How much does Bangladesh export to India, what will be impact of restrictions?

India has imposed certain restrictions on the import of Bangladeshi products via land ports. These restrictions target products that Bangladesh exports in large volumes.

As India’s Ministry of Commerce and Industry announced the decision on Saturday, Bangladeshi traders are now analysing the potential negative impacts of it.

Let’s take a look at how big the Indian market is for Bangladesh.

According to Bangladesh’s Export Promotion Bureau (EPB), in the 2023–24 fiscal, Bangladesh exported goods worth $1.57 billion to India, which is 3.75 per of Bangladesh’s total export earnings.

On the other hand, Bangladesh imported goods worth $9 billion from India. A large portion of these are industrial raw materials and intermediate goods. Bangladesh is also a major market for Indian consumer products.

According to data from India’s Ministry of Commerce and Industry, Bangladesh ranked 8th among India’s top 10 export destinations and accounted for 2.55 per cent of India’s total export revenue in the 2023–24 fiscal.

India is among Bangladesh’s top 10 export destinations, but this position fluctuates around the 8th position depending on the year. The United States is the top destination for Bangladeshi exports, followed by Germany, the United Kingdom, Spain, and France.

Asian countries like Japan and China are not at the top of Bangladesh’s export destinations. Exports to Russia are also low. In 2023–24, Bangladesh exported goods worth around $720 million to China, and that is less than half of what it exported to India.

Bangladesh’s export sector heavily depends on the US and European countries. This dependence on a handful of markets is risky. As a result, economists have often advised exploring new markets.

Exports to countries like India, China, Japan, South Korea, Brazil, New Zealand, and Australia have increased over the past decade, although exports have declined in some markets in certain years.

The government also provides cash incentives to create new markets and increase exports of new products. Outside of garments, processed food products have performed well, especially in the Indian market. Biscuits, chanachur (spicy snacks), chips, fruit drinks, beverages, mustard oil, and cakes from Bangladesh were being exported to India in good volumes.

Some Bangladeshi brands were even outperforming Indian local brands in competition and in launching new products. For instance, PRAN-RFL Group’s ‘Potata’ biscuit became very popular in India. Indian local brands began making similar biscuits in response.

India’s Ministry of Commerce announced the following restrictions on Saturday:

First: Bangladesh will not be allowed to export garments to India via any land port. Garments can only be exported through the Haldia Port in Kolkata and the Nhava Sheva (Jawaharlal Nehru Port) in Mumbai.

Second: Bangladesh cannot export processed food, beverages, furniture, plastic goods, yarn, and yarn-related products to the Indian states of Assam, Meghalaya, Tripura, and Mizoram using customs stations. It is to mention that customs stations are different from land ports—customs stations typically do not have full infrastructure of the land ports and only have facilities for customs collection.

Third: Bangladesh will not be allowed to export processed foods, drinks, furniture, plastic products, yarns and yarn byproducts through West Bengal’s Changrabandha and Fulbari customs stations. This means goods cannot be exported through Burimari in Lalmonirhat and Banglabandha in Panchagarh, Bangladesh. There is considerable demand for these Bangladeshi products in the Siliguri, Cooch Behar, and other surrounding areas of West Bengal.

Fourth: India imposed no restrictions on the import of fish, liquefied petroleum gas (LPG), edible oil, or crushed stones from Bangladesh. Additionally, the restrictions do not apply to the export of Bangladeshi goods to Nepal and Bhutan via Indian ports.

India’s restrictions came into effect on Saturday. Some Bangladeshi products already returned from Indian ports. Seventeen trucks of food items from PRAN-RFL Group were scheduled for India’s Siliguri on Sunday via Burimari, but those were halted due to the new restrictions.

Former member of the Bangladesh Trade and Tariff Commission (BTTC) and trade analyst Mostafa Abid Khan told Prothom Alo India’s northeastern states, known as the Seven Sisters, have no seaports and Bangladeshi exports to these regions will effectively cease due to the restrictions, as shipping by sea and then by land would be extremely difficult for Bangladesh.

India states of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura are landlocked and known as Seven Sisters. Transporting goods there from mainland India takes long and requires complicated process. However, these states are geographically adjacent to Bangladesh’s northeast border, making Bangladeshi exports to these areas easier and more cost-effective.

For trade with these northeastern Indian states, India uses transit and transshipment facilities from Bangladesh under a waterway protocol. Goods are sent from Kolkata port via waterways to Ashuganj in Brahmanbaria, Bangladesh, and then transported by road through Akhaura to Agartala in Tripura. India also sends goods from Kolkata to Assam via waterways.

Under the new system, if Bangladesh wants to export restricted goods to the Seven Sisters by land, it will have to rely on land ports like Bhomra in Satkhira or Sonamasjid in Chapainawabganj. To export to Assam, Tripura, or Meghalaya, goods will have to be sent to Kolkata first and then transported over 1,200 kilometers by road or rail to reach Agartala, Tripura. Less distance is needed to reach Guwahati or Karimganj in Assam or Shillong in Meghalaya.

If goods are to be sent by sea, they will have to go from Chittagong port to India’s Nhava Sheva port in Mumbai, or from Pangaon near Dhaka or Mongla in Bagerhat to Kolkata’s Haldia port. Then they must be transported to the northeastern states. However, shipments from Chattogram to Haldia under the coastal shipping system are irregular.

Regarding this, PRAN-RFL Group’s director (marketing) Kamruzzaman Kamal told Prothom Alo sending goods to northeastern India via Kolkata would take at least 10 days, and they doubt whether importers in Agartala would take goods through such a lengthy route.

The top export to India is garments. According to EPB, Bangladesh exported about $550 million worth of garments to India in the 2023–24 fiscal. Bangladesh earned $38.14 billion from garment exports in total in the 2023–24 fiscal and exports to India account for less than 1.5 per cent of it.

Garments were followed by jute and jute goods. Bangladesh's jute sector had been doing well in India, but in 2017, India imposed an anti-dumping duty on Bangladeshi jute goods, accusing Bangladesh of exporting below production costs and harming local industries. The duty was extended for five more years in 2023.

In 2023–24 fiscal, Bangladesh exported around $120 million worth of processed food and oil-based products to India, followed by leather and leather goods, earning about $100 million. Bangladesh also exported around $45 million worth of plastic goods to India that year.

It is evident that three of Bangladesh’s top five export products to India — garments, processed food, and plastic goods —are now at risk due to the new restrictions. Jute had faced tariff barriers once.

Exports are hindered by two types of barriers: tariff barriers such as duties and non-tariff barriers such as issues with certification, repeated testing at ports, or restrictions on using specific ports.

When asked how much Bangladesh’s total export earnings might be affected, Mostafa Abid Khan said exports to India would be affected. Since India accounts for about 3–4 per cent of Bangladesh’s total exports, that segment would be affected. Whether that is a serious concern depends on the business. As he put it, “The one doing the business will feel it.”

While the overall impact on export earnings might not be huge, the restrictions are worrying for businesses dependent on the Indian market. For example, PRAN-RFL Group exports $50 million worth of goods to India annually—they will be affected. Hatil Furniture also has several retail outlets in India, and keeping them running will now be difficult.

No official statement has been issued regarding whether this decision is politically motivated. India’s Ministry of Commerce did not provide a reason in its announcement.

However, Indian media is portraying the move as a retaliatory measure. In an NDTV report published Saturday, citing Indian government officials, it was said that the restrictions were a response to Bangladesh banning yarn imports from India via land routes.

In April, India revoked Bangladesh’s access to transshipment facilities for exports to third countries. Then on 15 April, Bangladesh’s National Board of Revenue (NBR) banned the import of yarn from India via land routes.

Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told Prothom Alo, “I believe this is part of the counter measures between the two countries.”