Why in News?

Recently, India’s Directorate General of Foreign Trade ordered the closure of all land ports with Bangladesh for the export of apparel and certain goods via northeastern ports.

The move is seen as a consequence of deteriorating India-Bangladesh relations following the fall of the Hasina government, with both countries yet to rebuild a functional diplomatic rapport.

What’s in Today’s Article?

• Key Highlights of the May Trade Order on Bangladesh
• Reasons Behind India’s Trade Restrictions on Bangladesh
• India’s Justification for the Trade Restrictions
• Impact on Bangladesh’s Trade with Nepal and Bhutan
• Wider Geopolitical Undercurrents Behind India’s Land Port Closure

Key Highlights of the May Trade Order on Bangladesh

• Import Restrictions via Land Ports
  • India has halted the import of readymade garments from Bangladesh through all land ports.
  • Imports are now only permitted via Nhava Sheva and Kolkata seaports.
• Export Bans to Bangladesh through the Northeast
  • Exports of specific goods have been banned through the land ports of Assam, Meghalaya, Mizoram, and Tripura.
  • These include fruits, fruit-flavoured drinks, processed food items (like baked goods, chips, and confectionery), cotton and cotton yarn waste, finished plastic and PVC goods (excluding pigments, dyes, plasticisers, and granules), and wooden furniture.
• Additional Land Routes Affected
  • The same export restrictions apply at the Changrabandha and Fulbari land customs stations in West Bengal.
• Exemptions from the Ban
  • Imports of fish, LPG, edible oil, and crushed stone from Bangladesh remain unaffected by the order.

Reasons Behind India’s Trade Restrictions on Bangladesh

• Call for Reciprocity in Trade
  • India cited the need to ensure reciprocal trade relations after Bangladesh took unilateral steps affecting Indian exports.
• Bangladesh's Restrictions Triggered Response
  • On April 13, Bangladesh’s National Board of Revenue banned the import of cotton yarn from India via land ports.
  • It also halted Indian rice exports through the Hili land port in West Bengal.
• Rising Friction at Border Crossings
  • Indian officials reported that Bangladeshi authorities had been conducting aggressive inspections of Indian trucks for several months, leading to delays and trade disruptions.
• Scale of Border Trade Affected
  • India and Bangladesh share 24 operational land ports, with several more under development, making these restrictions significant in scope and impact.

India’s Justification for the Trade Restrictions

• Immediate Implementation with Scope for Review
  • The restrictions, effective from May 17, are subject to regular review.
  • Even seaport trade with Bangladesh will face increased scrutiny and periodic assessments.
• Allegations of Trade Imbalance and Market Manipulation
  • Indian officials accused Bangladesh of “cherry-picking” trade issues and attempting to treat the northeast region of India as a “captive market” for its goods, without offering fair access or transit for Indian products.
• Strategic Importance of the Northeast Region
  • Citing Prime Minister Modi’s remarks, officials emphasized that the northeast is central to India’s BIMSTEC vision and economic strategy.
  • The move is aimed at encouraging domestic manufacturing and entrepreneurship in the region, in line with the Atmanirbhar Bharat initiative.

Impact on Bangladesh’s Trade with Nepal and Bhutan

• India’s Assurances on Third-Country Trade
  • India has stated that its order will not affect Bangladesh’s trade with Nepal and Bhutan.
  • Despite India’s claims, the overland trade restrictions are expected to cause logistical hurdles, leading to delays and disruptions in shipments from Bangladesh to Nepal.
• Ripple Effect on Investment Climate
  • The sudden order has created uncertainty, prompting investment planners to adopt a cautious approach towards entering or expanding operations in Bangladesh.

Wider Geopolitical Undercurrents Behind India’s Land Port Closure

• A Diplomatic Message to Bangladesh
  • Indian officials have described the land port restrictions as a calculated signal to Bangladesh, particularly in response to remarks made by interim government chief Mohammed Yunus during his visit to China in March.
• Concerns Over Northeast Region References
  • Prof. Yunus referred to India’s northeast as “landlocked” and promoted Bangladesh as a strategic route for Chinese access to the region, positioning Bangladesh as a “guardian of the ocean.”
  • India found these remarks unacceptable.
• Apprehensions About Bangladesh-Pakistan Ties
  • Indian officials also cited growing warmth between Bangladesh’s interim government and Pakistan—an actor India holds responsible for cross-border terrorism—as part of the backdrop to the decision.
• Economic and Symbolic Impact
  • While the ban on readymade garments affects only a $700 million slice of Bangladesh’s $50 billion exports, India believes it is significant enough to convey its geopolitical concerns to both Bangladesh and the global community.