Bangladesh-India Relations in 2025: Shifting Political and Economic Equations

X: @vivekbhavsar

New Delhi  – The political landscape in Bangladesh has undergone a dramatic transformation, significantly impacting its relations with India. The ousting of former Prime Minister Sheikh Hasina in August 2024 after mass protests has altered the strategic and diplomatic ties between the two nations. India, which had been a steadfast ally of Hasina, now faces a new reality as the interim government in Dhaka, led by Nobel laureate Muhammad Yunus, reshapes the country’s foreign policy.

The removal of Sheikh Hasina and the establishment of a new administration in Dhaka have strained India-Bangladesh relations. The new government has accused Hasina of human rights violations and financial irregularities, formally requesting her extradition from India, where she has taken refuge. India’s Ministry of External Affairs has acknowledged the request but has yet to take any action, leading to tensions between the two governments.

To defuse tensions, Indian Foreign Secretary Vikram Misri visited Dhaka in December 2024. During his visit, discussions centered on maintaining bilateral cooperation, protecting minority rights in Bangladesh, and ensuring regional stability. While both sides have pledged to strengthen diplomatic ties, the political uncertainty in Bangladesh remains a challenge for India’s strategic interests in South Asia.

India and Bangladesh share deep economic ties, with trade volumes exceeding $15 billion annually. However, recent developments have disrupted this partnership. One major issue is the dispute over electricity supply from India’s Adani Power, which operates a 1,600 MW power plant in Jharkhand that supplies energy to Bangladesh. The plant reduced power supply due to payment disputes and technical issues, prompting the Bangladeshi government to demand a full restoration of supply. Bangladesh has also sought a renegotiation of the power purchase agreement, citing concerns over pricing and contract terms.

In addition, India’s export restrictions on essential commodities have led to a rise in smuggling along the porous border. Reports indicate an increase in barter-based illegal trade, where gold is being exchanged for food items, particularly rice and wheat. This has raised concerns over security and economic stability, prompting both governments to step up border surveillance.

A key concern for India is the growing influence of China in Bangladesh. Since the change in government, Bangladesh has signaled its intention to diversify its foreign relations and strengthen economic cooperation with Beijing. China has been Bangladesh’s largest development partner, investing heavily in infrastructure projects, including roads, bridges, and power plants. The new administration in Dhaka has hinted at deepening ties with China, particularly in defense cooperation and trade, which could alter the balance of power in the region.

India, wary of China’s increasing presence in its neighborhood, is recalibrating its foreign policy approach. New Delhi is exploring fresh investment opportunities and economic collaborations to retain its strategic foothold in Bangladesh. However, with the new government prioritising diplomatic diversification, India faces an uphill task in maintaining its traditional influence over its eastern neighbor.

Despite the current challenges, India and Bangladesh remain key partners with shared historical, cultural, and economic ties. Both countries are likely to continue dialogue to address political and economic issues. However, India’s approach toward the new leadership in Dhaka will be crucial in determining the future of bilateral relations.

While Bangladesh looks to redefine its foreign policy, India must navigate the shifting landscape carefully, ensuring that regional cooperation remains strong. The coming months will be critical in shaping the next phase of India-Bangladesh relations, especially as both nations prepare for long-term diplomatic and economic engagements in an evolving geopolitical scenario.