Trade Tensions Escalate Between India and Bangladesh Over Yarn Imports and Transshipment Facilities

Dhaka, Bangladesh – April 20, 2025
A trade dispute between India and Bangladesh has intensified, with both nations taking measures that could impact bilateral commerce. Bangladesh has suspended the import of Indian yarn through land ports, citing concerns over unfair competition and false declarations by Indian exporters. In response, India has revoked the transshipment facility that allowed Bangladeshi exports to reach third countries via Indian land routes.
Bangladesh’s Decision to Halt Yarn Imports
Bangladesh’s National Board of Revenue (NBR) announced the suspension of yarn imports through key land ports, including Benapole, Bhomra, Sonamasjid, Banglabandha, and Burimari. The move follows complaints from the Bangladesh Textile Mills Association (BTMA), which has long argued that Indian exporters were underpricing their products and falsely declaring yarn counts, creating unfair competition for local manufacturers.
Bangladesh has been a major importer of Indian cotton yarn, accounting for nearly 45.9% of India’s total cotton yarn exports in 2024. With the suspension of land port imports, Bangladeshi garment manufacturers who rely on Indian yarn may face increased costs and logistical challenges.
India’s Retaliation: Transshipment Facility Revoked
India responded by withdrawing the transshipment facility that had allowed Bangladeshi goods—particularly ready-made garments—to reach international markets through Indian ports and airports. The facility, introduced in 2020, had significantly reduced costs and improved trade efficiency for Bangladesh’s exporters. However, India cited congestion at its ports and airports as the reason for revoking the facility.
The decision is expected to increase costs for Bangladeshi apparel exporters, who often use Indian airports like Indira Gandhi International Airport in New Delhi to ship goods to Western markets. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has expressed concerns that the move will shrink shipment opportunities and raise expenses.
Impact on Bilateral Trade Relations
The escalating trade tensions come at a time when South Asia is struggling with economic integration. Experts warn that the dispute could further strain diplomatic relations between the two neighbors, which have historically shared strong trade ties. Bangladesh’s commerce ministry is reportedly exploring alternative solutions, including utilizing domestic airports to mitigate the impact on exporters.
While India has clarified that the transshipment ban does not affect Bangladesh’s trade with Nepal and Bhutan, the broader implications of these restrictions remain uncertain. Both countries may need to engage in diplomatic negotiations to prevent further disruptions to trade.