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Bangladesh and India share more than a long border. Rivers flow across both countries, supply chains overlap naturally and centuries of cultural and commercial exchange make economic cooperation an obvious choice. On paper, Bangladesh should be one of India’s closest economic partners. Geography alone makes the case.
Sourcing inputs from India and exporting finished goods back across the land border could cut transport costs by as much as 30–50 per cent. For Bangladesh’s USD 50-billion garment industry, this is not a marginal saving. Indian yarn, dyes, chemicals and machinery are cheaper, closer and easier to integrate than imports hauled across oceans from China or Europe.
Until recently, this logic was reflected in trade numbers. Bilateral commerce hovered around USD 12 billion annually. With deeper cooperation in energy, transit, agriculture and inland waterways, trade volumes could have expanded several times over. Instead, politics intervened, and Bangladesh paid the price.
Politics Before Prosperity
For decades, economic engagement with India has been filtered through ideology rather than interest. Jamaat-e-Islami’s wartime baggage fostered a narrative of permanent suspicion toward India. BNP governments amplified historical grievances instead of addressing structural economic needs.
The consequences were predictable. Key agreements were delayed or quietly abandoned. The 2000 transit accord never reached its potential. The Teesta water-sharing arrangement remained frozen. Talks on a Comprehensive Economic Partnership Agreement were allowed to drift without political backing.
Even Indian investments in power plants and ports were portrayed as strategic overreach rather than economic necessity. This posture made little sense at a time when Bangladesh’s infrastructure was already struggling under the weight of industrial demand.
The approach did not change after 2024. Muhammad Yunus’s interim political positioning followed the same familiar instinct: keep India at arm’s length while signalling openness to Turkey, Pakistan and Western donors. The result was economic stagnation disguised as strategic independence.
Formal trade with India remained stuck at around USD 12 billion in 2024. At the same time, informal cross-border trade and smuggling surged, estimated at USD 5–10 billion a year. Projects that could have generated revenue and efficiency, such as the Akhaura–Agartala rail link, moved slowly or stalled altogether.
Bangladesh lost transit income, logistics advantages and its chance to anchor itself in regional value chains.
Costly Dependence on Distant Markets
Cut off from its most logical partner, Bangladesh turned outward. The idea was diversification. The outcome has been dependence without resilience.
Remittances from the Middle East, worth about USD 22 billion annually, keep consumption afloat but do little to create productive jobs. Garment exports to Europe and the United States face rising shipping costs, complex compliance regimes and tightening carbon rules that strain smaller firms.
Chinese Belt and Road investments, estimated at USD 8 billion, have not delivered the promised transformation. Assets like Payra Port remain underused. Technology transfer is minimal. Domestic supply chains remain shallow.
Energy dependence has added further pressure. Oil imports from the Gulf fluctuate sharply due to instability in the Red Sea. Western regulatory standards often overwhelm small and medium enterprises that lack capital buffers. Inputs imported from China cost roughly 20 per cent more than Indian alternatives, squeezing margins in garments, Bangladesh’s primary export engine.
Industrial growth has slowed to around 5–6 per cent, well behind regional competitors like Vietnam. Unemployment has crossed 10 per cent. Global shocks, whether from the Ukraine war or shifting US trade policies, hit harder because Bangladesh lacks India’s stabilising buffer in food supply, energy access and land-based transit.
Climate stress only deepens the problem. Floods damage crops year after year, while stalled negotiations over Teesta prevent coordinated river management that could have mitigated losses.
Rural Stress and Industrial Decline
The pain is felt most sharply in rural Bangladesh, where nearly 60 per cent of the population still lives. Farmers in districts such as Jessore and Chapai Nawabganj once relied on nearby Indian markets for jute, vegetables and fish. Today, much of that produce never finds a buyer in time.
Small manufacturers have been cut off from Kolkata-linked value chains in leather, ceramics and agro-processing. Power shortages idle factories. Job losses follow.
Development policy has offered little relief. Muhammad Yunus’s microfinance model, often praised abroad, has failed to deliver structural change at home. It has not created industrial employment or lifted productivity. Instead, it fragments capital into tiny loans, locks households into debt cycles and keeps millions operating at subsistence levels.
Under BNP-Jamaat influence, aid often flows into madrassas rather than industrial clusters or agro-processing zones. Rural poverty remains close to 25 per cent. Inequality is entrenched. Informal economic losses approach a quarter of total activity, trapping entire regions in stagnation.
Choosing Pragmatism Over Posturing
Bangladesh’s economic troubles are not inevitable. They are the result of choices and can be reversed by different ones.
Reviving CEPA talks, concluding the Teesta agreement and creating cross-border special economic zones would unlock growth quickly. Regional cooperation through SAARC, particularly in energy grids and transit corridors, should support global engagement, not compete with it.
Diversification matters. But without a realistic India-centric strategy, diversification becomes expensive and incomplete.
Breaking economic ties with India is not a neutral diplomatic stance. It is an act of economic self-harm. Under BNP, Jamaat and intermittent Yunus influence, Bangladesh has sacrificed jobs and industry for political signalling.
The route out of stagnation does not lie in distant alliances or moral rhetoric. It lies across the border. Bangladesh now faces a clear choice: rebuild regional ties and regain economic momentum, or continue paying the growing cost of isolation.
(Ashu Mann is an Associate Fellow at the Centre for Land Warfare Studies. He was awarded the Vice Chief of the Army Staff Commendation card on Army Day 2025. He is pursuing a PhD from Amity University, Noida, in Defence and Strategic Studies. His research focuses include the India-China territorial dispute, great power rivalry, and Chinese foreign policy.)
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