Explore the full breakdown of this major policy shift and its economic ripple effects

India introduced new restrictions on imports coming from Bangladesh. This unexpected move has raised serious concerns about the future of trade between the two neighboring countries. These restrictions are expected to impact goods worth hundreds of millions of dollars and could have long-term consequences for industries, exporters, and regional relations. 

Details of the New Restrictions 

On May 17, 2025, India’s Directorate General of Foreign Trade (DGFT) issued a directive that limits the import of several Bangladeshi products. These products include ready-made garments (RMG), processed foods, plastic items, rubber goods, and wooden furniture. However, the restriction applies only to goods entering India through land ports—mainly in the northeast. These items can still be imported through specific seaports like Kolkata and Nhava Sheva. 

This change is significant because about 93% of Bangladesh’s exports to India previously came in through land routes, especially to northeastern Indian states. Rerouting these goods to seaports adds extra transportation costs, longer delivery times, and logistical difficulties. Exporters in Bangladesh will now have to spend more and wait longer to get their products into the Indian market. 

Economic Impact on Bangladesh 

This policy shift is expected to hurt Bangladesh’s economy in a major way. The most affected industry is the ready-made garment sector, which is one of Bangladesh’s largest export industries. Each year, garments worth about $740 million are sent to India. The new restrictions will disrupt these trade flows, reduce profits, and create uncertainty for exporters. 

The impact is not limited to garments. Other sectors like processed foods, plastic goods, and wooden products are also vulnerable. These industries often rely on cost-effective and fast land transport. With the shift to seaports, costs will rise, delivery schedules may be affected, and exporters could lose their competitive edge in the Indian market. 

Estimates suggest that goods worth up to $770 million, or roughly 42% of Bangladesh’s exports to India, may be impacted by these new restrictions. This could lead to a serious loss of revenue, job cuts in export-dependent industries, and pressure on small and medium-sized businesses in Bangladesh. 

Why India Imposed the Curbs 

India has explained that the new trade restrictions aim to restore balance and fairness in bilateral trade. Officials argue that the move is based on the principle of reciprocity, meaning that both countries should offer each other equal access to markets. 

There have been earlier complaints from India about trade barriers put in place by Bangladesh. These include restrictions on Indian exports of yarn, rice, and other products, and the imposition of transit fees on Indian goods. The current move by India appears to be a response to such policies. 

By limiting imports from Bangladesh, Indian authorities also intend to boost local industries, especially the textile and food processing sectors. With reduced competition from Bangladeshi goods, Indian producers could gain a bigger share of the domestic market. 

Effects Within India 

While the restrictions are likely to help Indian producers, especially in textiles, they may also cause short-term supply issues. Shops and consumers in India’s northeastern states may face higher prices and reduced availability of some goods that were previously imported cheaply and quickly from Bangladesh. 

Still, Indian industry groups see an opportunity. The textile industry, for example, expects to gain up to ₹1,000 crore in new business due to reduced competition from Bangladeshi garments. This could lead to increased production, job creation, and investment in Indian factories. 

Bangladesh’s Reaction 

The government of Bangladesh has taken note of the situation and is working on diplomatic ways to address it. The Commerce Secretary has said that discussions with Indian officials will be held soon. Bangladesh wants to avoid further problems and keep trade relations stable. 

Business leaders and exporters in Bangladesh are urging the government to act quickly. At the same time, they are exploring new markets and alternative trade routes to reduce dependence on India. Diversifying export destinations could help reduce future risks if similar restrictions happen again. 

Geopolitical Background 

These trade tensions are unfolding in a changing regional environment. Bangladesh has recently deepened economic ties with China. In recent months, deals worth over $2 billion have been signed between the two countries. This growing relationship has raised concerns in India, which views increased Chinese influence in South Asia with caution. 

India’s latest trade move may partly be aimed at countering China’s growing presence in the region. By tightening control over trade flows and asserting more control in its neighborhood, India appears to be strengthening its strategic position. 

Looking Ahead 

India’s new export curbs mark a turning point in its trade relationship with Bangladesh. While the official explanation is centered on restoring fairness and boosting local industries, the move carries wider economic and political consequences. 

Bangladesh’s exporters face serious challenges due to higher costs and reduced access to India’s market. Small businesses, especially those in the garment and food industries, could suffer major losses unless alternative trade options are developed quickly. 

India may benefit in the short term by protecting its domestic industries, but long-term trade cooperation could be at risk if tensions are not resolved. The situation highlights the importance of open dialogue, balanced policies, and regional cooperation in ensuring smooth and mutually beneficial trade. 

The new export restrictions by India on goods from Bangladesh represent more than just a change in logistics. They affect thousands of businesses, millions of dollars in trade, and the broader economic relationship between two neighboring countries. 

How both nations handle the issue in the coming weeks—through talks, policy changes, or strategic planning—will determine whether this is a temporary disruption or the start of a deeper rift in one of South Asia’s most important trading partnerships.