Bangladesh Crisis: Rising Tensions, Fragile Governance, Regional Fallout

The nation, once hailed as a rising Asian "tiger economy", now stands precariously on the edge of systemic collapse. And that can't be good news for India, which faces the prospect of a demographic and security crisis, as economic migrants and political refugees — fleeing chaos, poverty, or persecution — trickle into its already sensitive northeastern frontier. 

Also part of India's policy matrix will be the altering geopolitical landscape of South Asia and the Bay of Bengal region, where it has traditionally played a dominant role. There is also the Ganga Water Sharing Treaty, which has to be renewed before 2026.

An Unfolding Crisis

Over the last weekend, Bangladesh’s ongoing political crisis took a new and perilous turn. On June 8, interim Head of State Muhammad Yunus announced that national elections will be held in April next year.

In doing so, he defied urgent calls by both the Bangladesh Nationalist Party (BNP) and the military establishment for polls to be concluded by December. Both view timely elections as essential to restoring order amid escalating street violence and a rapidly deteriorating state apparatus.

Amid this dangerous impasse between the interim civilian regime and the country’s armed forces, the unannounced and dramatic return of former President Mohammad Abdul Hamid early Monday morning has further unsettled the political landscape.

Hamid — an Awami League stalwart, respected statesman, and 1971 liberation war veteran — had been receiving medical treatment in Bangkok and was believed to be in political exile. That he managed to re-enter the country on a commercial flight, despite being listed as a travel risk by the regime, suggests not only calculated defiance but a re-emergence of political resistance.

At the heart of Bangladesh's current instability lies a widening rift between Yunus and the military establishment. Central to the dispute are attempts by the Yunus regime to recalibrate the chain of command. The sidelining of General Waker-Uz-Zaman in favour of a pro-Islamist officer, as well as the appointment of a new National Security Adviser whose loyalties are viewed with suspicion, have further deepened the institution's mistrust. 

Interim Govt's Quandary As It Faces Army, Political Dissent

The army's ultimatum for elections by December has placed the Yunus administration in a state of siege. International diplomatic overtures have yielded little in the way of tangible support. At home, his political standing has been eroded by the collective rejection of both the Awami League and the Bangladesh Nationalist Party (BNP) by the population.

The BNP has publicly backed the military's demand for immediate elections, a position that aligns with the broader public disillusionment over mounting lawlessness, spiralling inflation, and the rise of armed groups often linked with newly resurgent Islamist factions.

Former militants, some released during the tumultuous “August revolt”, have reportedly reassembled, raising fears of renewed insurgency — not only within Bangladesh but also spilling into neighbouring Indian states.

The banned Awami League, once the dominant force in Bangladeshi politics, has been pushed underground by a regime that acted under pressure from the Jamaat-e-Islami and the newly formed National Citizens Party (NCP) — two factions with negligible democratic legitimacy but growing influence in the current dispensation.

There are growing signs that exiled Awami leaders, now residing in India and the West, may attempt to return, potentially courting arrest and triggering unrest — a prospect feared by both Jamaat and the NCP.

Industry, Especially Textiles, Hit

Since the "August revolt", over 140 factories have been shut down or destroyed. Over 2 million workers are believed to have lost jobs, according to some estimates, the majority of whom are women.

Once the engine of Bangladesh’s economic miracle, the textile sector is now in retreat, with international buyers shifting orders to India, Vietnam, and Cambodia. Macroeconomic indicators tell a bleak tale. GDP growth slowed from 7.10 per cent in 2022 to 5.78 per cent in 2023, with the World Bank forecasting a further slump to 3.3 per cent — the lowest in 36 years. 

Foreign debt has surged, with repayments increasingly draining the country’s fragile reserves. Foreign direct investment has plunged to its lowest level in six years, and the Dhaka Stock Exchange has lost a fifth of its value since the regime change in August.

Policy Repercussions For India

Bangladesh's political turmoil carries significant policy repercussions for India, impacting its security, economic interests, and regional geopolitical standing.

The ousting of Sheikh Hasina’s government, which had cultivated a strong and cooperative relationship with New Delhi, is perceived as a big setback for India’s strategic objectives in the region, as her government was seen by India as a bulwark against Islamic extremism. Now, there is a potential for the resurgence of extremism in Bangladesh.

Across the border, the demographic crisis that India faces also raises the spectre of cross-border radicalisation. The porous border, difficult to police and easy to traverse, has long been a vector of tension, and mass movements of people could inflame communal and political fault lines. 

The crisis also casts a shadow over existing bilateral agreements, most notably the 1996 Ganga Water Sharing Treaty, which is set to expire in 2026. The future of this crucial water-sharing agreement, vital for both nations, could be jeopardised by the ongoing instability and any resulting shifts in diplomatic priorities.

What Indian Policymakers Need To Do

Bangladesh must ultimately resolve its internal contradictions. But India, as a regional power with both the means and the motive, cannot afford to be a passive observer.

India fears that a shift in sentiment in the neighbourhood could alter the geopolitical landscape of South Asia and the Bay of Bengal region, where India has traditionally played a dominant role.

India may need to work discreetly but deliberately to ensure that a resolution to the chaos on its borderlands is swift, legitimate, with a happy ending for the people of the subcontinent.

In Dhaka’s darkness, New Delhi must see not just the shadows but help shape a new vision for shared prosperity.