As regional cooperation frameworks such as BIMSTEC and the revival of Saarc gain momentum, New Delhi has implemented unilateral trade measures that have prompted Samsung Electronics to evaluate the viability of its smartphone and electronics manufacturing operations in India.
INDIA & TRADE
As regional cooperation frameworks such as BIMSTEC and the revival of Saarc gain momentum, New Delhi has implemented unilateral trade measures that have prompted Samsung Electronics to evaluate the viability of its smartphone and electronics manufacturing operations in India.
The company is considering a return to production in China or Vietnam due to burdensome compliance with the Production-Linked Incentive (PLI) scheme, retrospective tax demands, and an unpredictable regulatory environment. New Delhi has also curtailed imports from Bangladesh via land ports, affecting trade worth approximately $770 million, which constitutes 42 per cent of bilateral trade. These developments have created a challenging climate for multinationals, particularly concerning tax disputes, compelling Samsung to reassess its manufacturing footprint in India.
In response to geopolitical tensions, particularly Ankara's support for Pakistan, India’s domestic business lobbies, led by the All India Consumer Products Distributors Federation, representing approximately 13 million small retail outlets, have initiated an “indefinite and total” boycott of Turkish fast-moving consumer goods valued at INR20 billion. Beyond the role of distributors, chambers of commerce in Prayagraj and Lucknow have suspended imports of Turkish apple consignments, which previously generated a daily market turnover of approximately INR60–70 lakhs.
This shift in procurement has redirected imports toward South Africa, New Zealand, and Chile. Retailers have reported a significant 30 per cent decline in consumer engagement with Turkish products within days. Although the central government has not enacted an official ban, these consumer-driven initiatives demonstrate a robust public-private collaboration in economic statecraft, a strategy increasingly utilised within India’s policy framework.
On May 17, 2025, India's Directorate General of Foreign Trade (DGFT) imposed restrictions on goods entering from Bangladesh via its 16 land-port crossings, impacting imports estimated at $770 million nearly 42 per cent of total bilateral trade. The rationale for these curbs is the necessity of restoring equality and reciprocity following Dhaka's export restrictions on Indian products. Significant items affected include ready-made garments (valued at $618 million annually), processed foods, plastic products, and cotton waste, which are now required to enter India solely through designated seaports such as Kolkata and Chennai.
These measures are anticipated to disrupt supply chains in India's Northeastern states, which heavily rely on cross-border trade, and could result in a 2-3 per cent increase in retail prices for popular clothing lines. Analysts foresee short-term shortages, while India's domestic textile sector may experience a windfall estimated between Rs1,000 crore and Rs2,000 crore ($120 million to $240 million). Faced with land-port bans, approximately $660 million of Bangladesh's garment exports to India will now necessitate transit via seaports or third-country routes, which may result in longer lead times and an estimated increase in freight costs of 15–20 per cent.
Numerous global brands may encounter supply disruptions during critical seasonal periods. As Bangladesh navigates the repercussions of bans on land-port garments and processed foods, it is redirecting these products through select seaports or third countries. Some Bangladeshi firms are exploring the possibility of direct shipments to Pakistan's port of Karachi, with subsequent trucking of goods to Indian distributors via Wagah; however, political friction may complicate this option. Others are utilising container re-exports through ports in Colombo and Klang.
By favouring reciprocity over open-market reforms, India risks alienating its neighbours and encouraging them to align more closely with China. A more prudent course forward would involve balancing legitimate security concerns with transparent trade regulations
Pakistan, known for its competitively priced cotton and yarn, stands ready to capture the displaced orders resulting from Dhaka's $660 million annual garment imports. With competitive cotton yields of 4.5 million bales in FY24 and a robust yarn production of 1.8 million tons, Pakistan is strategically positioned to supply Bangladeshi mills that are pivoting away from Indian sources.
The Karachi Cotton Association anticipates a 10 per cent increase in yarn exports to Bangladesh by the fourth quarter of 2025, potentially reclaiming $200 million in lost trade. Furthermore, the Ministry of Commerce of Pakistan is currently negotiating preferential tariffs under the Generalised Scheme of Preferences-Plus (GSP+), aiming to strengthen bilateral trade in fabrics amid India's tightening border controls.
Samsung Electronics, recognised as India’s largest smartphone assembler, has expressed concerns regarding retrospective tax notices, compliance burdens associated with the Production-Linked Incentive (PLI) scheme, and a perceived regression in the ease of doing business. Despite failing to meet PLI targets for the fiscal year 2024, Samsung is seeking an additional year to qualify for incentives that could amount to INR 3,200 crore. However, the company faces uncertainty due to shifting regulatory expectations.
Industry insiders indicate that Samsung is contemplating either a partial or complete shutdown of its Indian manufacturing facilities, potentially relocating operations back to China or Vietnam, where tariff and regulatory environments appear more stable amid the ongoing US-China tariff disputes. Samsung's exports from India in FY2024 have approached $52 billion, highlighting the high stakes for the Indian government.
The company has already moved over 25 per cent of its smartphone production to Vietnam in recent years to mitigate exposure to US tariffs, leaving India with only 23 per cent of its global manufacturing footprint. The retrospective enforcement of duties and unpredictable import restrictions have fostered caution among global manufacturers, who increasingly view India as a “policy-risk hotspot.” This has prompted many multinationals to adopt ‘China +1’ strategies, which involve reallocating investments across Southeast Asia (such as Vietnam and Thailand) rather than consolidating their operations in India.
India merges economic policy with foreign policy objectives by associating trade policies with security concerns such as those linked to Turkish drones and Bangladesh’s diplomatic alignments. While such measures may yield short-term advantages, they pose risks of long-term economic repercussions, including increased consumer prices, retaliation, and the fragmentation of regional supply chains. Conversely, US President Trump’s approach, which advocates for ‘Trade, not War’, highlights the potential opportunities lost by transforming economic interactions into geopolitical conflicts.
India's recent policy decisions, such as tightening import regulations, imposing unpredictable fines, and permitting domestic boycotts, starkly contrast with collaborative integration trends in South and Central Asia. Although New Delhi’s approach claims to promote reciprocity and safeguard domestic industries, it risks estranging neighbouring countries, deterring multinationals, and diverting trade to competing corridors.
The paradox becomes evident as South Asia approaches a critical juncture: while regional cooperation is essential, India has chosen a more insular path, prompting strategic recalibrations by its neighbours and global entities alike. India’s departure from ‘Act East’ and its BIMSTEC partnerships in favour of unilateral trade barriers undermines the objectives of decades of economic cooperation within the Saarc framework.
By favouring reciprocity over open-market reforms, India risks alienating its neighbours and encouraging them to align more closely with China. A more prudent course forward would involve balancing legitimate security concerns with transparent trade regulations, revitalising dialogue on Saarc and BIMSTEC initiatives, and reaffirming a commitment to prioritising trade over conflict. Such a recalibration is imperative for South Asia to realise its substantial economic potential through cooperation rather than confrontation.
The writer is a trade facilitation expert, working with the federal government of Pakistan.
