Tangled fibres: The looming rift in South Asia’s jute trade

In the intricate weave of South Asia’s regional economy, jute has long served as a golden thread, sustaining millions of livelihoods, powering agro-industrial networks, and knitting together a legacy of cross-border trade and cooperation.

Yet, in mid-2025, that resilient strand began to unravel, frayed not only by trade imbalances and policy tensions but by the entanglement of politics, protectionism, and persistent structural woes.

On June 27 2025, the Government of India imposed sweeping port restrictions on the import of jute and allied fibre products from Bangladesh. The measure, excluding only the Nhava Sheva port in Maharashtra, marks a decisive shift, framed by New Delhi as a counteraction to years of “unfair trade practices.”

These included subsidized exports, circumvention of anti-dumping duties, and the suspected rerouting of jute goods through third countries to evade restrictions, all blatant contraventions of the spirit of the South Asian Free Trade Agreement (SAFTA).

At the core of India’s grievance lies a stark asymmetry. Though India is the world’s largest producer of raw jute, it trails far behind Bangladesh in export share.

In 2023 alone, Bangladesh exported over $162 million worth of jute and textile bast fibres, compared to India’s modest $18.2 million. Ironically, India itself was the largest importer, receiving nearly $95 million worth of jute goods, the bulk of it from Bangladesh.

The roots of this imbalance run deep. Bangladesh’s jute sector thrives on generous state incentives, including 12 per cent cash subsidies on hessian and sack exports, 7 per cent on yarn and fibres, and as much as 20 per cent on specialized jute-based composite boards. Many of these benefits are extended through Export Processing Zones (EPZs), making Bangladeshi goods highly competitive globally, even in the Indian market.

Meanwhile, India’s domestic jute industry finds itself caught in a chokehold. Over 75 per cent of jute production, predominantly sacking bags, is mandated for government procurement under the Jute Packaging Materials (Compulsory Use in Packing Commodities) Act of 1987.

The Act, along with recent reservation norms for the mandatory use of jute in packaging rice, wheat, and sugar, provides direct employment to 3.7 lakh workers and secures the livelihoods of nearly 40 lakh farm families.

Despite steady demand, the jute industry continues to grapple with rising cost pressures. Mills are often forced to procure raw jute through intermediaries and from remote farms, pushing prices well above the government-mandated Minimum Support Price.

This imbalance was exacerbated by the former ₹6,500 per quintal ceiling on processed jute sales until the price cap was lifted in 2022. However, structural inefficiencies and speculative hoarding by middlemen still undermine the sector’s viability. In an effort to curb artificial price inflation, the central government has now mandated that raw jute must be sold within 45 days of harvest.

Adding to the woes, Indian jute is increasingly undercut by smuggled Hessian bags from Nepal and undermined by declining cultivation. Farmers are shifting to high-yield rice varieties due to better returns, while synthetic alternatives continue to eat into jute’s market share.

The sugar industry, especially in markets like China, often opts for plastic packaging, ignoring both environmental implications and statutory jute usage norms. These practices have led to an estimated 5–6 per cent decline in Indian jute export revenues, which amounted to over ₹8 billion in FY22.

The regulatory story isn’t new. In 2017, India imposed anti-dumping duties (ADD) ranging from $19 to $352 per tonne on jute products exported from Bangladesh, citing unfair pricing practices. These duties were initially set for five years and were subsequently renewed in 2022.

In addition, India launched an investigation into the imposition of a countervailing duty (CVD) on jute and jute goods from Bangladesh, arguing that subsidies provided by the Bangladeshi government were harming its domestic jute industry. Despite the ADD, imports remained largely unaffected, as Bangladeshi exporters shifted focus to jute-sacking cloth, a product not covered under the original anti-dumping framework. Indian manufacturers then processed this cloth into jute-sacking bags domestically, effectively circumventing the duties. In response, a March 2019 report commissioned by India’s Ministry of Commerce and Industry recommended extending the anti-dumping duty to include jute-sacking cloth as well.

For the Indian jute industry, the challenges extend beyond economics. An analysis by CRISIL in 2024 projected that jute manufacturers’ operating margins, already squeezed by rising wages and falling overseas demand, could contract even further.

For Dhaka, the new curbs could not have come at a worse time. India is a critical export market, and the sudden clampdown, preceded by similar restrictions in May on ready-made garments and processed food, risks further destabilizing rural employment and industrial output in Bangladesh. The political backdrop only sharpens the stakes. Relations between India and Bangladesh have chilled following Prime Minister Sheikh Hasina’s ouster. This has cast a shadow over bilateral goodwill and accelerated the rise of economic nationalism.

The jute standoff, then, is more than a commercial dispute. It is a parable of ecological responsibility undermined by expedience, of regional integration strained by subsidy battles and lopsided trade frameworks.

Repairing this tear will require streamlining India’s procurement mechanisms, enforcing the JPM Act with resolve and reevaluating the subsidy imbalances. It also calls for anchoring trade in transparent, rules-based cooperation by Dhaka.

For now, South Asia’s golden fibre stands as a metaphor for its economic entanglements: organic, valuable, deeply rooted, but vulnerable to fraying when politics, policy, and profit pull in opposing directions.

The writer is an analyst of strategic and geoeconomic affairs. 

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