhi not to use land ports to export yarns to Bangladesh? Will it not damage the country's textile and readymade garment businesses, throwing thousands out of work?

Bangladesh hits back India, stops use of land ports 

Political analysers and business experts alike are upset with the recent decision of the Yunus-led government in the South Asian country bordering India. In a decision that may have far-reaching consequences, the Bangladesh National Board of Revenue (NBR) suspended yarn imports from India through the land ports of Benapole, Bhomra, Sonamasjid, Banglabandha, and Burimari. It said that the decision had been taken to address the concerns within the domestic textile sector regarding false declarations and unfair competition.

It was a tit-for-tat to India's decision to rescind transshipment facilities given to Bangladesh, with the exception of exports to Nepal, Bangladesh, and Myanmar. India MEA spokesperson clarified that the facility was taken back because it clogged Indian ports, creating problems for domestic exporters. However, this decision was announced after Muhammad Yunus had said in China that the seven Indian states were landlocked and so Dhaka was the natural guardian of sea in the area. He also added that China should extend its economy to Bangladesh. 

Why did Muhammad Yunus upset India?

It did not go down well with New Delhi, with Foreign Minister S. Jaishankar reminding Yunus at the BIMSTEC Summit in Bangkok that India had the longest coastline in the Bay of Bengal.

According to Bangladeshi media, the textile mill owners are upset with the decision of their government, though yarn manufacturers are happy. India exported cotton yarns worth $1.6 billion and manmade fiber worth $85 million in 2023-24 globally. However, more than 45% was exported to Dhaka. New Delhi also exported these yarns to China, Vietnam, Indonesia, Taiwan, Thailand, and other countries. Textile mill owners argue that now China may exploit the situation and dump their low-quality, cheaper products in Bangladesh. 

Bangladesh to have egg on its face?

Readymade garments have the biggest share in the total exports from Bangladesh. Dhaka exported readymade garments worth $47 billion in 2022-23. With India stopping Bangladesh from using its airports and seaports for exporting these products, Dhaka is most likely to suffer as its exports may become more expensive and late. 

Bangladesh's total exports reached $55.8 billion in 2022. It went up to $55.79 in 2023 before plummeting to $50 billion in 2024 due to political turmoil. 

India-Bangladesh bilateral trade

New Delhi exported 5,620 commodities to Bangladesh worth $11.06 billion in FY24 and $12.21 billion in FY23. On the other hand, India imported 1,012 commodities worth US$1.8 billion in FY24 and US$ 2.02 billion in FY23. Dhaka exported paper and paperboard, articles of pulp, paper, and board; salt, sulfur, earth, stone, plaster, lime, and cement; raw hides and skins (other than furskins); and leather to India. 

India is the biggest trade partner of Bangladesh, with a surplus of $10.01 billion in FY 2024. Instead of trying to reduce the trade deficit with India, Dhaka has chosen to hit back and bring its biggest export, readymade garments, into jeopardy.