India-Bangladesh ties in peril amid China pivot

Dipak Kurmi

(The writer can be reached at dipakkurmiglpltd@gmail.com.)

The decades-old camaraderie between India and Bangladesh is facing unprecedented strain, as Dhaka appears to pivot strategically toward Beijing. This geopolitical recalibration—accelerated in the aftermath of Sheikh Hasina’s ouster in August 2024—comes at a time when Bangladesh is preparing to graduate from the United Nations’ Least Developed Country (LDC) category in November 2026. While this elevation is a testament to Bangladesh’s economic progress, it brings the end of duty-free access to key export markets like the European Union. To offset the looming trade disadvantages, Bangladesh has turned sharply to China for economic support, undermining its traditionally close ties with India.

This shift has had immediate consequences. On May 17, 2025, the Indian government imposed significant import restrictions on several Bangladeshi goods—primarily ready-made garments (RMG), the country’s largest export segment and key foreign exchange earner. The move follows a series of escalatory actions: from India’s abrupt termination of a five-year-old transhipment facility that had helped Bangladesh export goods via Indian ports and airports to reciprocal restrictions on yarn and rice exports and now the suspension of land-route trade in multiple product categories.

A Trade Relationship under Siege

Bangladesh has long been India’s largest trading partner in South Asia, with bilateral trade reaching $15.9 billion in FY25. However, of this, India enjoys a significant trade surplus—exporting $11.38 billion worth of goods while importing $4.52 billion. Ready-made garments form the bulk of Bangladeshi exports to India, valued at over $700 million annually. However, Indian textile manufacturers have raised red flags about what they consider an uneven playing field.

According to the Global Trade Research Initiative (GTRI), Bangladeshi exporters enjoy a 10–15% price advantage in India due to duty-free access to Chinese fabric and generous export subsidies. Indian textile firms, by contrast, must pay 5% GST on locally sourced fabrics. “Global brands like H&M, Zara, Primark, Uniqlo, and Walmart source apparel from Bangladesh, some of which enter India’s domestic market, displacing local producers,” GTRI said in a recent report.

With India securing duty-free access to the UK for its textile exports and actively negotiating similar arrangements with the EU and the U.S., New Delhi has grown more aggressive in defending its domestic textile industry. The recent curbs on RMG and other Bangladeshi products—ranging from snacks and beverages to PVC goods and wooden furniture—affect nearly $770 million worth of Bangladeshi exports, or 42% of its total trade with India.

The Retaliatory Spiral

The bilateral trade spat intensified when Bangladesh recently limited Indian yarn exports to only seaports, blocking land routes that traditionally facilitated faster and cheaper delivery to Bangladeshi textile mills. Yarn accounts for over 20% of India’s total exports to Bangladesh. Indian officials interpret this move as protectionism aimed at satisfying domestic lobbying by Bangladeshi mills.

In response, India has begun curtailing exports to Bangladesh through land customs stations—particularly to the northeastern states—and has revoked the free transit facility for Bangladeshi cargo to third countries via Indian territory. This escalation, Indian officials argue, is rooted in the principle of reciprocity. “Bangladesh cannot cherry-pick terms of engagement solely to benefit itself,” an official said, urging Dhaka to foster an environment free of rancour.

Strategic Subtext: The China Factor

While trade friction alone is enough to sour relations, the geopolitical backdrop is equally volatile. Since June 2020, China has allowed 97% of Bangladeshi goods duty-free access to its markets. But beyond trade, Beijing’s strategic foray into Dhaka’s economy is growing alarmingly comprehensive.

Bangladesh is the second-largest recipient of Chinese military hardware globally, and Chinese arms account for over 70% of its major defence procurements, according to the Stockholm International Peace Research Institute. In infrastructure, Dhaka has emerged as the epicentre of Chinese projects in South Asia. The Carnegie Endowment for International Peace notes that Bangladesh hosts the highest number of Chinese-supported infrastructure projects in the region. The shift in Dhaka’s foreign policy trajectory has been stark under Muhammad Yunus, the interim Chief Adviser, following Sheikh Hasina’s collapse in August 2024 amid a student-led uprising. Yunus, a Nobel laureate, has demonstrated an open tilt toward Beijing, inviting $2.1 billion in Chinese investments and backing projects like the controversial Teesta River development—previously under negotiation with India.

But it is the developments near the strategic Siliguri Corridor—or “Chicken’s Neck”—that have truly rattled New Delhi. Reports of a Chinese delegation making a “secret” inspection visit to the under-construction Lalmonirhat airbase, just 20 km from the Indian border, have raised alarms in Indian intelligence circles. While Bangladesh claims the airstrip is being restored for civilian use, Indian agencies are monitoring whether the facility may be dual-use or even host Chinese or Pakistani military assets.

Internal Upheaval, External Aggression

Domestically, Bangladesh’s political environment is rapidly deteriorating. The interim government has banned the Awami League, once led by pro-India Sheikh Hasina, from political activity. Maps of “Greater Bangladesh” depicting parts of Jharkhand, Odisha, and the northeastern states of India as Bangladeshi territory have surfaced on university campuses in Dhaka, stoking fears in New Delhi of irredentist propaganda.

Relations have further worsened over the contentious issue of illegal migration. India, under pressure to stem demographic changes in its border states, has initiated “pushback” operations to return suspected illegal Bangladeshi immigrants without formal repatriation. Dhaka has condemned these actions as unlawful, asserting that repatriation must follow due diplomatic process. The situation escalated when Border Guards Bangladesh, reportedly assisted by local villagers, thwarted a Border Security Force (BSF) attempt to return a group of migrants across the border.

Bangladeshi Home Affairs Advisor Mohammed Jahangir Alam Chowdhury has urged border communities to remain “united and vigilant” against India’s alleged efforts to force migrants back. This call for local resistance not only adds a dangerous communal undertone to bilateral border management but also risks igniting localised conflicts.

The Siliguri Corridor: India’s Strategic Lifeline

The Siliguri Corridor—a 22-kilometre-wide land bridge connecting mainland India to its northeastern states—is one of the most sensitive geostrategic choke points in the subcontinent. Any Chinese or Pakistani presence in this region, even under civilian cover, could significantly compromise India’s ability to secure its Northeast and project power in the Indo-Pacific.

That is why India has drawn a red line at the reported developments in Lalmonirhat. The revival of the airbase and the invitation to China for river conservation projects near the Chicken’s Neck are being viewed through a national security lens in New Delhi. “The airstrip could serve as a forward operating base or logistics hub in the event of regional conflict,” an Indian defence source warned.

India’s Broader Strategic Calculus

India’s firm response to Bangladesh’s provocations must also be viewed in the context of its wider foreign policy ambitions. New Delhi has consciously rejected the China-led Regional Comprehensive Economic Partnership (RCEP) and is instead pursuing trade integration with Western blocs—such as the EU, UK, US, and the European Free Trade Association (EFTA).

By tightening controls on garment imports, India is not only defending domestic industry but also positioning itself as an alternative to China in global supply chains. The Modi government’s emphasis on “friend-shoring” with democratic economies further sets the stage for a prolonged divergence between New Delhi and Dhaka, especially under Yunus’s pro-China leadership.

A Relationship at the Crossroads

The India-Bangladesh relationship, long held up as a regional success story, is now mired in mistrust, strategic divergence, and retaliatory economic measures. With Bangladesh drifting toward China and India hardening its position in response, the subcontinent risks a return to Cold War-style alignments—where connectivity, trade, and regional stability become collateral damage in a larger geopolitical contest.

India, while committed to democratic values and regional cooperation, has made it clear that reciprocity, not one-sided generosity, will now guide its South Asia policy. The unfolding events—from economic sanctions and military build-ups to border flare-ups—indicate that unless a conciliatory political shift occurs in Dhaka, the India-Bangladesh relationship may be entering a prolonged period of strategic hostility.