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Whether the political change in Bangladesh on August 5 has made an impact on the country's bilateral trade with India is a matter of discussion for understandable reasons. The media has already shed light on the matter, linking it with the deterioration of overall bilateral relations between the two countries. In the discussion, the trend of bilateral trade with China has also emerged as an important factor. Some are eager to show that the country's bilateral trade with China is rising as it is declining with India after the ouster of the Hasina regime through a mass uprising led by students.
There is no doubt that India heavily backed the Hasina regime. Bangladesh's closest and biggest neighbour has also supported the now-ousted regime since 2009. The regime's fall is considered a setback for New Delhi, which is yet to accept the new reality in Bangladesh. India's unwillingness to accept the new reality in Bangladesh is clear. The strong allegation is also there that the BJP-led Indian government is trying to destabilise the interim government through various means. Indian media is also continuously spreading misinformation and disinformation against Bangladesh, adding fuel to anti-India sentiment.
On the other hand, Beijing signals its readiness to work with Bangladesh despite the changes, which is a promising development that is making China more popular with most Bangladeshis. There is also a move to enhance bilateral trade, which is reflected in a further increase in imports from China, marking a potential invigoration of Bangladesh economy.
Bilateral trade with India has increased significantly in the last decade with some fluctuations. Gone are the days when the trade deficit with India was a matter of disappointment. Bangladesh continues to source various raw materials and intermediate goods from the neighbouring country mainly due to geographical proximity and historical links. Bangladesh is also used to import food items and consumer goods from India. The major import items include textiles and textile articles, vegetable products, prepared foodstuffs, products of the chemical or allied industries, mineral products, machinery and mechanical appliances, electrical equipment, etc, to meet domestic demands.
Nevertheless, the size of Bangladesh's economy has been continuously growing over the decades. So, higher and diverse demand for various products and items has gradually made China the main import source. Currently, around one-fourth of the country's total imports are sourced from China, and this is not a unique feature for Bangladesh. Today, one-tenth of global imports are sourced from China. The United States of America (USA) is ahead of China, supplying around 13 per cent of global imports. Though India is the eighth top global importer, it still provides less than three per cent of global imports of goods.
The rise of China as a global export powerhouse started to become evident at the beginning of the current century. However, the background work was done more than three decades before that. During the 1970s, China started a set of reforms to transform its economy from a communist model to a market economy mixed with socialism. So, the country also started to open up to the world gradually. At that time, China's share of global trade was less than one percent.
During the first decade of the current century, two critical events pushed China to become a global manufacturing powerhouse. One is the emergence of global value chains (GVCs), a system where different stages of production are spread across different countries to take advantage of their unique strengths, and another is China's accession to the World Trade Organization (WTO). Using the leverage of intertwined events, China has become a global trade giant at a rapid pace that no country has been able to attain so far. India was far behind in this regard due to the country's slow pace of trade liberalisation coupled with inadequate reforms to transfer it into a full-fledged market economy.
Bangladesh's bilateral trade with China started to surge at the beginning of the second decade of the current century. Though China offers flexible market access, Bangladesh has yet to tap it for various reasons, so the country's exports to China have yet to reach the $1 billion level. But, imports from China continued to grow, ballooning the trade deficit with the world's second-biggest economy. In the last fiscal year (FY24), Bangladesh's trade deficit with China reached around $16 billion. In contrast, the trade deficit with India was recorded at $7.44 billion.
Undoubtedly, intensified anti-Indian sentiment in Bangladesh cast a shadow on bilateral trade to some extent. As reported in some media, the country's imports from India have declined following the call for boycotting Indian products. After the 12th national parliament election in January last year, in which Hasina secured a fourth term while the opposition boycotted the polls, a massive 'India Out' campaign was launched as a protest against India's interference in Bangladesh politics. The campaign forced many stores to remove Indian goods from shelves. During the July uprising, a period of significant civil unrest, anger against India intensified for its persistent backing of Hasian's oppressive move to curb the protest movement. After the fall of Hasina, anti-Indian sentiment burst across the country, which is also reflected in the reduction of imports from India, according to some media reports. These reports also linked the rise in imports from China with the decline in imports from India last year.
It is, however, not easy to suddenly change the source of import on a large scale, as finding the alternative source requires some time. Statistics available from Bangladesh Bank showed that imports from India increased by 15 per cent in the last quarter of 2024 compared to the same quarter of 2023. At the same time, imports from China increased by 6.60 per cent.
Looking at the decade-long data provides more insights into the rise in imports from China than India. In FY10, imports from China accounted for around 55 per cent of combined imports from China and India. The ratio increased to 60 per cent in FY20 and further increased to 67 per cent in the first half of FY25. It means there is a linear trend, with some fluctuations in imports from China and India. Again, the ratio of imports from China was 26 per cent of the total imports in Bangladesh in FY23, which increased to 26.31 per cent in FY24 and 28.32 per cent in the first half of FY25. The ratio of imports from India was 13.90 per cent in FY23, which also increased to 14.23 per cent in FY24 but dropped slightly to 14 per cent in the first half of FY25.
Thus, the latest fluctuation in imports from India is not entirely linked to the deterioration of the bilateral relation, which is also reflected in the export trend. According to Bangladesh Bank statistics, Bangladesh exports to India increased to $502 million in the last quarter of 2024 from $391.20 million in the third quarter of the last year. At the same time, exports to China increased to $171.40 million from $155.80 million respectively. So, the buzz that the Indo-Bangla trade is shifting fast to the Sino-Bangla trade is misleading.