India-Bangladesh Trade Volume: Historical and Recent Trends, Sectoral Analysis, and the Impact of New Restrictions

India (Bharat) and Bangladesh share one of South Asia’s most dynamic and complex trading relationships. Their economic ties have deepened since Bangladesh’s independence in 1971, but recent tensions and new restrictions on Bangladeshi products by India have brought the spotlight back to the scale, structure, and strategic importance of this trade. This article provides a detailed, data-driven analysis of bilateral trade from 1971 to 2025, with a focus on the last five years, and examines the likely impact of India’s new restrictions.

Historical Overview: From 1971 to the 2000s

Early Years (1971–1990s)

After Bangladesh’s independence in 1971, the two countries quickly established trade agreements to support reconstruction and growth. The 1972 Treaty of Friendship and the first bilateral trade agreement set the stage for annual trade of about US$35–42 million each way in the early 1970s, with balanced trade being a key principle.

Throughout the 1970s and 1980s, trade remained modest. Both economies were relatively closed, and state-to-state trade dominated. By the late 1980s, annual bilateral trade was still in the low hundreds of millions of US dollars, with India typically running a trade surplus.

Liberalisation and Growth (1990s–2010s)

With economic liberalisation in both countries, especially after 1991 in India, trade volumes began to rise. The 1996 bilateral trade agreement and subsequent protocols on inland water transit and border trade helped further boost cross-border commerce. By the early 2000s, total bilateral trade had crossed the US$1 billion mark, with India exporting mainly raw materials, machinery, and foodstuffs, while Bangladesh’s exports were dominated by jute, textiles, and later, garments.

The Last 15 Years: Rapid Expansion and Shifting Balance

Trade Volume and Balance (2010–2023)

• 2013–14: Bilateral trade stood at US$6.6 billion.
• 2018–19: Trade crossed the US$10 billion mark for the first time, with Bangladesh’s exports to India exceeding US$1 billion.
• 2022–23: Bilateral trade reached a peak of US$13.7 billion, with Indian exports to Bangladesh at US$11.3 billion and Bangladeshi exports to India at US$2.13 billion.

Annual Trade (2018–2023)

Trade Structure

Indian Exports to Bangladesh

• Major Products (2023):
  • Electricity: $1.42B
  • Non-retail pure cotton yarn: $1.2B
  • Refined petroleum: $723M
  • Foodstuffs (rice, wheat, sugar): $1.21B
  • Machinery, vehicles, chemicals, iron, and steel

Bangladeshi Exports to India

• Major Products (2023):
  • Ready-made garments (RMG): $700M (annual, 93% via land ports)
  • Non-knit men’s suits: $219M
  • Planes, helicopters, and/or spacecraft: $172M
  • Textile scraps: $113M
  • Plastics, processed foods, furniture, bakery items

Bangladesh’s exports to India have grown at an annualised rate of 16.2% over the past five years, outpacing the growth of Indian exports to Bangladesh (5.17% annualised).

The Garment Sector: The Cornerstone of Bangladesh’s Exports

Bangladesh’s RMG sector is the world’s second largest after China, with total global exports of $36–40 billion annually. Its exports to India, however, are a small (but growing) share of this total, reaching about $700 million per year and accounting for 93% of Bangladeshi garment shipments to India via land ports.

Transshipment via India

Between January 2024 and March 2025, Bangladesh transshipped $462 million worth of garments through India to 36 countries, leveraging Indian ports and infrastructure for global exports. This arrangement was abruptly cancelled by India in April 2025, disrupting Bangladeshi exporters’ access to key third-country markets.

Trade Deficit and Economic Impact

Bangladesh consistently runs a large trade deficit with India, which has widened as Indian exports have grown faster than Bangladeshi exports.

• 2022–23: Trade deficit at $11.7 billion (Bangladesh’s highest ever).
• 2023–24: Deficit remains above $9 billion.

Why the Deficit?

• Bangladesh imports essential raw materials, machinery, energy, and foodstuffs from India.
• Indian market access for Bangladeshi goods has improved, but non-tariff barriers and logistical issues remain.
• Bangladesh’s export basket to India is less diversified, heavily reliant on garments and textiles.

Impact of New Indian Restrictions

Immediate Effects

• Garment Exports: With 93% of Bangladeshi RMG exports to India previously routed through land ports, the new restriction to only Kolkata and Nhava Sheva seaports will significantly increase logistics costs, transit times, and customs bottlenecks.
• Other Consumer Goods: Products such as plastics, processed foods, furniture, and bakery items are now also restricted via land, impacting small and medium exporters in Bangladesh.
• Transshipment Loss: The cancellation of the transshipment route for $462 million worth of garments to third countries will hit Bangladesh’s export competitiveness, especially for time-sensitive orders.

Broader Economic Impact

• On Bangladesh: The restrictions could cost Bangladesh hundreds of millions in lost exports, threaten jobs in the garment sector, and exacerbate its foreign exchange crisis. Small and medium enterprises are particularly vulnerable.
• On India: The Northeast may benefit from reduced competition from Bangladeshi goods, potentially boosting local industry and employment.
• On Regional Trade: The move signals a hardening of India’s stance on reciprocity and could slow progress on broader South Asian economic integration.

Five-Year Trends: 2018–2023

Growth in Bilateral Trade

• Indian exports to Bangladesh: Grew from $8.74B (2018) to $11.3B (2023), +5.17% annualised.
• Bangladeshi exports to India: Grew from $894M (2018) to $1.89B (2023), +16.2% annualised.
• Total trade: Rose from $9.63B (2018–19) to $13.43B (2022–23).

Shift in Export Composition

• Bangladesh: Increased share of RMG, textiles, and some higher-value items like aircraft parts.
• India: Expanded exports of energy (electricity), refined petroleum, and industrial inputs.

Long-Term Perspective: Since 1971

• 1970s–80s: Bilateral trade was below $100 million annually, mostly state-to-state, with limited private sector involvement.
• 1990s–2000s: Trade liberalisation and new agreements pushed trade above $1 billion.
• 2010s–2020s: Rapid expansion, with trade exceeding $10 billion by 2018–19 and peaking at $13.7 billion in 2022–23.

Statistical Summary Table

Conclusion: Strategic and Economic Implications

India-Bangladesh trade has grown exponentially since 1971, with both sides benefiting but with a persistent and widening deficit for Bangladesh. The last five years have seen especially rapid growth in Bangladeshi exports to India, driven by garments and textiles, but India remains the dominant partner, supplying critical inputs and energy.

The new Indian restrictions are likely to hit Bangladesh’s export earnings, disrupt supply chains, and force a rethink in Dhaka’s trade and diplomatic strategy. For India, the move is about reciprocity, strategic leverage, and supporting domestic industry in the Northeast. The longer-term future of bilateral trade will depend on how quickly both countries can resolve their differences, restore reciprocal access, and recommit to a stable, rules-based trading relationship.

If Bangladesh does not address India’s concerns and continues with protectionist and politically motivated trade barriers, its export sector could face severe headwinds, threatening jobs and economic stability. The data makes clear: the health of Bangladesh’s economy is closely tied to its trade with India, and the impact of these new restrictions will be both immediate and profound.

References

• OEC World: India-Bangladesh Trade Data
• CENJOWS (Centre for Joint Warfare Studies): “India-Bangladesh Trade Relations”
• The Financial Express (Bangladesh): “India-Bangladesh Bilateral Trade”
• Wikipedia: “Bangladesh–India relations”
• Indian Ministry of Commerce and Industry: Export-Import Data
• Bangladesh Export Promotion Bureau: Trade Statistics
• World Bank: South Asia Trade Integration Reports
• Press releases and notifications from Directorate General of Foreign Trade (DGFT), Government of India