By Annunthra Rangan
On August 5, 2024, Bangladesh Prime Minister Sheikh Hasina resigned unexpectedly amidst widespread student protests and public dissatisfaction with her administration. This led to an interim government led by Nobel Laureate Muhammad Yunus, who will oversee the country until fresh elections are held. The situation has introduced notable economic uncertainty, affecting Bangladesh’s already strained economy, characterised by high inflation, slow export growth, a depreciating currency and dwindling foreign exchange reserves.
For India, which had good relations with Hasina, these are uncertain times. What makes it fraught with risk is the presence of China in Bangladesh’s backyard where it has become a valuable ally.
India was Bangladesh’s largest South Asian trading partner and its 25th largest globally. It now faces potential disruptions in its economic relations with Bangladesh. In FY 2023-24, India exported goods worth $11.1 billion to Bangladesh, including petroleum products, cotton yarn and various manufactured goods. However, Indian exporters recently encountered delays in payments due to Bangladesh’s foreign exchange shortage—a situation likely to worsen due to the current political crisis.
Indian businesses with investments in Bangladesh such as Asian Paints, Marico and Tata Motors are also concerned about potential losses as the crisis unfolds. The Adani Group, a noteworthy electricity supplier to Bangladesh, may face scrutiny over its agreements, especially if a new government takes issue with existing terms.
Additionally, anti-Indian sentiments observed during the protests could hinder people-to-people interactions, affecting tourism and medical travel from Bangladesh to India. Moving forward, much depends on the interim government’s ability to stabilise the country and maintain economic ties with key partners like India, as a faltering Bangladesh could have serious repercussions for the region’s economic stability.
In the wake of Sheikh Hasina’s resignation, tensions between India and Bangladesh have escalated, especially regarding the narratives emerging around the democratic revolution there. Many in Bangladesh are disappointed by the spread of hateful rhetoric from individuals associated with India’s ruling party, which has framed the revolution as an anti-India or anti-Hindu conspiracy rather than recognising it as a democratic movement. This has been further aggravated by reports of violence against Muslims in India, with shanties destroyed and people beaten in the name of opposing the chaos in Bangladesh.
Bangladeshis have observed with concern the circulation of fake videos in India falsely claiming that Hindus are victims of genocide in Bangladesh. Despite these videos being debunked, they continue to be spread, exacerbating tensions. The Indian government’s initial response, which focused more on the safety of Hindus and minorities in Bangladesh than on supporting the democratic aspirations of the people, has been met with criticism. The formation of a committee to protect Hindus in Bangladesh has been perceived as direct interference in the country’s internal affairs.
India’s external affairs minister assured Parliament that students and other revolutionaries in Bangladesh are safeguarding minorities, including Hindus. However, this has not quelled the hateful propaganda circulating in India, where some political figures have labelled the situation in Bangladesh as an attack on Sanatana Dharma.
On the other hand, China-Bangladesh relations have evolved from a once-adversarial stance to a sturdy strategic partnership. Despite China’s support for Pakistan during Bangladesh’s 1971 liberation and its initial veto against Bangladesh’s entry into the United Nations, the bilateral relationship has transformed consequentially. Since establishing diplomatic ties in 1976, the two nations have steadily deepened their cooperation across various sectors. The relationship gained momentum under successive Bangladeshi governments, especially after military dictator General Ziaur Rahman’s landmark visit to China in 1977.
Today, China is Bangladesh’s largest trading partner and a key supplier of military equipment, with extensive investments in infrastructure and development projects. The strategic partnership was formalised during Chinese President Xi Jinping’s visit to Dhaka in 2016, further solidifying ties. China’s influence in Bangladesh is evident through its substantial economic assistance, defence cooperation and cultural exchanges. With multiple investments in infrastructure and trade, China has positioned itself as a vital ally, offering Bangladesh access to resources and markets while enhancing its own strategic interests in the region.
To secure its energy interests, China is enhancing its influence in the Bay of Bengal by forging strong ties with regional littoral states. Although Beijing faces challenges such as a lack of legal claims to the Bay, distrust with India, political instability in Myanmar and economic weaknesses in Sri Lanka, Bangladesh has emerged as a key partner. Its strategic location at the northern apex of the Bay and its openness to foreign investment make it attractive.
In terms of military engagement, China has also established Bangladesh’s first submarine base, BNS Sheikh Hasina, near Cox’s Bazar. This brings Chinese submarines closer to India’s Andaman and Nicobar Command, exacerbating regional geopolitical tensions. China’s growing footprint in the Bay of Bengal poses a huge challenge to India, which views this maritime space as critical to its economic and security interests. China’s substantial investments in Bangladesh, particularly in port development and naval infrastructure, heighten India’s concerns as Beijing encroaches upon areas of strategic importance.
India has been a long standing supporter of Sheikh Hasina, who spent several years in exile here after the tragic assassination of most of her family in 1975. Under her leadership, relations between India and Bangladesh have been cordial. While Dhaka has carefully balanced the interests of both India and China, it was evident that Hasina consistently prioritised her relationship with India. For instance, Bangladesh initially granted permission for the Chinese-built frigate PNS Taimur of the Pakistan Navy to dock at Chattogram Port from August 7-10. However, after India raised concerns, the docking was denied. Sheikh Hasina was reportedly unaware of the initial clearance granted by her bureaucracy. Given China’s limited and transactional capabilities, the focus now shifts to Yunus and Waker-uz-Zaman (Bangladesh Chief of Army Staff) as the Bangladesh Nationalist Party and Khaleda Zia are unlikely to address the strategic challenges posed by China.
Hasina’s visa was reportedly revoked by the US as she seeks asylum in the UAE and European countries after the UK declined her request for refuge. Hasina fled Bangladesh amid student protests demanding her resignation due to a controversial quota system, leading to violent clashes with over 400 fatalities. Despite previously strong ties with the US, Hasina faced increasing criticism from Washington over her autocratic tendencies and concerns about democratic processes, resulting in visa sanctions.
The Biden administration labelled Bangladesh’s recent general elections as “unfair and not free” and imposed visa restrictions on key officials. Bangladesh’s strategic importance to the US is highlighted by its role in the Indo-Pacific Strategy, with the US being the largest importer of Bangladeshi goods and an important foreign investor. The US has invested heavily in Bangladesh’s economy, particularly in the readymade garments sector, energy and crucial food security and health programmes through USAID. It is also important to note that US lawmakers have called for sanctions against Bangladeshi officials who served under Sheikh Hasina. US Senator Chris Van Hollen and other Democrats have called for sanctions against key figures from Hasina’s administration, including former Home Minister Asaduzzaman Khan Kamal and Awami League General Secretary Obaidul Quader. The US State Department has acknowledged the situation, but has not commented on potential sanctions.
The current turmoil in Bangladesh has drawn widespread international attention, highlighting the need to consider the roles of China and India in stabilising Dhaka. China’s influence in the region gives it a strategic advantage. While India has enjoyed certain benefits under Sheikh Hasina’s leadership, China’s stronger position suggests it may be more capable of countering India’s influence there. China stands to gain from the current political vacuum in Bangladesh.
The absence of Hasina’s balanced approach between Indian and Chinese interests could allow China to strengthen its foothold in the region. The BNP, seen as having pro-China leanings, could further this shift if it gains influence. China’s strategic investments, including those under the Belt and Road Initiative, may find less resistance, thereby enhancing Beijing’s influence in South Asia at the expense of New Delhi’s efforts to contain it.
India was seen as the strongest supporter of Hasina. Now that she is ousted, the future of Indo-Bangla relations is uncertain. Overall, India’s primary challenges lie in managing the evolving political landscape in Bangladesh and mitigating the risks of increased Chinese influence, while China is sophisticated enough to capitalise on the opportunities presented by this transition.
—The writer is a Research Officer at Chennai Centre for China Studies. Her research interests constitute China-WANA (West Asia and North Africa) relations and human rights