India’s recent imposition of port restrictions on Bangladeshi imports marks a significant escalation in trade tensions between the two countries, with far-reaching economic and geopolitical implications. The directive, issued by India’s Directorate General of Foreign Trade (DGFT) on May 17, 2025, restricts the import of key Bangladeshi goods-including readymade garments, processed foods, plastics, and wooden furniture-by limiting their entry to only the Nhava Sheva and Kolkata seaports, while barring overland trade through established land routes, especially those in West Bengal and the north-eastern states.

This measure directly affects goods worth approximately $770 million, which constitutes nearly 42% of India’s total imports from Bangladesh.

Economic Fallout For Bangladesh

The most substantial blow is to Bangladesh’s flagship export sector: ready-made garments, which generated $618 million in exports to India between April 2024 and February 2025. The new restrictions will disrupt the established, faster, and cost-effective overland supply chains, forcing exporters to rely on slower and more expensive sea routes. Other affected categories include processed foods, plastic items, cotton waste, and wooden furniture, collectively valued at about $153 million. Notably, essential imports such as fish, edible oils, LPG, and crushed stone remain exempt from these restrictions.

Geopolitical And Strategic Context

The timing and scope of India’s restrictions are widely interpreted as a response to Bangladesh’s recent trade barriers on Indian goods. Since late 2024, Bangladesh has imposed bans and curbs on Indian yarn, rice, tobacco, milk powder, and other products, and has introduced a transit fee on Indian cargo that previously moved duty-free through its territory.

These measures coincide with a marked shift in Bangladesh’s foreign policy under Interim Prime Minister Muhammad Yunus, who has deepened economic ties with China, including signing $2.1 billion in deals and inviting Chinese participation in sensitive infrastructure projects. This realignment has raised concerns in New Delhi about China’s growing influence in South Asia.

Domestic Industry Dynamics

Indian textile manufacturers have long complained about unfair competition from Bangladeshi exporters, who benefit from duty-free Chinese fabric imports and government export incentives, allowing them to undercut Indian prices by 10–15%. Global brands like H&M, Zara, Primark, Uniqlo, and Walmart source heavily from Bangladesh, with some of these goods entering the Indian market and intensifying competition for domestic producers. The new restrictions are expected to provide some relief to Indian manufacturers, who have struggled to compete on price and scale.

Broader Bilateral Trade Trends

Despite rising tensions, Bangladesh remains India’s largest trading partner in South Asia. Bilateral trade stood at $14.24 billion in 2022–23, with Indian exports at $12.22 billion and imports from Bangladesh at $2.02 billion. However, total trade declined to $12.91 billion in FY24, reflecting the growing friction and mutual trade barriers. Up to February 2025, India exported $10.40 billion worth of goods to Bangladesh and imported $1.83 billion.

Outlook And Prospects

While the current measures are likely to inflict immediate losses-particularly to Bangladesh’s garment and processed goods sectors-experts suggest the relationship is not beyond repair. The longstanding economic interdependence and shared regional interests may eventually prompt a recalibration of policy on both sides. However, as Bangladesh continues its pivot toward China and India leverages economic tools to signal its strategic concerns, the near-term outlook for bilateral trade remains uncertain, with significant risks for both economies.

India’s port restrictions are set to hit Bangladesh’s dollar-earning trade hard, with an estimated loss of $770 million in exports, primarily affecting garments and processed goods. The move is rooted in both economic grievances and shifting geopolitical alignments, and marks a new phase of strategic competition in South Asia.

Based On A Mint Report