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Critical Topics and Their Significance for the UPSC CSE Examination on May 20, 2025

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Least Developed Country (LDC)

For Preliminary Examination: Current events of national and international significance

For Mains Examination: General Studies II: India and its neighbourhood

Context:

With Bangladesh set to graduate from the United Nations’ Least Developed Country (LDC) category in November 2026 — a move that will end its duty-free access to export markets such as the European Union, posing fresh challenges — the country has begun a sharp economic pivot away from New Delhi towards Beijing, thereby straining trade ties with India

Read about:

What is the least developed country?

Discuss the recent developments in India–Bangladesh trade relations

Key takeaways:

• A government source revealed that Bangladesh has recently restricted Indian yarn exports through land ports, now permitting them only via seaports. This move appears to be a response to demands from Bangladeshi textile manufacturers, even though transporting yarn by land is both faster and more cost-effective for Bangladesh’s ready-made garment sector.

• China has been significantly expanding its presence in South Asia, especially in Bangladesh. Since June 2020, it has granted duty-free access to 97% of Bangladeshi exports. Beyond trade benefits, China is also assisting Bangladesh in broadening its export portfolio and upgrading its industrial capabilities.

• The Carnegie Endowment for International Peace notes that Bangladesh hosts the highest number of China-backed infrastructure projects in South Asia. Moreover, Bangladesh is the second-largest importer of Chinese military equipment globally, making up nearly 20% of China's arms exports between 2016 and 2020. According to a 2020 report by the Stockholm International Peace Research Institute, over 70% of Bangladesh’s significant arms acquisitions come from China.

• Tensions are escalating between India and its top South Asian trading partner, as the Indian government has imposed fresh import restrictions targeting Bangladeshi products — especially ready-made garments, which are vital to Bangladesh's economy and foreign exchange earnings.

• These developments come after India decided in April to discontinue a transshipment arrangement that had allowed Bangladesh to transport export goods to Western countries using Indian land and air routes, marking an early sign of strained relations.

• Indian officials attribute these steps — the trade restrictions and the end of the transshipment deal — to similar actions taken by Bangladesh and logistical issues caused by congested ports. However, some believe that statements by Bangladesh’s Chief Adviser Muhammad Yunus, who advocates for a greater Chinese economic footprint in India's Northeast, may be further straining bilateral trade ties.

• These events align with China’s broader objective of reducing Indian influence in the region. India, which opted out of the China-led Regional Comprehensive Economic Partnership (RCEP), is instead focusing on becoming a global manufacturing hub by strengthening trade relations with countries like the US, UK, EU, and members of the European Free Trade Association (EFTA).

• India’s decision to limit garment impo