Since news broke of violence erupting between India and Pakistan, as the former launched strikes against the latter, prompting Islamabad to vow retaliation, panic has spread across South Asia.
This has directly impacted the Dhaka Stock Exchange, as the market saw a major drop at the start of the trading day on Wednesday, hours after the attacks.
However, the impact is not limited to the capital market; the ripple effects of this conflict are touching multiple sectors of Bangladesh’s economy.
Experts warn that if the conflict turns into a full-blown and prolonged war, Bangladesh could face serious challenges in trade, investment, inflation, remittance, and diplomatic balance.
Economists emphasize the urgent need for strategic planning by the government and policymakers.
Without prior preparation to tackle the multidimensional pressure that war could bring, Bangladesh’s economy may come under significant strain, they say.
Trade and export at risk
Despite tensions between India and Pakistan, both countries maintain commercial ties with Bangladesh, especially India, which is one of Bangladesh’s top import partners.
In a war scenario, border trade, transit routes, and South Asian maritime transport corridors could be disrupted.
There is also concern about potential delays or cancellations in exports of Bangladesh’s ready-made garments, pharmaceuticals, and light engineering products.
Uncertainty in foreign investment
A rise in political instability in South Asia may lead foreign investors to label the region as a “high-risk zone,” which could reduce both existing and potential foreign direct investment (FDI).
Many ongoing projects in infrastructure, textiles, ICT, and renewable energy could come to a halt.
Potential shocks to business and trade
Economists believe that if the war continues, multiple sectors in Bangladesh’s economy will be negatively impacted, especially foreign trade, investment, logistics, export orders, and supply chains.
Given the close trade relationship between Bangladesh and India, any military conflict could directly affect imports and exports.
Additionally, if India increases its military spending, it may scale back domestic development projects and regional cooperation efforts, which could impede Bangladesh’s economic progress.
Dr Mustafizur Rahman, a distinguished fellow at the private research organization Centre for Policy Dialogue (CPD), said: “Although the current state of war between India and Pakistan may not pose a major threat to Bangladesh’s business activities, it is a matter of serious concern. Tensions between two nuclear powers can have negative consequences for regional stability and cooperation.”
He added: “India is an important trade partner for Bangladesh. A significant portion of our exports goes to the Indian market under duty-free access. An increase in Indian military spending could impact its economic priorities, which may negatively affect Bangladesh’s exports.”
BKMEA President Mohammad Hatem, representing the knitwear manufacturers, echoed the concern that war between India and Pakistan will not just affect them but also neighbouring economies like Bangladesh.
At a discussion event held at Sonargaon Hotel on Wednesday, he said: “A war would disrupt import-export routes. We rely heavily on importing raw materials like yarn and fabric. Any disruption in the supply chain due to war will have a direct impact on our garment industry.”
He added: “War is never beneficial for any country. If the flames of war spread, border-adjacent countries like ours will also suffer economically.”
Need for safe trade strategies
Experts suggest that amid this crisis, Bangladesh must diversify its trade strategies, look for alternative markets, and strengthen diplomatic efforts.
Furthermore, export-oriented industries must adopt disciplined strategies while monitoring global demand and price fluctuations.
Major stock market crash
Amid the India-Pakistan conflict, Bangladesh’s stock market suffered a major crash on Wednesday.
At the end of the day, the DSEX index of the Dhaka Stock Exchange (DSE) dropped by 149 points or nearly 3%, closing at 4,802 points—the lowest in five years.
This single-day fall is the largest since October 29, 2024. Panic among investors led to massive sell-offs.
On Wednesday, only nine company stocks rose in value, while 385 fell, and five remained unchanged.
Ashequr Rahman, managing director of Midway Securities, told Bangla Tribune: “The India-Pakistan war situation has created extreme instability in the market. Geopolitical uncertainty is frightening investors. Many are selling shares out of fear for safety.”
He also mentioned that a letter from the Financial Institutions Division (FID) arrived on Wednesday morning, saying: “On May 11, a high-level meeting will be held at the office of the chief adviser. The finance adviser, FID secretary, and BSEC chairman will be present. The meeting will discuss measures to stabilize the market.”
However, this positive message was not enough to immediately restore investor confidence.
Energy crisis and inflation
A potential war could drive up global fuel prices.
If the price of imported crude oil and LNG from the Middle East increases, the cost of electricity production in Bangladesh will rise. This could trigger widespread inflation across the industrial and consumer levels.
Particularly, if transportation and agricultural production costs rise, food prices may spiral out of control.
Concerns over remittance flow
Stakeholders have expressed concern that many Bangladeshi expatriate workers are based in the Middle East and Malaysia.
The political atmosphere in these regions may also be affected by India-Pakistan tensions. If the war drags on, labour markets could stagnate, threatening a decline in remittance earnings.
Diplomatic pressure on Bangladesh
Bangladesh maintains political and diplomatic ties with both India and Pakistan.
In the wake of a war, the country may need to adopt a cautious stance to avoid offending either side.
In this context, maintaining balance with regional and global allies could become Bangladesh’s primary diplomatic strategy.