China diplomacy behind India's curbs on Bangladesh jute?

Official justification

Indian authorities claim the ban is necessary to shield domestic producers from “unfair” trade practices, citing Bangladesh’s duty-free access under the South Asian Free Trade Area (SAFTA). Officials argue that this advantage has led to “dumped and subsidised” imports, harming Indian farmers and mills. Despite existing anti-dumping duties, imports rebounded to $144 million in FY2023-24, allegedly depressing domestic jute prices below government-mandated levels and forcing production cuts. The government also alleges widespread circumvention of duties through mislabelling, technical exemptions, and round-tripping schemes. Publicly, the move is framed as protecting rural livelihoods, particularly in West Bengal—which produces 78 per cent of India’s jute and aligns with the Atmanirbhar Bharat (self-reliant India) initiative. The DGFT asserts that mandating seaport entry will improve quality checks, curb fraudulent labelling, and strengthen enforcement against duty evasion facilitated by porous land borders.

Market disruption

The latest step has severely disrupted the Bangladesh jute sector, which relies on land routes for 80 per cent of its trade with India. Redirecting an estimated $150 million in annual exports—about 23 per cent of total Bangladesh jute shipments—to Nhava Sheva imposes steep freight costs and delays. Around 117 exporters, primarily supplying India’s bordering states (West Bengal, Bihar, and the Northeast), now face logistical hurdles, including supplying landlocked regions via Mumbai.

Industry leaders have expressed alarm, with traders scrambling for alternatives such as third-country routing or shifting to raw jute exports which are still duty-free. Economists warn of short-term sectoral depression, while stranded trucks at the border have highlighted the immediate logistical chaos.

Political undercurrents

Analysts view the trade restrictions as a part of escalating tensions between India and Bangladesh. The move followed Bangladeshi interim Prime Minister Muhammad Yunus’s March visit to China, where he referred to India’s northeastern 'Seven Sister' states as “landlocked” and promoted Bangladesh as a maritime gateway for Beijing. Additionally, Bangladeshi officials attended an informal China-Pakistan-Bangladesh meeting in Kunming, drawing criticism from New Delhi.

Domestically, India’s Bharatiya Janata Party (BJP) has criticised Dhaka for its muted response to the June 10 vandalism of Rabindranath Tagore’s Kachharibari mansion-museum, framing it as neglect of minority rights under the Yunus government. While the DGFT order avoids overt political language, many see it as part of a broader pressure campaign amid Dhaka’s diplomatic overtures to China.

Core dispute

Indian officials frame the policy as a necessary enforcement measure, while Bangladeshi exporters reject claims of smuggling or fraud, calling themselves “victims of politics.” Critics argue the move is driven by industrial protectionism, as India’s mills struggle with high costs, outdated infrastructure and synthetic fibre competition.

Bangladesh dominates global jute trade, supplying over 70 per cent of exported jute goods despite being the second-largest grower after India. Analysts note that rerouting shipments through Nhava Sheva functions as a de facto non-tariff barrier—adding ocean freight, handling costs and delays without an outright ban. This effectively insulates India’s higher-cost mills from Bangladeshi competition.

Broader repercussions

The restrictions risk worsening an already lopsided trade relationship. Bangladesh sends 25 per cent of its $793 million jute exports to India and the land route blockade could deepen its $9-10 billion trade deficit with India by inflating costs and slowing shipments.

The policy also clashes with SAFTA’s free-trade principles and may face WTO scrutiny, as GATT Article V ensures transit freedom—though India claims compliance since Bangladesh is not landlocked. Dhaka is considering legal action if disruptions persist.

Environmentally, the shift could push buyers towards synthetic alternatives, undermining jute’s sustainability benefits. Meanwhile, border chaos continues, with exporters struggling to adapt. Analysts suggest the move is a tactical—and reversible—signal, reflecting ongoing diplomatic friction rather than a permanent trade realignment.

ALCHEMPro News Desk (IL)