Business & Policy | News & Insights

Trade Between India and Bangladesh Affected by Upcoming General Elections

Published: January 4, 2024

According to exporters, the India-Bangladesh trade relationship has been further strained by the upcoming general elections in Bangladesh. With the 12th general election set to take place on January 7, the pre-election atmosphere has cast a shadow on cross-border trade. Data from the Department of Commerce reveals that Indian exports to Bangladesh between April and October 2023 have declined by 13.32 per cent, while imports saw a smaller dip of 2.3 per cent.

Stakeholders attribute the slowdown in trade activity to factors such as Bangladesh’s forex shortages, liquidity crunch, and stricter rules, like the 110 percent margin on letters of credit compared to the previous 10 per cent. Additionally, a general slowdown in trade activity during elections is considered a natural phenomenon due to tighter border controls, heightened risk aversion among businesses, and potential disruptions, including protests and shortages of skilled labourers who return to their hometowns to vote.

The impact is particularly felt in the West Bengal border town of Bangaon near the Petrapol border, as local markets heavily rely on Bangladeshi tourists. Construction material exports, such as stone chips and fly ash, have been particularly affected, with a 15-25 per cent drop in exports during the peak construction season. However, industry experts anticipate a temporary slowdown, expecting trade to return to normal after the elections.

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