Trade steady amid Bangladesh-India political tensions

Bangladesh relies heavily on India for cotton and yarn imports, which remain unaffected despite tensions

Amid political tensions between Bangladesh and India following the change in government in Dhaka, discussions are rife about the potential impact on bilateral trade.

Despite some disruptions, key imports such as cotton, yarn, electricity, and fuel have remained unaffected.

For the first time since the 1971 Liberation War, when Bangladesh gained independence from Pakistan, the country has reopened trade routes, with reports of increased imports from the neighbouring country.

However, allegations of minority persecution in Bangladesh have caused trade disruptions in Indian border states.

Both nations have expressed concerns over each other’s actions through statements and counterstatements, with some reports highlighting interruptions in international trade.

The Indian high commission has also limited visa issuance, particularly affecting certain areas of West Bengal.

Nevertheless, Mohammad Abdur Razzaque, chairman of the private sector research body Research and Policy Integration for Development, or RAPID, told bdnews24.com that Bangladesh continues to benefit from trade with India due to its proximity and lower costs.

"When there's a market crisis caused by supply-demand imbalance, we can import from India quickly and at a lower cost," Razzaque explained, adding that alternatives like importing onions from Egypt would take more time and be more expensive.

After August’s political upheaval, trade normalised somewhat in September and October.

However, incidents such as the arrest of Chinmoy Krishna Das, a Hindu priest and spokesperson of the Bangladesh Sammilito Sanatani Jagaran Jote, and the defacing of flags at the Agartala Assistant High Commission have reignited tensions.

Potato imports through the Hili Land Port have also been halted as the West Bengal government reportedly stopped online slot bookings.

Importer Shahidul Islam expressed frustration, saying: “I opened LCs for 900 tonnes of potatoes from Haryana, Punjab, and Uttar Pradesh, not West Bengal. Why would they stop our imports?”

The vice president of the Hili Land Port Import-Export Group remarked that both countries’ businesses want stability to avoid future disruptions at ports.

Finance Advisor Salehuddin Ahmed believes political developments will not significantly impact trade.

“Businesses won’t pay attention to politicians. If they have surplus production, they will sell,” he said at a seminar at Dhaka’s BRAC University on Nov 16.

Addressing why Bangladesh imports significant food products from India, Salehuddin said the practicality.

“Could you eat eggs imported from Thailand? Each egg would cost Tk 50. Practical considerations matter here,” he added.

TRADE BETWEEN INDIA AND BANGLADESH

Although discussions often focus on food products, the largest share of Bangladesh's imports from India in monetary terms consists of cotton and yarn, which serve as raw materials for the country’s garment industry.

India supplies 80–85 percent of Bangladesh’s demand for these materials.

Other significant imports include electricity and refined diesel, crucial for Bangladesh’s energy security, conducted through government-to-government agreements.

According to the United States Department of Agriculture, or USDA, 84.5 percent of the yarn imported by Bangladesh in the 2023 calendar year came from India.

The country also spends over $3 billion annually on cotton imports, of which approximately $200 million per month, or nearly $2.5 billion annually, is sourced from India, accounting for around 80 percent of total cotton imports.

Bangladesh is also highly dependent on India for food products, including rice, lentils, onions, chillies, and seeds for crops.

IMPORT TRENDS

In FY 2023-24, Bangladesh’s total imports from India exceeded $11.5 billion.

During the first four months of FY 2024-45, imports stood at nearly 7.5 million tonnes of goods valued at Tk 299.14 billion, averaging Tk 75 billion per month.

In July, imports totalled $803.5 million, up from $723 million in the same period of the previous fiscal year.

The largest imports included $203.2 million worth of cotton, $17.5 million of yarn, $113.4 million of fuel, and $49.4 million of vegetables and other food items.

However, the political transition in August disrupted trade, with imports falling by 19.43 percent compared with the same month in the previous year.

August imports totalled $760.4 million, compared with $943.8 million the previous year.

Cotton imports during the month amounted to $180.7 million, yarn $21.5 million, fuel $133.8 million, and vegetables $46.2 million.

In September, imports reached $860.8 million, a slight decrease of 1.02 percent compared with the previous year. Cotton imports for the month were $207.3 million, yarn $25.3 million, fuel $147.4 million, and vegetables $36 million.

EXPORT TRENDS

Data from India’s cinistry ministry shows that Bangladesh’s exports to India in July were valued at $168.3 million, up 5.42 percent from $159.6 million in the same period last year.

During this period, $44.2 million worth of garment accessories and $25.5 million worth of spare parts for aerospace and aviation were exported to India.

In August, exports declined by 6.69 percent to $156.8 million. However, in September, exports surged by 26 percent to $206.2 million, with ready-made garments dominating the export list.

BUSINESS LEADERS OPPOSE DISRUPTIONS

Fazle Shamim Ehsan, owner of Fatulla Apparels, a leading player in Bangladesh’s apparel export sector, has stressed the importance of uninterrupted trade between Bangladesh and India.

He told bdnews24.com: “As businesspeople, we maintain good relations with everyone. We aim to stay out of political turmoil and continue trading with all.”

He pointed out that even amid tensions between China and the US, trade persists for mutual benefit.

“We source cotton and yarn from Gujarat and Ahmedabad. Neither Indian businesses nor their government would want disruptions, so trade is unlikely to stop,” he remarked.

Highlighting alternative sources, Ehsan added: “Indonesia, Turkey, and Pakistan are options. While there might be minor delays in the supply chain, such as three or four days, it won't be a major issue.”

Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, or BKMEA, echoed similar sentiments, saying: “If imports of cotton and yarn from India halt, there will be some challenges, but I don’t foresee significant impacts. We also source from the US, Africa, and Australia.”

However, he expressed hope that trade with India would remain unaffected.

“Political tensions exist everywhere, but trade doesn’t stop,” he said.

Bangladesh consumes approximately 6.5 million tonnes of fuel annually, with around 1.5 million tonnes being crude oil imports.

The remainder is met through refined oil imports, including 50,000 to 70,000 tonnes of diesel from India each year.

Last fiscal year, electricity imports from India amounted to $1 billion.

Most trade-related challenges arise in the food import sector, where discussions and tensions often dominate.

COSTS TO RISE IN ALTERNATIVE MARKETS

Razzaque, the former Commonwealth Secretariat trade policy head, believes trade disruptions between Bangladesh and India are unlikely to last due to mutual economic interests. “Bangladesh’s trade won’t collapse, but it will become more expensive if alternatives are sought,” he told bdnews24.com.

Razzaque said India also depends on Bangladesh, which ranks as its seventh-largest export market, excluding informal sectors like healthcare, tourism, and education.

He said, “The absence of language barriers in trade with India significantly boosts international commerce.”

LAND PORTS FACE STAGNATION

Bangladesh has 24 land ports, with most imports coming through Burimari in Lalmonirhat and Benapole in Jashore, according to the Bangladesh Land Port Authority.

However, disruptions have been reported.

Sajedur Rahman, an importer using Benapole, said protests erupted on Monday in India’s Petrapole over the arrest of Chinmoy, with threats to halt potato and onion exports.

While trade remains operational, West Bengal BJP chief Suvendu Adhikari has threatened a five-day suspension and a complete halt from January unless Chinmoy is released.

Other ports, such as Sylhet’s Zakiganj customs station and Feni’s Bilonia, have ceased operations.

Coal and stone imports via Tamabil are also stalled due to transportation issues in India.

Customs Commissioner Md Tasnimur Rahman confirmed that offices remain open, but trade has stopped.

Rafiqul Islam Royal, a Benapole importer, reported a 70 percent decline in business compared with last year, citing high dollar rates and unprofitable raw material imports.

“Although the government reduced rice and onion duties, higher prices in India mean there’s no profit,” he said.

FUEL IMPORTS SITUATION

Bangladesh Petroleum Corporation, or BPC, imports refined fuel from India's Numaligarh Refinery Limited, or NRL, under a government-to-government, or g2g, agreement.

Despite earlier disruptions due to dollar shortages, the situation has stabilised, according to Muhammad Morshed Hossain Azad, BPC's general manager (finance).

Azad told bdnews24.com: “Previously, we imported fuel through loan confirmations from banks. Later, NRL requested transactions via the State Bank of India. Due to its dollar crisis, we proposed alternative banks, and now, we are processing imports through a commercial bank’s LC.”

Currently, the import of 4,000 tonnes is underway, with annual imports capped at 60,000 tonnes, subject to a 10,000-tonne variation.

“So far, we’ve imported 55,000 tonnes this year, with an additional 15,000 tonnes expected this month,” Azad said.

While delays in NRL’s operations have occurred, BPC has identified alternatives, he added.

RISING TENSIONS BETWEEN BANGLADESH AND INDIA

Tensions between Bangladesh and India have risen following the Nov 25 arrest of Chinmoy, principal of Chattogram’s Pundarik Dham, on sedition charges.

His detention and subsequent bail denial have drawn criticism, with clashes leading to the death of a lawyer.

The Indian government expressed "deep concern," while Bangladesh responded with a counter-statement.

Amid this, a video of the Indian flag being trampled in Dhaka circulated on social media.

On Dec 2, a group attacked Bangladesh's Assistant High Commission premises in Tripura’s Agartala, removing the national flag, according to Indian media reports.

India termed the incident “unfortunate,” and Bangladesh summoned Indian High Commissioner Pranay Verma for an explanation.

Reports also emerged of arrests in West Bengal over alleged disrespect to Bangladesh’s national flag.

[Writing in English by Arshi Fatiha Quazi]