How India–Bangladesh trade ties are fraying — and China gaining ground?

In recent years, the historically strong trade relationship between India and Bangladesh has faced increasing challenges, with economic and geopolitical shifts tilting the balance. While India was once Bangladesh’s primary trading partner and regional ally, several factors have contributed to a gradual fraying of these ties. At the same time, China has been steadily expanding its economic footprint and strategic presence in Bangladesh, reshaping South Asia’s regional dynamics.

India’s New Trade Restrictions and Their Impact

India has introduced stricter import regulations affecting a significant portion of goods coming from Bangladesh. This move has particularly targeted key Bangladeshi exports such as ready-made garments, processed foods, and plastic products. These restrictions have resulted in higher logistical costs and longer transit times, negatively impacting the competitiveness of Bangladeshi exports to India.

This shift is seen by many analysts as a response to Bangladesh’s growing engagement with China, reflecting India’s strategic concerns about maintaining influence in its neighborhood. The tightened trade rules have strained bilateral commerce, risking economic friction that could hamper cooperation beyond trade, including cultural and political ties.

China’s Expanding Role in Bangladesh’s Economy

Meanwhile, China has significantly deepened its economic ties with Bangladesh, becoming the country’s largest trading partner. Bilateral trade between China and Bangladesh has surpassed $25 billion, fueled by large-scale Chinese investments and infrastructure projects. Beijing’s financial support for key developments such as bridges, tunnels, and railway links has boosted Bangladesh’s connectivity and industrial capacity.

Beyond economics, China’s influence extends into defense and strategic cooperation. Bangladesh sources the majority of its military equipment from China, a trend that strengthens Beijing’s foothold in the Bay of Bengal region. This military dimension adds a layer of geopolitical complexity, as India views China’s expanding presence with growing concern, especially given Bangladesh’s geographic proximity to India’s sensitive northeastern states.

Geopolitical Implications for South Asia

The shifting trade and strategic landscape poses significant challenges for India’s role as a regional leader. Bangladesh’s tilt toward China reduces India’s traditional leverage and influence, compelling New Delhi to rethink its approach. India faces the delicate task of balancing its economic interests with strategic concerns, as overly aggressive trade policies could push Dhaka further into China’s orbit.

China’s increasing investments and diplomatic outreach in Bangladesh exemplify its broader Belt and Road Initiative ambitions to strengthen connectivity and influence across South Asia. This intensifying competition between India and China over Bangladesh underscores the larger contest for regional dominance, with economic ties and strategic partnerships acting as key battlegrounds.

Conclusion

India and Bangladesh share deep historical, cultural, and economic links, but recent trade restrictions and geopolitical shifts have tested this relationship. As India tightens its trade policies, Bangladesh finds new opportunities in Chinese investment and partnership, leading to a gradual realignment in the region. For India, the challenge lies in engaging Bangladesh constructively while countering China’s growing influence — a complex balancing act with significant consequences for the future of South Asian cooperation and stability.