Delhi-Dhaka need reset, must let go of political baggage

The golden era of India-Bangladesh relations, known as the sonali adhyay, seems to have faded away. Despite sharing close trade ties, cross-border connectivity, energy interdependence, and regional cooperation, the relationship is now facing significant challenges. As Bangladesh remains India's most important trade partner in South Asia, the trade connection is at a critical point, teetering between the potential for renewed collaboration and the threat of a reversal.

Imports from India have been declining, while those from China and Malaysia have risen during the period following Sheikh Hasina's leadership. The expansion of energy cooperation, such as India's electricity exports to Bangladesh, the Maitree Super Thermal Power Plant, and the India-Bangladesh Friendship Pipeline, has deepened cross-border energy flows and established a more structured infrastructure framework.

However, this current trajectory raises concerns that future collaboration may increasingly hinge on renewable energy, grid modernization, storage technologies, and market-based cross-border power trading.

Trade diversion away from India is primarily fueled by non-tariff measures (NTMs), including abrupt land-port restrictions, the loss of transshipment privileges, anti-dumping duties, and rigorous testing or certification requirements. These regulatory hurdles elevate overall trade costs and disrupt supply chains, particularly for garments, food products, and production materials.

India-Bangladesh relations should not be bound by the question of Hasina's tenure in India. Although she, her father Bangabandhu Sheikh Mujibur Rahman, and her party played pivotal roles in Bangladesh's formation, the future of bilateral ties must be dictated by the interests of both nations. Additionally, both countries must facilitate a freer flow of goods and services across their borders.

If trade retaliation persists, friendship will weaken, and they may continue as neighbors without functioning as a genuine neighborhood.

Bangladesh should not disregard the benefits of being adjacent to one of the world's largest economies. A well-crafted bilateral agreement could shift the relationship from a mere goods-trade model to a wider framework encompassing investment, services, standards harmonization, digital trade, logistics facilitation, and regional value-chain development.

For Bangladesh, this is particularly relevant as it prepares to leave the least developed country status, gradually altering its preferential access to major external markets. For India, enhanced economic integration with Bangladesh aligns with its Neighbourhood First approach and Act East policy.

The prevailing political instability does not necessarily signify an inevitable collapse of economic cooperation. A lasting reset necessitates both governments to rebuild trust via formal diplomatic channels, transparent communication, and mutually advantageous economic frameworks. As they stand at this pivotal juncture, the relationship demands a reset that transcends accumulated political baggage.