Sheikh Hasina capitalized on Bangladesh’s increasing geostrategic significance amid the India-China strategic rivalry, inviting China to invest in numerous projects within the country.
Sheikh Hasina’s removal from power is poised to significantly impact Bangladesh and reverberate throughout the South Asian geopolitical landscape, including in India.
Since Sheikh Hasina assumed office in 2009, Bangladesh has been a key ally of India. Her departure and the installation of a new military-backed interim government could disrupt not only security but also trade relations, potentially hindering the movement of people and goods between the two nations.
During periods when the Bangladesh Nationalist Party (BNP) was in power under Khaleda Zia, tensions arose between New Delhi and Dhaka. The BNP government permitted groups like the United Liberation Front of Assam (ULFA) to operate from Bangladesh, using its territory to stage attacks in India. However, Hasina’s return to power in 2009 led to a reversal of these policies, resulting in increased cooperation between Bangladesh and Indian security forces, and the arrest of several insurgents.
Despite this, Hasina leveraged Bangladesh’s strategic position amid the India-China rivalry to attract Chinese investments, presenting a complex challenge for India. The current instability in Bangladesh comes on the heels of the Taliban’s resurgence in Afghanistan, which has already increased India’s regional concerns and strengthened Pakistan’s position.
New Delhi is closely observing the interim government’s formation led by Bangladesh Army chief Waker-uz-Zaman, especially given the recent surge in violence linked to protests and a police crackdown. There is apprehension that extremism might rise in Bangladesh, with potential connections to terrorist organizations like Lashkar-e-Taiba (LeT) and Pakistan’s Inter-Services Intelligence (ISI), possibly intensifying activities against India.
Trade between India and Bangladesh is substantial, with Bangladesh being India’s largest partner in the subcontinent, and India being the second-largest trading partner for Bangladesh in Asia after China. Bilateral trade reached $13 billion in the 2023-24 fiscal year. Bangladesh is a major destination for Indian cotton exports, while India imports significant amounts of Bangladeshi textiles. The two countries have discussed a free trade agreement, which could further enhance trade relations.
India has also supported Bangladesh’s infrastructure development through three lines of credit totaling $8 billion since 2016, funding projects like the Akhaura-Agartala rail link and Khulna-Mongla Port rail line. These improvements have significantly reduced travel times and are expected to boost tourism and trade. Disruptions in Indo-Bangladesh relations could, however, impact India’s access to its northeastern states, which are connected through a narrow corridor.
In the fast-moving consumer goods (FMCG) sector, Indian companies could face challenges due to the political instability. Marico, for example, has a significant presence in Bangladesh, and any unrest could affect its operations and revenue. Indian firms with manufacturing facilities in Bangladesh may encounter production delays and shortages, potentially leading to a shift towards alternative manufacturing hubs like Tirupur, which could benefit from this strategic pivot.
Bangladesh remains a critical market for Indian textiles, both as a manufacturing base and a major export destination.
