A Nation at the Brink: Bangladesh's political landscape has undergone profound upheaval in recent months, marked by widespread protests, a change in government, and escalating tensions both within the country and with its neighbours. The interim administration, led by Chief Adviser Muhammad Yunus, is struggling to circumnavigate a complex web of economic, social, and diplomatic challenges that have repercussions far beyond its borders. As civil-military relations strain, economic crises deepen, and ties with India deteriorate, Bangladesh stands at a critical crossroads – one that could reshape the region's stability and security perhaps for years to come.

The Quota System and Political Unrest: At the heart of Bangladesh's recent turmoil lies the deeply controversial government job reservation, or quota, system. Originally introduced in 1972 by Sheikh Mujibur Rahman, the system was meant to honour the sacrifices of 1971 Liberation War veterans and promote inclusion for marginalised groups. At its inception, the quota system reserved a significant 80% of government jobs for various groups, leaving only 20% for merit-based recruitment. This initial allocation included 30% for freedom fighters, 10% for women affected by the war, and 40% for residents of underrepresented districts.

Over the decades, the quota system underwent several revisions. By 2012, the total reserved seats stood at 56%, with 30% allotted to descendants of freedom fighters, 10% to women, 10% to residents of backward districts, 5% to ethnic minorities, and 1% to people with disabilities. Notably, by this time, the freedom fighters' quota had been extended to include children and, subsequently, grandchildren of the freedom fighters.

From Student Protests to Political Crisis: In 2018, massive student-led protests erupted, demanding a merit-based system and the abolition of most quotas. The government responded by abolishing quotas for higher-grade jobs, but this was challenged legally by groups representing war veterans. In June 2024, the High Court reinstated the old quota system, reigniting protests. The Supreme Court later suspended this order, revising the system so that 93% of jobs would be merit-based, with only 7% reserved for specific groups: 5% for freedom fighters and their descendants, 1% for ethnic minorities, and 1% for people with disabilities.

Despite these changes, protests intensified, with students demanding an almost entirely merit-based system (with only minimal reservations for the most marginalised groups like ethnic minorities and people with disabilities) and justice for victims of violent crackdowns. Prime Minister Sheikh Hasina's harsh rhetoric, her refusal to meet the protesters, and the government's use of force further inflamed tensions. The protests soon became a symbol of broader frustrations with Hasina's 15-year-long rule, marked by allegations of corruption, authoritarianism, and shrinking democratic space.

The Fall of Hasina and the Interim Government: Amid escalating unrest, Hasina resigned and sought asylum in India in August 2024. President Mohammed Shahabuddin dissolved parliament and, on the advice of protest leaders and civil society, appointed Nobel laureate Muhammad Yunus as Chief Adviser of an interim government. The new administration was tasked with uniting the nation, restoring stability, and preparing for free and fair elections.

Descend into Chaos: Instead of uniting the country, Yunus' interim government has struggled to contain deepening social, political, and economic crises. One of its most controversial decisions was lifting the ban on Jamaat-e-Islami, Bangladesh's largest Islamist party, previously banned for its role in war crimes during the 1971 Liberation War and its opposition to secularism. While the government framed this as promoting inclusivity, critics argue it has emboldened religious fundamentalists, threatened secular values, and led to increased violence against minorities and women.

The return of Jamaat-e-Islami has coincided with a surge in religious vigilantism and attacks on minorities, especially Hindus and Ahmadiyyas. Anti-India sentiment, ignited by misinformation and the 'Boycott India' movement, has led to further targeting of minority communities, with the interim government's muted response raising concerns about its commitment to secularism. It was the beginning of Bangladesh's descent into chaos.

Controversial Constitutional Reforms: The Constitutional Reform Commission (CRC), established by the Yunus government, was tasked with drafting a new constitution to address past governance failures and strengthen democracy in Bangladesh. Its three-fold mission included the promotion of equality, human dignity, social justice, and pluralism; restructuring of the political system to reduce the concentration of power; and the expansion of fundamental rights while decentralising governance.

However, the CRC's process has drawn significant criticism due to the exclusion of major political parties and minority groups, which has raised serious questions about the commission's legitimacy and the sustainability of its proposed reforms. In particular, the recommendation to drop secularism as a state principle has alarmed secularists and minority communities, who fear this could undermine religious tolerance and minority protections.

Compounding these challenges is the absence of clear constitutional provisions for an interim government, leading to widespread legal confusion. The CRC now finds itself caught between competing demands: student protesters advocating for greater decentralisation and Islamist groups pushing for Sharia-based governance.

Meanwhile, the country embroiled itself in a judicial crisis, marked by the resignations of a significant number of judges. These resignations are attributed to a mix of political pressure, protests against the interim government, frustration over the lack of judicial independence, and ongoing political turmoil. There are also allegations that some elements within the judiciary are attempting to destabilise the interim government and create conditions favourable to the return of former Prime Minister Sheikh Hasina and her political party.

Economic Instability and Public Discontent: Bangladesh's economy, once regarded as a model of resilience, is now confronting a series of severe and interconnected challenges. Current forecasts for 2025 indicate that inflation is expected to exceed 10%, significantly eroding household purchasing power and driving up the cost of living for millions. Economic growth has sharply decelerated, with GDP growth falling from 6.88% in the early part of fiscal year 2023-24 to just 3.91% by the final quarter of that fiscal year, and further declines are projected for the coming year. The banking sector is grappling with a severe liquidity crunch, forcing many small and medium-sized enterprises (SMEs) and garment factories to close; nearly 900 out of approximately 3,000 garment factories have shut down, resulting in mass layoffs and rising unemployment.

The depreciation of the Taka against major currencies has made imports more expensive and increased the cost of servicing foreign debt. Foreign exchange reserves are under pressure, raising concerns about Bangladesh's ability to pay for essential imports and meet external obligations – a scenario that could precipitate a balance of payments crisis. Meanwhile, the suspension of USAID funding has disrupted critical projects in health, education, food security, climate resilience, and governance, leading to job losses and undermining social welfare and economic stability.

At the same time, the imposition of a 37% tariff on Bangladeshi garments in 2025, up from 15.62%, significantly reduced the competitiveness of Bangladeshi garments in the American market. The new tariff scenario exacerbated the impact of inflation, currency depreciation, and the liquidity crunch. Further complicating matters, the Yunus government's decision to restrict land transport of goods to India – including vital yarn imports – has backfired. India responded by blocking over $770 million in Bangladeshi exports from using land routes, forcing a costly shift to sea transport and further straining the garment sector's export competitiveness.

Backlash Against the Public Service Ordinance: The Yunus administration's Public Service (Amendment) Ordinance, 2025, has provoked strong opposition from civil servants across the country. The ordinance grants the government sweeping powers to dismiss or suspend civil servants for certain disciplinary offences through a simple show-cause notice, bypassing formal departmental proceedings and denying employees the right to a proper defence. Condemning the law as 'repressive' and 'oppressive,' civil servants and their representative bodies argue that it undermines job security and due process. In response, they have demanded the immediate withdrawal of the ordinance and have launched nationwide strikes and demonstrations, which threaten law and order and disrupt administrative functions throughout the country.

Conflict with India: Since the formation of the interim government led by Muhammad Yunus, relations between India and Bangladesh have sharply deteriorated due to a mix of political, strategic, and economic tensions. The crisis began when India granted asylum to former Bangladeshi Prime Minister Sheikh Hasina. New Delhi's refusal to respond to repeated Bangladeshi demands for her extradition fuelled resentment in Bangladesh, sparking a 'Boycott India' movement. This sentiment was further inflamed by a surge in attacks on Hindu minorities, which complicated the diplomatic atmosphere and eroded mutual trust between the two nations.

Adding to these tensions, Yunus invited Chinese investment to revitalise and upgrade the Lalmonirhat airbase, which lies close to India's strategically vital Siliguri Corridor – a narrow land link connecting India's northeastern states to the rest of the country. Given the ongoing border disputes between India and China, the prospect of Chinese involvement near this sensitive area was perceived by India as a direct threat to its territorial integrity and regional dominance.

Further intensifying the situation, during a visit to China in March 2025, Yunus described India's Northeast as "landlocked" and declared Bangladesh the "only guardian of the ocean for all this region." He suggested that Bangladesh could act as an extension of the Chinese economy, facilitating trade, production, and exports for China into India's Northeast and beyond. These remarks were widely interpreted as an attempt to leverage Bangladesh's geography to enable Chinese economic – and potentially strategic – expansion into a region that India considers its own and where it is deeply cautious of Chinese influence.

India responded decisively. In May 2025, it terminated the trans-shipment facility that had allowed Bangladeshi export cargo to transit through Indian territory to third countries (except for Nepal and Bhutan). India also imposed strict restrictions on imports from Bangladesh via land ports, particularly targeting ready-made garments, processed foods, and other key exports worth about $770 million – approximately 42% of Bangladesh's exports to India. These goods are now required to use only designated seaports, making the process more costly and time-consuming.

India has accelerated plans to reduce its reliance on Bangladesh for access to its northeastern states. The Kaladan Multi-Modal Transit Transport Project – a $500 million initiative connecting Kolkata to Mizoram via Myanmar through sea, river, and road routes – has been prioritised and fast-tracked. Similarly, the Shillong – Silchar High-Speed Corridor, a four-lane highway project, is being expedited to enhance connectivity within the region and bypass Bangladesh entirely. These infrastructure developments are central to India's strategy of avoiding transit fees, bureaucratic obstacles, and geopolitical risks while promoting trade, tourism, and industrial growth in the Northeast as part of its broader Act East Policy.

The Rakhine Corridor and Security Concerns: Yunus's endorsement of a United Nations proposal to establish a humanitarian corridor from Cox's Bazar to Myanmar's Rakhine State has sparked significant debate within Bangladesh's security establishment. The military fears that such a corridor could allow armed groups to infiltrate, facilitate arms trafficking, or entangle Bangladesh in Myanmar's ongoing civil war, threatening the country's sovereignty and regional stability.

Developments in Rakhine directly affect India's northeastern border regions, especially Mizoram, which hosts refugees from Myanmar. The corridor could also disrupt India's Kaladan Multi-Modal Transit Project and become a new flashpoint in the broader US-China-India rivalry, particularly as China expands its presence in Rakhine through the Kyaukphyu Port and the China-Myanmar Economic Corridor.

Civil-Military Tensions and Power Struggles: The interim government's reluctance to commit to a clear election timeline has frustrated the military, which sees this as overstepping its mandate and risking prolonged instability. Different political parties, civil society organisations and student groups who were part of the anti-government protests in July 2024 are demanding immediate elections. In May 2025, Army Chief General Waker-Uz-Zaman demanded that elections be held by December 2025 and that the military be kept fully informed on national security matters.

The military was further angered by Yunus's release of nearly 300 convicted Bangladesh Rifles mutineers and about 400 Islamist radicals, viewing these actions as a betrayal of justice and a threat to security. Tensions within the military's top ranks also surfaced: Lieutenant General Kamrul Hassan, Yunus's military adviser, reportedly sought US support to become the next army chief, and Yunus blocked Army Chief Waker's attempt to dismiss him. Earlier in the year, there were reports of an aborted plot by Lieutenant General Faizur Rahman, who allegedly tried to rally support for a coup against Waker but failed after being exposed. There are also claims that Yunus's administration considered supporting military factions to sideline or remove Waker, especially as disputes over election timing and policy intensified.

The current socio-political unrest and economic instability in Bangladesh, combined with escalating tensions with India, present a complex and volatile regional scenario. Compounding these challenges is Bangladesh's proximity to China, which has been steadily expanding its economic and geopolitical influence across South Asia. Together, these factors can have significant geopolitical implications for the broader region.

This confluence of internal instability in Bangladesh strained relations with India, and growing Chinese engagement is a significant cause for concern. It increases the risk of external intervention, shifts in regional alliances, and potential security threats – all of which could undermine stability in South Asia and alter the balance of power among neighbouring states.