New realities of Delhi-Dhaka ties

Recent trade restrictions suggest that the era of India’s preferential treatment of Bangladesh is over, and the latter must take much of the blame

Many of the physical, economic, and energy connectivity measures India initiated with Bangladesh over the past decade were aimed at boosting the development of the country’s landlocked northeastern states. In a way, this was an acknowledgment of the long-standing economic complementarities of a region that faced widespread disruptions in the wake of the Partition in 1947 and subsequent wars with Pakistan. Bangladesh too benefited from its access to the markets in the seven northeastern states and from the revenues generated by allowing its territory and rivers to be used for the trans-shipment of goods from the Indian hinterland to the northeast. However, the interim government in Dhaka led by Muhammad Yunus has taken a range of steps that appear to be aimed at whittling India’s access to Bangladesh’s markets, especially for goods made in the northeastern states. Yunus’s remarks during a visit to China last month on leveraging the geographical isolation of India’s northeastern states while seeking Chinese investments, especially about the extension of the Chinese economy to the region, were a red flag for New Delhi.  

The interim government in Dhaka led by Muhammad Yunus has taken a range of steps that appear to be aimed at whittling India’s access to Bangladesh’s markets (AFP)

India’s latest restrictions on Bangladeshi exports, especially those targeting the lucrative ready-made garments (RMG) sector, have to be viewed in this context and are a further indication that the era of New Delhi’s preferential treatment of Dhaka is over. The trade barriers for India, including economically unviable transit charges levied by Bangladesh on goods originating from the northeastern states and the undue inspections of Indian exports, have made it clear to New Delhi that the political regime in Dhaka is reversing India-friendly policies nurtured by the previous Sheikh Hasina government. Bangladesh’s muted reaction to the Pahalgam attack and its seemingly neutral stand during the recent hostilities between India and Pakistan would not have gone unnoticed in New Delhi. The multiple power centres under the new dispensation in Dhaka have not augured well for Bangladesh’s foreign policy, with some elements working overtime to bolster economic and defence ties with Pakistan.  

Bangladesh’s projection of its domestic politics into the foreign policy realm is likely to hurt the country’s fragile economy, notwithstanding the grandstanding that Yunus did before the Chinese business leaders last month. While India has made it clear that Bangladesh can no longer take access to India’s markets for granted, it has also signalled that it is open to discussions on trade-related matters, provided the Bangladeshi side creates the right environment for such talks.