For Bangladesh, better ties with India will help it weather the economic effects of the current Middle East crisis By Pratim Ranjan Bose Removing curbs on Indian imports will beneift the Bangladesh economy | Photo Credit: Fatima Tuj Johora The Middle-East crisis can, in fact, be a boon to India-Bangladesh relations. After the exit of the Muhammad Yunus-led interim administration, anti-India rhetoric has stopped. The newly elected Tarique Rahman government of the Bangladesh Nationalist Party (BNP) is giving every conceivable signal that it wants to restore ties. The emerging economic crisis can only pave the ground for better ties. The combined setbacks — of the post-Covid supply chain disruption; aggressive monetary tightening by the US, pushing the dollar index to a record high; and the decline in global trade coupled with global inflation following the Ukraine crisis — have stalled Bangladesh’s decade-long growth story under the Sheikh Hasina government. The economy was showing early signs of stabilisation when Hasina was ousted from power. As of June 2024, inflation was 9.5 per cent, foreign exchange reserves improved and exports were on a recovery path. Remittances, however, suffered. Bangladesh slipped into a debt-trap during the interim rule. Hasina borrowed to finance infrastructure projects. Yunus cut development expenditure by over 12 per cent yet public debt is up by 13-14 per cent. Added to this is the widening revenue gap. Dhaka is clearly meeting current expenditure through borrowings. Economic distress As an import-dependent economy, all economic activities in Bangladesh necessarily lead to imports. As of March 2026, private investments are at an 11-year low. Bank credit to the private sector is at a record low. Suppressed activities kept the forex position artificially stable but created a supply deficit of goods. Inflation is ruling high at 8.5 per cent. It crept up throughout the winter months. To cut a long story short, the Yunus administration’s moves to suppress political dissent, coupled with indiscriminate arrests and destruction of Awami League-affiliated businesses, hit the economy hard. GDP growth was down from 4.22 per cent in 2023-24 to less than 3.5 per cent in 2024-25. Jobs were lost and poverty rose. Bangladesh is now operating at a low equilibrium and may collapse at the slightest external shock. Prime Minister Tarique Rahman has an unenviable task of bringing both social and economic order. To complicate matters, he has promised the moon to voters. Yunus survived much of the criticism by blaming Hasina but Tarique will not have that advantage. The interim administration signed a one-sided deal with the US three days prior to the election. Tarique’s foreign minister — who was a key negotiator for Yunus — claimed that the pact was reached in consensus with the BNP. Meanwhile, the patience of voters is running low after three-and-a-half years of economic struggle. The Islamists, who ruled the roost in the Yunus administration, are waiting to capitalise on grievances and capture power. The situation is already tough, and the Iran crisis has made it worse. If the war continues for a few more weeks, it will have a devastating impact on the economy. Nothing short of a full-scale restoration of India-Bangladesh ties can help Tarique survive the imminent disaster. Remove barriers Removing all barriers to trade and connectivity is an immediate requirement to combat inflation. Bangladesh suffers from high logistics costs. Corruption in the National Board of Revenue (NBR) led the Hasina administration to impose import restrictions through India’s North-Eastern gates. Tarique must remove them. A fully ready rail-connected terminal at Sabroom in Tripura, bordering the Chittagong Hill Tracts, has been waiting for inauguration since August 2024. Opening the route can reduce the price of staples — like eggs and wheat — in northern Bangladesh. The Padma Bridge was supposed to pave the way for direct rail-based container movement between Kolkata and Dhaka. It can bring down transport costs substantially and make the turnaround faster. Work must be initiated on a war footing for trade facilitation. The US submarine attack off the Sri Lankan coast may severely impact trade in the Bay of Bengal. Before the Yunus administration came to power, Delhi was working to offer Bangladeshi exporters an opportunity to ship products through the Nhava Sheva port in Mumbai. Kolkata-Dhaka rail cargo movement can open up that opportunity. Until that happens, India can reopen air-cargo transshipment through Delhi. The war has sent air fares through the roof, which were already higher from Bangladesh.

Disruptions in the Middle-East has increased shipping time and cost. The India-Bangladesh diesel pipeline helps Bangladesh cut delivery time and reduce the need for high capital blockage in inventories. The pipeline, which now ends at Parbatipur in north Bangladesh, must be extended to Dhaka. Desperate times need extraordinary measures. BNP thrived in the past on anti-India rhetoric and blamed Delhi for not supporting it. The time has come for the party to rewrite the rules. That’s a win-win for Delhi. For India, a thriving and prosperous Bangladesh will be less of a security concern. The writer is an independent journalist Published on March 6, 2026 Important Stories AI’s volatile power demand is damaging its own data centers Temasek-backed Shiprocket targets ₹7,057 crore valuation in trimmed IPO Rupee falls 9 paise to 95.17 against US dollar in early trade UAE defies Hormuz risks to keep crude flowing to global market Google Shifts AI Power to California in Race Against Anthropic, OpenAI Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments. We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle. Access 10 free stories per month Access to comment on every story Sign up/Manage to our newsletters Get notified by email for early preview to new features, discounts & offers Terms & conditions | Institutional Subscriber