Bangladesh–India trade, once a symbol of regional cooperation, is now strained by restrictions and mistrust. India’s recent curbs on jute exports through land ports have slowed shipments, raised costs, and deepened uncertainty—threatening not just commerce but the trust that underpins one of South Asia’s most consequential relationships.

For two nations bound by history, culture, and geography, these tensions run deeper than economics. They signal an erosion of confidence at the heart of a partnership that has delivered decades of progress in trade, energy, and connectivity. Unless addressed through dialogue, such frictions could erode those gains and reverberate across the wider region.

Restrictions and Retaliation: A Cycle of Distrust

In recent months, India has restricted imports of Bangladeshi jute and other goods via land ports, forcing these goods to route instead via the distant Nhava Sheva seaport in Maharashtra in western India. Earlier, India also withdrew a transshipment facility allowing Bangladesh to export via Kolkata airport and imposed new curbs on garments, processed food, plastics, and other goods.

In response, Bangladesh limited yarn imports from India via land routes —a move reflecting a widening trust deficit.

The stakes are high. In FY 2023–24, Bangladesh exported approximately USD 855 million of jute goods to India—almost a fifth of its total jute exports. Bilateral trade in FY 2024–25 reached about USD 13.5 billion, underscoring deep interdependence.  With shipments rerouted from a two-day land route to six to eight weeks by sea, costs have surged and small exporters are bearing the brunt.

A Relationship Bound by History

The Bangladesh–India relationship is among Asia’s most deeply entwined. The two countries share a 4,096-kilometre border—the fifth longest in the world—and centuries of cultural, linguistic, geographic and economic interlinks.

After Bangladesh’s 1971 independence, India emerged as its principal ally. Over time, the partnership expanded into trade, infrastructure, energy, and connectivity. Today, India is Bangladesh’s largest trading partner in South Asia, while Bangladesh has become India’s most significant partner in the subregion. India supplies nearly one-fifth of Bangladesh’s imports in raw materials, machinery, fuels, and foodstuffs.

Yet, despite this interdependence, trade frictions recur with alarming frequency. A structural asymmetry lies beneath: a much larger Indian economy capable of setting terms, and a smaller Bangladesh reliant on Indian market access and transit corridors. When India issues unilateral policy changes or non-tariff barriers with little warning, it disrupts not only trade flows, but also the psyche of trust underpinning bilateral cooperation.

In regional terms, trade is more than the movement of goods—it is an index of political will. In a world ruled by protectionism and geopolitical tension, neighborly economic cooperation should be an anchor. But in South Asia, it often becomes a source of division.

Jute Sector: Economic and Social Ripple Effects

These trade frictions land hardest on Bangladesh’s jute sector—historically called the “golden fiber.” While its share in export earnings has fallen from ~90 percent in the 1970s to around 3 percent today, jute still supports millions of farmers and factory workers and contributes about 1 percent of GDP.⁵ Bangladesh remains the top global exporter of raw jute and jute goods, with India as its largest single market.

The new restrictions strike at the core of this ecosystem. Land routes that once moved jute in days now lie blocked, forcing exporters to reroute by sea at steep cost. Delays lead to missed contracts, storage losses, and deterioration of quality. For small producers in Faridpur, Jessore, and Khulna, this translates into lower farmgate returns and dwindling livelihoods.

 Border port restrictions also disrupt ancillary economies in trucking, warehousing, and logistics. Over time, these ripples risk hardening into political resentment and negative public perceptions.

Connectivity and Energy: Achievements at Risk

The fallout from trade friction threatens not only short-term commerce but also the broader cooperation architecture that Bangladesh and India have built since the early 1970s.

A landmark in that journey was the 2015 Land Boundary Agreement, which finally resolved decades-long enclave and adverse possession disputes, turning a protracted humanitarian issue into a diplomatic breakthrough. That accord removed a longstanding irritant and cleared space for deeper cooperation.

That same year, the Trade and Transit Agreement expanded cross-border access through roads, railways, and waterways, introduced border haats, and aimed to make the boundary a bridge rather than a barrier.

Energy cooperation, too, became a signature success. The interconnection of Bangladesh and India’s power grids in 2013 enabled Bangladesh to import electricity from India’s Baharampur, Tripura, and Jharkhand plants. The Rampal 1,320 MW power plant (a joint venture) stands as a symbol of this interdependence. Recently, Bangladesh began receiving 40 MW of hydropower from Nepal via India’s grid—the first cross-border electricity trade in South Asia.

These successes illustrate what sustained cooperation can yield—and what is now at stake. If trade tensions intensify, they could unravel years of progress in regional connectivity and energy integration. The same border that once symbolized shared progress could become a fault line of friction. Safeguarding these gains requires renewed dialogue, predictability, and partnership. Trade must be the foundation, not the fault line, of the Dhaka–Delhi relationship.

Neighborhood First or Trust Deficit?

The implications of this trade dispute extend beyond tariffs or logistics. India’s “Neighborhood First” and “Act East” policies seek regional leadership, but unilateral trade measures erode that ambition and reinforce perceptions of asymmetry.

Bangladesh’s countermeasures—like limiting yarn imports—signal that it will not tolerate one-sided economics. Yet India, as the larger economy and linchpin of South Asia’s integration, bears greater responsibility to ensure that cooperation, not coercion, defines regional ties.

Trust is built through consistency, not rhetoric. The credibility of India’s regional diplomacy depends on treating neighbors as genuine partners, not dependent satellites. If the trust deficit persists, the fallout could cascade beyond bilateral trade—weakening initiatives such as BBIN, BIMSTEC, and the broader South Asian free trade ambition. What starts as a trade rift could evolve into regional retrenchment.

Resetting the Terms: From Friction to Partnership

In a world of shifting geopolitics and fractured trade regimes, South Asia cannot indulge in isolationist logic. The U.S.–China trade rivalry, the weakening of the WTO, and the rise of mega-regional blocs all stress the urgency of regional cohesion.

For Bangladesh and India, cooperation is not optional—it is imperative. Their shared gains stem from integrated supply chains, shared energy security, and cross-border infrastructure. Mistrust that fragments these gains is a collective loss.

The Dhaka–Delhi relationship is too critical—economically, strategically, and symbolically—to be hostage to distrust. A reset grounded in trust, fairness, and dialogue would not only stabilize bilateral ties but also offer South Asia a model of cooperation in times of global uncertainty. The moment for a diplomatic and economic reset is now.

(The author is Professor and Chair of the Department of Economics, International University of Business Agriculture and Technology (IUBAT), Dhaka. His research focuses on regional trade, sustainable development, and South Asian economic cooperation. Views expressed are personal. He can be reached at golam.grasul@gmail.com)