Trade limits between India and Bangladesh have deteriorated into a fully blown diplomatic standoff.
As economic relations sour, military concerns have emerged with intelligence suggesting Bangladesh might be readying military operations amid turmoil next door.
Military Moves Escalate Economic Disagreements
A team of senior officials from Bangladesh’s National Security Intelligence recently departed for Britain to meet with intelligence officials. This follows an urgent meeting between Bangladesh Army Chief General Waqar Uz Zaman and several formation commanders.
Bangladesh Foreign Affairs Adviser Md Touhid Hossain clarified the country’s stance on South Asian peace. “We want peace in South Asia,” Hossain told reporters in Dhaka.
"We do not want any major conflict that could endanger people of this region."
The military activity occurs alongside Bangladesh reportedly mobilising for logistics support to the Arakan Army against Myanmar junta forces.
These forces occupy three townships in Rakhine state, including Sittwe, Kyaukphyu and Manaung.
Cricket Tours Upended by Border Frictions
Cross-border discord also threatens the cricket calendar, a popular sport.
India’s scheduled tour of Bangladesh for limited-overs matches in August now seems unlikely.
"The tour is part of the calendar but nothing is final yet," a source tracking developments told The Times of India.
“There is a bright possibility of India not touring Bangladesh for the ODIs and T20Is because of the current situation.”
Even the 2025 Asian Cup is at stake.
Ex-General’s Remarks Stoke Regional Worries
A retired Bangladeshi army officer recently made statements that damaged already brittle links.
Major General (Retd) ALM Fazlur Rahman, former head of Bangladesh Rifles, advocated for Bangladesh to “invade and occupy” India’s northeastern states if New Delhi attacked Pakistan.
Rahman, who chairs the National Independent Commission of Inquiry, even suggested starting talks with China on a joint military agreement.
His comments followed a bloody attack in Jammu and Kashmir’s Pahalgam area that killed 26 people.
The remarks fit with a wider change in Bangladesh’s foreign policy under interim leader Muhammad Yunus.
During a recent China trip, Yunus described India's northeastern states as "landlocked" and positioned Bangladesh as their "only guardian of the ocean."
Trade Routes Entangled in Dispute
The impasse with Delhi began when Bangladesh restricted cotton yarn imports from India via land routes last month. This action sought to protect its domestic textile industry from competition.
India had exported $1.6 billion worth of cotton yarn to Bangladesh in 2024, with nearly a third transported overland.
India quickly retaliated by suspending a needed transhipment arrangement.
The corridor had allowed Bangladeshi-made apparel to reach Indian airports for global distribution.
New Delhi cited “congestion” as the official reason for the pause.
"The India route got cargo to Western countries in a week.
By sea, it takes up to eight," said Anis Ahmed, CEO of logistics firm MGH Group.Â
The land-air corridor had enabled over $1 billion worth of apparel exports annually.
Commerce Unity Succumbs to Political Rifts
Unlike ASEAN, South Asia has lagged in economic unity.
The newest trade clash exposes how political discord hinders trade ties, according to The Straits Times, which called it a "mini trade war."
Bangladesh risks more losses in this dispute due to its greater export dependence.
The country’s National Board of Revenue halted yarn imports from India through five land ports starting 13 April, including Benapole and Bhomra. Indian yarn can only arrive now via pricier sea routes.
The Bangladesh government acted on complaints from textile millers about unfair competition and smuggling.Â
India cancelled transhipment facilities on 8 April, exempting only exports to Nepal and Bhutan.
Trade Barriers Hurt Both Nations
Ready-made garment manufacturers in Bangladesh have asked India to restore transhipment facilities.
The limits boost costs for their export-driven industry, which makes up 11 percent of Bangladesh’s GDP.
India is suffering drawbacks.
The Confederation of Indian Textile Industry reports that Bangladesh buys 45.9 percent of India's cotton yarn exports, worth $3.57 billion in 2024.
“People have had to reschedule logistics. It’s cheaper and faster by road,” said Dr Siddhartha Rajagopal of India’s Cotton Textiles Export Promotion Council.
The land route had granted quick access for specialty yarns and smaller orders.
Icy Diplomacy After Power Change
Contacts have frozen since a popular uprising removed then Prime Minister Sheikh Hasina, a longtime Indian ally.Â
She escaped to India, where she stays. The interim government led by Nobel laureate Muhammad Yunus wants her extradited to answer criminal allegations.
India has yet to reply to this request. New Delhi has also voiced worries over alleged attacks on Bangladesh’s Hindu minority, charges Dhaka denies.
Ramifications of Spat: People-to-People Relations
The diplomatic freeze creates knock-on effects.
Indian visa approvals for Bangladeshis have nosedived. Indian textile groups now push to curb Bangladeshi garment imports.
Bangladesh reviews transport allowances granted to India under Hasina’s administration.
Geopolitical Maneuvers Hinder Business Growth
India observes with worry as Bangladesh draws closer to both China and Pakistan.
Diplomatic talks between Dhaka and Islamabad have resumed after a long gap. This occurs amid worsened Indo-Pakistani frictions following the Pahalgam attack.
Yunus’s remarks during his China trip especially worried Indian officials.
He stressed Bangladesh’s role in linking India’s landlocked northeast to the ocean and welcomed Chinese involvement in projects near the vulnerable Siliguri Corridor.
“The main worry is more on the strategic and political front. India will certainly be watching Bangladesh, China and Pakistan links very closely,” Professor Sanjay Kathuria told the Straits Times.
"Every country has its limits, and for India the limit is security."
Still, businesses yearn for better bonds between two countries that jointly create a market of more than 1.6 billion people.
“We should do more business within the region. We shouldn’t depend on the Western world,” Bangladesh Garment Manufacturers and Exporters Association president Faruque Hassan urged.
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