India-Bangladesh trade restrictions rattle businesses

Businesses in South Asia are on edge as India and Bangladesh engage in tit-for-tat trade restrictions following months of rising tensions, reports BBC. 

In a recent move, Bangladesh blocked land imports of Indian cotton yarn, aiming to protect its domestic textile sector from cheaper Indian alternatives. This followed India's abrupt suspension of a key transhipment facility that had allowed Bangladesh to export garments to global markets via Indian ports and airports—officially citing "congestion."

Ties between the two nations have frayed since former Prime Minister Sheikh Hasina was ousted in August amid large-scale protests. Now in exile in India, Hasina faces serious criminal allegations from Bangladesh's interim government led by Nobel laureate Muhammad Yunus, who wants her extradited. India has yet to respond to the request.

Further straining relations, India has raised alarms over alleged attacks on Bangladesh's Hindu minority, accusing the interim government of enabling systematic persecution—charges that Dhaka strongly denies.

The trade fallout is already being felt. Bangladesh's massive garment industry—second only to China's—relied on the India land-air corridor to quickly ship goods to Western markets. The now-suspended route accounted for over \$1 billion in exports last year, slashing delivery times to a week compared to up to two months by sea. With yarn imports rerouted to slower and costlier channels, production costs are expected to rise.

Some analysts view India's actions as retaliation for Yunus's recent comments during a China trip, where he emphasized Bangladesh's strategic role in connecting India's landlocked northeast to the ocean and welcomed Chinese involvement in a key river project near the sensitive Siliguri Corridor. Indian officials viewed this as provocative and strategically risky.

The diplomatic chill has had other ripple effects: Indian visa approvals for Bangladeshis have plummeted, and Indian textile groups are now lobbying to restrict Bangladeshi garment imports. In response, Dhaka is reassessing its own transport concessions granted to India under the Hasina administration.

Adding another layer of complexity, Bangladesh has begun warming up to Pakistan, with diplomatic exchanges restarting after a long hiatus. While India isn't officially alarmed, growing ties between Dhaka and Islamabad amid heightened Indo-Pakistani tensions are being watched closely.

Observers warn that unless tensions cool, the fallout could damage trade, undermine regional connectivity, and reverse years of people-to-people engagement between the two neighbours.