In FY24 Indiaโs exports to Bangladesh fell by 9.5% to $11bn
NEW DELHI: Indiaโs trade and investment relationship with Bangladesh has entered a phase of uncertainty following the resignation of Bangladesh Prime Minister Sheikh Hasina after weeks of violent demonstrations. The Army chief has declared that an interim government will now run the country.
Bangladesh is Indiaโs 25th largest trading partner, with bilateral trade valued at $12.9 billion. This trade is dominated by exports, making Bangladesh Indiaโs eighth-largest export partner.
In FY24, Indiaโs exports to Bangladesh contracted by 9.5 per cent to $11 billion. Over the last two years, outbound shipments to Dhaka have been declining. For example, during FY22, Bangladesh was Indiaโs fourth-largest export market. However, factors such as dollar shortages, high inflation, and Indiaโs export restrictions on essential items like wheat and some categories of rice have affected outbound shipments.
A key destination for Indian auto exports
Bangladesh is also a key destination for Indian auto exports, alongside African and Latin American countries. The political unrest in the neighboring country could pose risks for investors with existing projects and may lead to an influx of illegal migrants into India.
โThe political unrest in Bangladesh will create uncertainty for exporters. In fact, there will be greater risk for investors,โ said Arpita Mukherjee, professor at the Indian Council for Research on International Economic Relations (ICRIER).
According to Delhi-based think tank Global Trade Research Initiative (GTRI), Indiaโs exports, such as onions, other agricultural products, and electricity, are crucial for the people and economy of Bangladesh and may not be significantly affected by the unrest.
Facing a severe dollar shortage
However, Bangladeshโs economic challenges have negatively impacted bilateral trade in recent years. The country has been facing a severe dollar shortage, which has limited its ability to import goods, including those from India. The rising inflation in Bangladesh has also reduced domestic demand, leading to lower consumption of both local and imported products.
Indiaโs imports from Bangladesh contracted by 8.7 per cent to $1.8 billion in 2023-24. Top inbound shipments include iron and steel products, textiles, and leather goods, among others.
Biswajit Dhar, distinguished professor at the Council for Social Development, emphasized that Bangladesh is a very important and large market for India. โPolitical uncertainty in Bangladesh will certainly hit us on the trade front. If the political uncertainty spills over to economic uncertainty, then Bangladeshโs economy will get affected. That may result in illegal migration into India,โ Dhar added.