Can economic engagement act as a stabiliser between India and Bangladesh when their political relations are strained?

Abstract Economic engagement is widely regarded as a potential stabilising mechanism during periods of political strain between states, primarily by increasing the costs of conflict and fostering mutual dependence. This logic is most closely associated with the “liberal peace” thesis, which posits that trade generates shared interests that reduce incentives for military confrontation. Following Sheikh Hasina’s resignation and departure to India in August 2024, anti-India rhetoric gained prominence in Bangladeshi public discourse. As a result, both India and Bangladesh imposed selective trade restrictions—such as India’s limitations on land-route imports of Bangladeshi readymade garments and Bangladesh’s restrictions on rice and yarn imports from India. Despite these political frictions and trade restrictions, bilateral trade continued to expand, underscoring the depth of structural economic interdependence between the two countries. Given the geographic location of Bangladesh vis-à-vis India, it would always be beneficial to Bangladesh to maintain cordial relations with India for the revival of its economy and regaining the lost momentum. Index Terms - Economic Engagement, Interdependence, Liberal Peace, India, Bangladesh