Instability in bangladesh

Instability in Bangladesh

• Bangladesh Prime Minister Sheikh Hasina’s resignation marks a turning point in South Asian geopolitics. After fleeing the country amid protests and taking refuge in India, questions have been raised about the stability of Bangladesh and its relations with India.
• This turmoil can have far-reaching consequences not only for Bangladesh but also for India’s national security.

The current situation in Bangladesh:

Protests and unrest:

• Bangladesh continues to witness protests over the job quota issue, fuelled by authoritarian policies and repression of the opposition, which has led to considerable unrest, the biggest since Sheikh Hasina’s tenure in 2008.

The economic challenges:

• Sheikh Hasina’s departure has raised concerns over the country’s economic recovery from the Covid-19 pandemic, which is already affected by rising inflation and currency devaluation.

Political scenario:

• The Bangladesh Army is set to form an interim government, reflecting the volatility of the situation. The possible return of radical Islamist forces could endanger Bangladesh’s secular governance.

Disruptions in Export Flows:

• Bangladesh’s textile sector, which contributes significantly to its export revenues, is facing major disruptions. The ongoing unrest has led to the breakdown of supply chains, affecting the movement of goods and production schedules.
• Bangladesh accounts for 7.9% of the global textile industry, global trade in garments. The country’s US $45 billion apparel sector, which employs more than four million workers, represents more than 85% of its merchandise exports.
• International buyers are reassessing their supply sources due to uncertainty in Bangladesh. This may result in transfer of orders to alternate markets including India.
• India can benefit significantly if it gets a part of the displaced orders from Bangladesh. Industry experts estimate that India could gain an additional USD 300-400 million in monthly turnover if 10-11% of Bangladesh’s textile exports are redirected to Indian hubs like Tirupur.

Impact of political instability in Bangladesh on India:

Loss of a Partner:

• India has lost an important partner in Sheikh Hasina, who was playing an essential role in countering terrorism and strengthening bilateral relations.
• Under Hasina’s leadership, India had the opportunity to work closely with Bangladesh on security matters, but this relationship is now under threat due to the change in political dynamics.
• India-Bangladesh bilateral trade reached US $13 billion in FY 2023-24, making Bangladesh India’s largest trade partner in the subcontinent. Under Hasina’s administration, duty-free access to most tariff lines was provided under the South Asian Free Trade Agreement (SAFTA) agreement.
• India’s support to his administration has now become a liability, as his unpopularity and controversial rule could affect India’s regional status.

Western scrutiny and possible reaction:

• India’s support to Hasina has created friction with Western allies, particularly the US, which has criticised her undemocratic activities. Now the challenge for India is to balance international relations while supporting an unpopular leader.
• Hasina’s growing unpopularity could lead to India facing the ire of Bangladeshi citizens who consider India an ally of the deposed leader. This situation can affect India-Bangladesh relations.

Importance of Bangladesh to India

• The country serves as an important corridor for trade and transport, connecting Northeast India with the rest of the country and facilitating access to international markets.
• A stable and friendly Bangladesh is essential for regional security. Cooperation on counterterrorism, border security and other security issues is important for maintaining peace in South Asia.
• Bangladesh is India’s largest trading partner in South Asia and India is Bangladesh’s second largest trading partner in Asia.
• This economic relationship supports India’s foreign trade policy goals and contributes to its goal of becoming a US $5 trillion economy.
• Active cooperation between India and Bangladesh is crucial for the success of regional forums such as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and the South Asian Association for Regional Cooperation (SAARC).

Challenges faced by India in engaging with the new regime:

Uncertain political environment:

• The nature of the new government, whether led by opposition parties or the military, will have a significant impact on India’s strategic interests.
• A new administration with a less friendly attitude towards India could reactivate anti-India militant groups, further straining the already tense security situation on the borders.
• Hindu minorities may face greater risk if Islamic extremism increases. India should act cautiously on promises of citizenship for Hindu refugees to avoid regional tensions.

Regional geopolitics:

• Political instability in Bangladesh could provide an opportunity for China to increase its influence in the region.
• India should be cautious as Beijing could offer lucrative deals to the new government, just as it has taken advantage of regime changes in Sri Lanka and the Maldives.
• India will have to engage in strategic partnerships to ensure that extremist elements are not encouraged, and Bangladesh’s economic stability is maintained.
• The turmoil in Bangladesh comes at a time when India is facing challenges on multiple fronts, including tensions with Pakistan, instability in Myanmar, strained relations with Nepal, the Taliban’s seizure of power in Afghanistan and the Maldives.

Impact on Indian investment:

• Indian businesses and investments in Bangladesh are likely to face uncertainties due to the political turmoil. Trade disruptions and payment delays can affect the profitability and sustainability of these investments.
• The unrest will affect Indian-owned textile manufacturing units in Bangladesh. About 25% of the textile units in Bangladesh are owned by Indian companies. It is likely that due to the current volatility, these units may shift their operations back to India.
• As discussions begin about a possible Free Trade Agreement (FTA) in October 2023, expectations are high that it could increase Bangladesh’s exports to India by 297% and India’s exports by 172%.
• However, political instability raises doubts about the future of these negotiations and could disrupt existing trade flows.

Infrastructure and connectivity concerns:

• Infrastructure and connectivity have played an important role in strengthening India-Bangladesh relations. Since 2016, India has extended a line of credit of USD 8 billion for road, rail and port projects, including the Akhaura-Agartala rail link and the Khulna-Mongla port rail line.
• However, the current unrest threatens these vital links, disrupting trade and access to India’s northeastern region and jeopardising earlier agreements.

Balance:

• India must strike a balance between supporting democratic forces and managing relations with regional powers.
• The challenge will be to avoid getting embroiled in internal disputes while maintaining a strong diplomatic presence in Bangladesh.
• What should India do to further its foreign policy?

Forging new alliances:

• India is maintaining a cautious approach, adopting a “wait and watch” strategy while closely monitoring the situation in Bangladesh. This includes assessing developments and their potential impacts on regional stability.
• Further, India should engage with different political blocs in Bangladesh to develop a more inclusive relationship. India should develop a flexible strategy that can accommodate the evolving political scenario in Bangladesh.
• It will be important to engage with a broad spectrum of Bangladeshi society to counter any negative perception about India. India needs to move beyond the liberation story of 1971.

Enhanced safety measures:

• India should further strengthen its security measures along the border and in areas with significant Bangladeshi migrant populations to mitigate potential spillover effects and maintain stability.

Digital Connectivity Corridor:

• Developing digital connectivity corridors can boost trade, technology exchange and e-commerce.
• To evaluate the feasibility of FTA with Bangladesh in view of the new political environment.

Geopolitical manoeuvrings:

• India should anticipate that Pakistan and China will try to take advantage of the situation in Bangladesh.
• To mitigate these risks, it will be important to collaborate with international partners, including the US, UK and European countries.
• India should work with Gulf partners like UAE and Saudi Arabia for economic stabilization of Bangladesh and countering extremist influences. This cooperation can help maintain regional stability and prevent Bangladesh from drifting away from its traditional allies.