In this episode of businessline’s State of the Economy Podcast, Amiti Sen talks about the recent political upheaval in Bangladesh and the uncertainty that looms over the future of Bangladesh and its impact on trade relations with India with Biswajit Dhar, distinguished economist and retired professor from Jawaharlal Nehru University.

Dhar talks about how the political instability in Bangladesh could disrupt its economic growth and, in turn, affect Indian exports and investments. “When there is political uncertainty of the kind that we have seen in Bangladesh, there is going to be economic uncertainty that follows,” he notes.

Dhar highlights the significance of Bangladesh as a trading partner for India, particularly in the context of exports.

In the fiscal year 2021–22, Bangladesh was India’s fourth-largest export market, a position that has since slipped to sixth due to India’s restrictions on wheat and rice exports. “India’s exports to Bangladesh have been growing, but the recent political turmoil could affect this trend significantly,” Dhar warns.

The discussion also touches on the impact of the unrest on the textile industry, a critical sector for both countries. Bangladesh, known for its robust garment industry, has been a key part of India’s supply chain, especially for yarn and fabrics. However, the ongoing turmoil threatens to disrupt this supply chain. “The garment industry has suffered hugely in this political turmoil, and as a result, the whole supply chain is going to get disrupted.” Dhar explains.

Beyond textiles, the podcast explores the broader implications for Indian businesses operating in Bangladesh, including those in the FMCG sector, personal care, and even IT services. Dhar points out that Indian companies have increasingly been setting up operations in Bangladesh to take advantage of lower wage costs. “Indian companies have been going into Bangladesh, and they were actually trying to piggyback on Bangladesh’s success in garments to access the international market,” Dhar notes.

The conversation also looks at the potential Free Trade Agreement (FTA) between India and Bangladesh, which has been in the works. Dhar is optimistic about the FTA, stating that it could be a “win-win” situation for both countries. He emphasises the need for India to maintain strong economic ties with Bangladesh, irrespective of the political changes in Dhaka. “The strong economic relations that have developed between the two countries should be a strong enough reason for the new government to continue relations with India,” Dhar adds.

Listen to the podcast to learn more.

(Host: Amiti Sen; Producer: Siddharth Mathew Cherian)

About the State of the Economy podcast

India’s economy has been hailed as a bright spot amid the general gloom that seems to have enveloped the rest of the world. But several sectors continue to stutter even as others seem set to fire on all cylinders. To help you make sense of the bundle of contradictions that the country is, businessline brings you podcasts with experts ranging from finance and marketing to technology and start-ups.

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