India’s $770 Million Trade Curbs: India has recently put new rules in place that stop many Bangladeshi products, like garments and processed foods, from entering through land borders, requiring them to go by sea instead. This change could seriously hurt Bangladesh’s economy, especially its clothing industry, by raising shipping costs and reducing access to the Indian market at a time when Bangladesh is already struggling with economic and political problems. These restrictions affect about $770 million in trade, which is nearly 42% of Bangladesh’s exports to India, and are expected to make things even tougher for Bangladeshi businesses right now. Below is a clear, simple explanation of what’s happening, why it matters, and what could happen next.
India’s New Trade Restrictions
India has decided to limit the entry of Bangladeshi goods through its land borders, forcing many products to be shipped only through certain seaports. This change, announced by India’s Directorate General of Foreign Trade (DGFT) on May 17, 2025, affects a wide range of Bangladeshi exports, including:
- Readymade garments
- Processed foods
- Plastic products
- Flavoured drinks
- Cotton waste
- Wooden furniture
Previously, these items could enter India through convenient land routes, especially via West Bengal and the northeastern states. Now, most of these goods must be shipped by ocean, using either the Kolkata or the Nhava Sheva ports. This shift is expected to increase Bangladeshi exporters’ costs and slow their deliveries.
Economic Impact on Bangladesh
This new rule could impact Bangladeshi exports to India worth about $770 million, which is nearly 42% of everything Bangladesh sells to its neighbour. The garment industry, Bangladesh’s largest export sector, will be hit the hardest. Between April 2024 and February 2025, Bangladesh earned $618 million from garment exports to India alone.
Other affected goods, such as processed foods and plastics, make up another significant portion of trade. With these restrictions, Bangladeshi exporters will now have to rely on more expensive and less flexible shipping routes, which could hurt their competitiveness.
Why Did India Make This Move?
India’s decision did not come out of nowhere. India made this decision as a clear reaction to several trade barriers that Bangladesh has put on Indian products lately. Over the past year, Bangladesh has:
Banned Indian yarn imports through major land ports, affecting Indian textile exporters.
Placed stricter limits on Indian rice, paper, tobacco, and milk powder.
Bangladesh started charging a fee for Indian goods traveling through its territory, stopping the free passage that had existed for years under regional deals.
These actions have hurt Indian exporters and limited market access for India’s northeastern states, which depend on trade with Bangladesh for economic growth.
Geopolitical Tensions
The trade dispute is happening against a backdrop of shifting political alliances in South Asia. In mid-2024, Bangladesh’s pro-India government led by Sheikh Hasina was replaced by an interim administration under Muhammad Yunus, who has taken a friendlier stance toward China. The government led by Yunus has agreed to contracts with China totaling $2.1 billion, covering big construction projects and letting China work on important developments like the Teesta River project.
India sees Bangladesh’s growing closeness to China as a strategic concern, especially since Bangladesh’s new government has not openly supported India during recent regional tensions. The trade restrictions are seen as part of India’s broader effort to signal its displeasure and protect its own economic interests.
How Are Indian Businesses Affected?
Indian textile manufacturers have long complained that Bangladeshi exporters have an unfair advantage. While Indian companies pay a 5% tax on locally sourced fabric, Bangladeshi garment makers benefit from duty-free Chinese fabric and export incentives, allowing them to sell products at lower prices in India. Major international brands like H&M, Zara, and Walmart source garments from Bangladesh, and some of these products end up in the Indian market, competing with local manufacturers.
By restricting Bangladeshi imports, India aims to protect its domestic industries and level the playing field for its producers, especially in the northeast.
What Goods Are Still Allowed?
Despite the new restrictions, India will continue to allow some Bangladeshi products to enter through land routes, including:
- Fish
- Edible oils
- Liquefied petroleum gas
- Crushed stone
Also, Bangladeshi goods heading to Nepal and Bhutan through India are not affected by these changes.
Is This Retaliation?
Many experts see India’s move as a measured response rather than outright retaliation. India wants to send a message that it will not accept one-sided trade benefits and that both countries need to maintain a fair and balanced relationship. Officials in India have said they are open to dialogue and hope Bangladesh will work towards a more cooperative trade environment.
The Bigger Picture
Trade between India and Bangladesh has been strong for years. In 2022-23, the two countries traded goods worth $14.24 billion, with India exporting $12.22 billion and importing $2.02 billion from Bangladesh. However, trade fell to $12.91 billion in the following year, partly due to these rising tensions.
India’s recent decision also follows its earlier move to withdraw a key transit facility that allowed Bangladesh to ship goods through Indian territory to other countries. This has made it harder for Bangladesh to reach neighboring markets quickly and cheaply.
Although the current situation is tense, experts believe the relationship between India and Bangladesh can still be repaired. Bangladesh remains India’s biggest trading partner in South Asia, and both countries have benefited from years of close economic ties. Many hope that, with dialogue and cooperation, the two neighbors can resolve their differences and restore smoother trade relations in the future.
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