Bangladesh Crisis
Monoswini Sarmah

Economic status is an important issue for an individual, a family, as well as a country. Economic ups and downs affect a country’s politics, socio-politics, culture, etc. in many ways. An economy experiences various ups and downs over time, but an economic crisis or severe recession can determine the country’s present and future in a different direction.
There are many reasons behind the economic crisis in a country. After Sri Lanka, the economic crisis in Bangladesh has revealed many of these reasons.
Bangladesh, which is at the stage of developing, was expected to become a developed country by 2041. The country’s GDP growth rate was higher than that of India from 2012 to 2019 and its per capita income was higher than that of India. With such positive aspects, Bangladesh had received $4.5 billion from the International Monetary Fund (IMF), $1.7 billion from various sources during the pandemic time in 2020, $61 million from the United States for free COVID-19 vaccine, $1.4 billion from World Trade Organization (World Trade Organisation, WTO). With these investments, the picture of Bangladesh’s economy was not what it should have been.

After becoming Prime Minister, Sheikh Hasina declared many developmental, infrastructural projects. But at the time of execution of the projects, due to corruption and delays, the costs had increased than the costs which were pre-estimated, and ultimately the price had to be paid by the people. Additionally, a lot of big scams were unearthed. From 1000 crore to 10,000 crore, people scammed banks and ran off with their loans.
Bangladesh provided cheap electricity to industries for boosting economic activities. The country generated more than 61% electricity from natural gas, but due to Russia-Ukraine war the whole world has been facing natural gas shortage. From the years 2010-2021 Bangladesh provided 7.1 billion subsidies to the power sector. The biggest importer of Textiles of Bangladesh is Europe, but since Europe is now in a recession period, the country’s textiles product exports have vastly reduced.
The monthly average inflation rate (January- November) increased from 7.6 percent in 2022 to 9.5 percent in 2023. Export earnings increased by only 2.4 percent in January- November 2023 compared to the same period in 2022. Remittance growth through formal channels was only 1.7 percent in January-November 2023, compared to the same months in 2022. The official exchange rate depreciated by 30 percent between November 2022 and November 2023.
The current macroeconomic crisis in Bangladesh has deep roots in persistent unresolved structural issues, which include poor tax revenue performance, a fragile banking sector, ineffective public expenditure management, unsuitable trade, and industrial policies for economic and export diversification, low FDI, inadequate public spending on health and education, and weak institutions.
The foreign exchange reserves declined from more than $30 billion to less than $20 billion between November 2022 and November 2023. Some wrong policies worsened the situation. One of them was fixing the interest rate at 9-6 percent in April 2020, which continued until the middle of 2023. This bizarre decision made the monetary policy instrument ineffective in controlling inflation. These reasons hit the economy of Bangladesh negatively.

The reverse counting of Sheikh Hasina started with protests against the quota system. She re-introduced the quota system which was stopped in 2018, which was based on non-social justice system. Hasina introduced freedom fighter quota where 30% government jobs will be reserved for freedom fighters. Students demanded to remove this quota system. Hasina rigged election, politics to create an opposite free Bangladesh.
Also, there was no press conference in the country. Day by day the student protests became violent. Officially 200 students were killed and unofficially 1000 students were injured in this protest. But the student protests continued and finally supreme court removed this quota. After the removal of the quota system, the protests should have stopped. But they did not, because of the way the students were treated by Awami league.
The students demanded resignation of Sheik Hasina. If Sheik Hasina had tried to solve it democratically than such situations would not have taken place. The Army force of Bangladesh sided with the students against the dictator Sheik Hasina. On the 5th of August, 2024, Sheik Hasina resigned from the PM position and she fled to India. People celebrated on the streets and the army personnel were given flowers.
The victory of removing the dictator Sheik Hasina is named ‘second independence of Bangladesh’. Afterwards, an interim government was formed. From this, we can say that economic factors were not the only responsible elements for the country’s economic crises, the political factors were too.

The situation of Bangladesh can affect our Indian economy and politics too.
Bangladesh is a major market for India’s cotton exports and imports significant amounts of petroleum products and cereals from India and the present crisis threatens future partnership and trade.
Infrastructure projects funded by India are at risk due to instability. Bangladesh has been a key ally for India since Sheikh Hasina became Prime Minister in 2009, her leadership had significantly improved trade and economic relations between the two countries. While Bangladesh is an important trade partner for India, the impact of the severe political crisis there will have a very limited impact on India’s overall trade volumes.
The exports to Bangladesh account for only 2.5% of India’s total merchandise exports. Since 2016, India provided $8 billion in credit for the development of road, rail, shipping, and port infrastructure in Bangladesh. Several Indian companies also have strong business ties to Bangladesh, including Tata Group, VIP Industries, Marico, Adani Power, Emami, among others. There are millions of Indians employed in various sectors of Bangladesh.
India exports cotton, petroleum, cereals to Bangladesh, and import readymade clothes from it and this trade may be disrupted if the country’s situation continues to deteriorate. India’s exports to Bangladesh dipped to USD 11 billion in 2023-24 from USD 12.21 billion in 2022-23. Imports too declined to USD 1.84 billion in the last fiscal, from USD 2 billion in 2022-23. Bangladesh is a key supplier of textiles and garments.
Disruptions in production due to political unrest could affect the supply chains of Indian garment manufacturers, potentially leading to delays and increased costs. A significant devaluation of the Bangladeshi Taka could impact the exchange rate dynamics between the Taka and the Indian Rupee, affecting bilateral trade settlements and potentially leading to increased costs for Indian importers.

The crisis in Bangladesh could dampen investor sentiment in the region, leading to a pullback of foreign direct investment (FDI) not just from Bangladesh but from South Asia as a whole. This could have a knock-on effect on Indian markets. Political instability could lead to an influx of refugees and migrant workers into India, straining local resources and labour markets. An increase in Bangladeshi refugess could pose significant social and economic challenges for India. India-Bangladesh bilateral trade reached USD 13 billion in FY 2023–24, making Bangladesh India’s largest trade partner in the subcontinent.
The nature of the new government, whether it is led by opposition parties or the military. will significantly impact India’s strategic interests. The Hindu minority may face increased risks if Islamist extremism rises. India must navigate citizenship promises for Hindu refugees carefully to avoid regional tensions.
Amidst the turmoil, violence, and abrupt change of government in Bangladesh, Delhi’s immediate priority is to work through diplomatic channels to protect Hindu minority rights in Bangladesh. Increased security measures, intensified vigilance are necessary along the 4,096- kilometre India-Bangladesh border, as there is a strong possibility of escalated infiltrations and smuggling.
Hundreds of Hindus in Bangladesh gathered along the Indian border in the aftermath of prime minister Sheikh Hasina’s ousting. Some faced attacks on their businesses and homes, as security officials worked to maintain order and prevent potential crossings.
Bangladesh crisis shows that dictatorship don’t last long. The turmoil is a warning to India about the consequences of pushing youth to the edge, highlighting that dictatorships are short-lived. Hope the situation in Bangladesh returns to normal soon.

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