Border Restrictions: The Impact of India’s Policy Shift on Bangladesh’s Garment Export Industry

Bangladesh’s readymade garment (RMG) industry, valued at $45 billion, is facing a serious challenge. Recently, India withdrew its trans-shipment facility for Bangladeshi goods, previously a crucial route for exports. This move is causing chaos for exporters who are now forced to find new, often pricier shipping options.

The trans-shipment facility used to allow goods from Bangladesh to be transported through India to international ports, which significantly sped up deliveries to markets like Nepal and Bhutan. With its cancellation, Bangladeshi exporters are feeling the heat. They now have to deal with increased shipping costs and delays, which could lead to lost orders.

In a media briefing, External Affairs Ministry spokesperson Randhir Jaiswal explained that the facility was first introduced to help manage traffic at Indian ports. However, it led to congestion and logistical backlogs, prompting its revocation starting April 8, 2025. Despite the withdrawal, exports to Nepal and Bhutan remain unaffected, but the impact on Bangladesh’s garment sector could be significant.

Just days ago, four trucks filled with garments were denied entry to India, forcing them to turn back. The sudden need to change shipping routes is not just inconvenient; it’s costly. Expanding air freight rates and longer transit times threaten Bangladesh’s competitiveness on a global scale.

Observers note that this decision may reflect broader political tensions. Ties between India and Bangladesh have been strained, especially after political unrest led to a change in leadership in Bangladesh, with Muhammad Yunus stepping in as a Chief Adviser following the collapse of Prime Minister Sheikh Hasina’s government in August 2024. Indian Prime Minister Narendra Modi’s recent meetings with Yunus showed an attempt to maintain diplomatic relations, but lingering tensions remain, especially regarding Bangladesh’s growing ties with China.

Adding to the context, concerns are rising that Bangladesh could lose its position as the world’s second-largest apparel exporter. Kihak Sung from Youngone Corporation emphasized the need for Bangladesh to improve its logistics and trade processes to remain competitive against countries like Vietnam.

Furthermore, Anand Kumar from the Manohar Parrikar Institute of Defence Studies and Analyses highlighted two potential reasons for India’s withdrawal of the trans-shipment facility. One possibility is confusion among border officials regarding the new order, while the second suggests Bangladesh might be trying to circumvent restrictions by routing goods through other countries.

Political analyst Sharin Shajahan Naomi agrees that better relations between the nations could have prevented this situation. She suggests that the interim government in Bangladesh should make a genuine approach to India for the reinstatement of the facility.

The garment industry is a crucial part of Bangladesh’s economy, and disruptions like this can have wide-ranging effects. The dynamics between India and Bangladesh are complex, escalating as global trade becomes more competitive. This situation will require thoughtful diplomacy and strategic planning to navigate the challenges ahead.

For more insights on this issue, you can read about how trade relations have historically impacted regional economies in this study.

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