In 2020, as the world battled the COVID-19 pandemic, global trade came to a standstill. Borders were closed, flights were grounded, supply chains froze – and few economies in the Indian subcontinent were hit hard as Bangladesh. The backbone of Bangladesh’s economy, its ready-made garment (RMG) sector, faced an existential crisis. This single industry accounts for roughly 85% of Bangladesh’s total exports and 13% of its GDP, employing nearly 4 million workers, mostly women.
When global demand surged for masks, medical textiles, gloves, and hospital clothing, Bangladesh had the orders but no way to deliver. That’s when India stepped in. At the peak of the crisis, the Sheikh Hasina-led government in Dhaka reached out to New Delhi, seeking help to overcome crippling logistical hurdles. India responded by extending a critical lifeline: a transshipment facility via Indian ports and airports.
Why was this important? Because Bangladesh’s own ports and airports couldn’t handle the volume. The cost of transshipment from Kolkata ranged between $2 and $2.50 per kilogram, while shipping directly from Bangladesh would cost $5 to $6 per kilogram. Sending products from Kolkata airport to Western nations was nearly three times cheaper. For Bangladeshi exporters, this facility was a game changer. For India, it was a favour extended free of charge – grounded in the belief that neighbours stand by each other in times of crisis.
Here’s how the facility worked: Bangladeshi export items were transported across Indian land borders and transferred to Indian ports and airports. Goods were trucked to Indian land customs stations and then moved to major hubs like Kolkata, Haldia, Nhava Sheva, and airports such as Delhi and Kolkata.
Between FY 2021-22 and 2023-24, the United States, Germany, the United Kingdom, Spain, and France remained the top destinations for Bangladesh’s RMG exports. In FY 2023-24, RMG exports to the USA stood at USD 6,014.9 million (88.37% of total exports to the country), followed by Germany at USD 4,216.6 million (93.94%), the UK at USD 3,769.1 million (94.47%), Spain at USD 3,046.5 million (97.74%), and France at USD 1,886 million (89.18%) -underscoring the sector’s central role in Bangladesh’s economy.
According to Bangladesh Bank, in FY 2023-24, Bangladesh’s exports to Nepal via Indian land ports stood at USD 41.74 million, while imports from Nepal amounted to USD 4.98 million – maintaining a consistent trade surplus. With Bhutan, Bangladesh exported goods worth USD 9.37 million and imported goods worth USD 65.29 million during the same period.
Now, the very facility that empowered Bangladesh’s exports has been revoked. India cited growing congestion at its ports and airports, which created backlogs and raised costs for its own exporters. The Apparel Export Promotion Council of India had previously urged the government to act. But the final trigger may not have been logistics, it may have been politics.
Even before the withdrawal of this transshipment facility, Bangladesh had imposed restrictions on land ports and targeted cotton imports from India – signaling the new regime’s intent to scale back economic engagement with India.
Around the same time, Muhammad Yunus, the leader of Bangladesh’s interim government, made a controversial and provocative statement in Beijing about India’s Northeast region. Referring to the region as the “seven sisters” and calling it landlocked, Yunus declared: “We are the only guardian of the ocean for this entire region. So this opens up a huge possibility. This could be an extension of the Chinese economy.” His comments, which implied that Bangladesh controls India’s northeastern access to the sea, were widely viewed as offensive and strategically troubling.
India needed to draw a red line, but still gave Yunus a final chance to change course. A week later, after several requests, Prime Minister Modi agreed to meet him on the sidelines of the BIMSTEC summit in Bangkok. Though the meeting was arranged at Bangladesh’s request, the Bangladeshi delegation arrived late, violating diplomatic norms. Worse still, the Bangladeshi media spun the narrative, boasting that India had been made to wait.
The meeting lasted 40 minutes. India raised its concerns about attacks on minorities in Bangladesh. But Dhaka’s version of the meeting took a dismissive tone, accusing India of falling for social media propaganda and even suggesting that India was open to extraditing exiled Bangladeshi President Sheikh Hasina – a claim Indian officials labeled as mischievous and politically motivated.
Days later, India officially withdrew the transshipment facility, signaling that goodwill cannot be one-sided. The decision dealt a major blow to Bangladesh’s textile sector, already reeling from the upheaval caused by the violent regime change in August last year. For example, 170 factories in the Beximco Industrial Park have shut down, resulting in the loss of 40,000 jobs in a single cluster.
Now, Bangladeshi exporters will be forced to reroute shipments through alternative hubs in Sri Lanka, the Maldives, or Pakistan, significantly raising freight costs and lead times. Faruk Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association, publicly appealed to India to reconsider, calling the move a threat to the sector’s competitiveness: “Our freight costs will go up. Our lead time will increase. It will reduce our competitiveness. I request the Indian government to withdraw this decision because we are your neighbours.”
But instead of engaging diplomatically, Dhaka has complicated matters further. In a retaliatory move, Bangladesh halted yarn imports via Indian land ports, citing undervaluation and quality concerns. The decision has drawn backlash from Bangladesh’s own exporters, who depend heavily on Indian yarn for an affordable supply. A staggering 95% of Bangladesh’s yarn imports come from India. The disruption could send costs soaring.
India was an ideal source: abundant, fast, and reliable. According to Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, the price of 30 single yarns in Bangladesh is $3.50 per kilogram, compared to $2.90 in India and $2.96 in Vietnam. He warned that the ban would be suicidal for Bangladesh’s apparel industry, predicting raw material shortages and disrupted production.
But will this hurt India? No way. India boasts several robust textile hubs, notably in Tiruppur and Ludhiana. During Bangladesh’s political crisis, many apparel orders were already being redirected to India. Indian leadership has recognized the opportunity and is pushing for growth. For instance, Uttar Pradesh Chief Minister Yogi Adityanath recently announced the creation of a 1,000-acre mega textile and apparel park and pointedly mentioned Bangladesh.
Transitioning from a friendly ally to a determined competitor, Bangladesh faces significant risks in the competitive landscape of ready-made garments. India has clearly articulated its stance, signaling the conclusion of an implicit understanding that once fostered trust and goodwill between the two nations.
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Whether this rift is temporary or long-lasting will depend entirely on Bangladesh’s political choices in the months ahead. If anything, this episode serves as a stark reminder: geography remains constant but access is earned.
