Bangladesh’s political turmoil casts strategic, economic shadow over India

The collapse of Bangladesh Prime Minister Sheikh Hasina’s government has major strategic as well as economic implications for India. The political turbulence in the country may not only put a strain on diplomacy but also hit trade prospects, lend uncertainty to on-going projects and increase influx of immigrants.

Strategically, the situation is challenging for New Delhi as Hasina was seen as a “close friend of India” and ties between the two nations had strengthened during her regime. With her ouster, some other nations competing with India for influence in the region, for instance China, may try to take advantage, some analysts say. It would also be a diplomatic problem to handle the increased number of illegal immigrants from the country who may want refuge in India.

Economic uncertainties

“Bangladesh is our close and strategic partner.  Hence, instability in the neighbourhood has obvious diaspora and security imperatives which might already be felt. Influx of refugees escaping violence can become a problem. External powers, inimical to India’s interests may gain ground, which will have to be factored in,” Ambassador Anil Trigunayat told businessline.

People from the British Bangladeshi community step on an image of Bangladeshi Prime Minister Sheikh Hasina on a banner following her resignation, in a park in East London, Britain | Photo Credit: TOBY MELVILLE

The political crisis will surely spill over into the economic sphere, said Biswajit Dhar, Distinguished Professor, Council for Social Development. “Bangladesh has emerged as a major export destination for India. Before India’s rice export ban, the country was among the top five export destinations. Its economy has been growing at a decent rate. But the political crisis has brought in a whole lot of economic uncertainties,” Dhar said. When an economy gets on a downhill, prospects of a growing market goes out of the window, he added.

Hasina had received a lot of flak from the Opposition Bangladesh Nationalist Party (BNP) for “going out of the way” to strike deals with India for various infrastructure projects, Dhar pointed out. Now that she has been ousted, one needed to watch out for what lay ahead.

Trade prospects

The first items to get affected because of the turmoil are perishables. “Temporarily trade has taken a hit. There are more worries on the commodities front. India exports perishables such as onions and other vegetables to Bangladesh. If clearance is delayed and logistics poses a challenge, the consignments would be at risk,” pointed out Ajay Sahai from exporters body FIEO.

If the internet outage in Bangladesh continues, banks will have an issue functioning as they work on internet, which will create further delays, Sahai said.

Political ramifications

“As Bangladesh experiences political turmoil, it is essential for all political factions to protect garment and other factories and keep supply lines open across the border to sustain trade and economic activity,” pointed out Ajay Srivastava from Global Trade and Research Initiative.

India’s exports to Bangladesh in 2023-24 were valued at $11.1 billion, down from $12.2 billion in 2022-23 and $16.2 billion in 2021-22, because of multiple factors such as India’s ban on rice exports and a severe dollar shortage in the neighbouring country. India’s imports from Bangladesh were at $1.8 billion in 2023-24.