India’s economic engagements in the Bay of Bengal appear to be entering a new phase. On the face of it, there is reason for quiet confidence. Trade volumes through India’s eastern ports are up. Cargo throughput at Visakhapatnam (Andhra Pradesh), Paradip (Odisha), and Haldia (West Bengal) has grown steadily. The signing of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Maritime Transport Cooperation Agreement earlier this year promises to ease regulatory frictions and reduce port costs. For a region long characterised by low trade integration, these are welcome signs.
The decision on Bangladesh
And yet, the optimism sits uneasily alongside a decision that has raised more than a few eyebrows. In early April, India withdrew the transshipment facility it had granted to Bangladesh — an arrangement that had allowed Dhaka to route exports through Indian ports to third-country destinations. The official explanation was logistical: Indian terminals were congested, and delays were hurting exporters. That may well be true. But in Dhaka, the move was read differently — as a quiet assertion of Indian disapproval, possibly linked to Bangladesh’s recent diplomatic overtures toward China. The timing was hardly a coincidence. The announcement came after Bangladesh’s interim Chief Adviser, in a speech in Beijing, described India’s northeastern States as ‘landlocked’ and cast Bangladesh as the region’s maritime lifeline — a claim that did not sit well in New Delhi. Prime Minister Narendra Modi has repeatedly underscored the strategic and economic importance of the Northeast, with Indian Ministers also championing its role in regional connectivity. The suggestion that these States are dependent on Bangladesh for maritime access struck a nerve.
This came as India has doubled down to position itself as a regional integrator. In recent years, New Delhi has invested heavily in port infrastructure through the Sagarmala programme to improve coastal logistics and connectivity. Cargo movement on the east coast has more than doubled in a decade, aided by policy changes such as Goods and Services Tax (GST) cuts on bunker fuel and incentives for coastal shipping. Maritime trade is, by all measures, a national priority.
Tensions amid reenergised BIMSTEC
At the regional level, India has sought to reinvigorate BIMSTEC. The BIMSTEC Maritime Transport Cooperation Agreement, for instance, aims to harmonise customs procedures and foster multimodal linkages, with the broader goal of reducing the cost and friction of trade within the Bay. For smaller economies such as Bhutan, Myanmar and Nepal, improved access through Indian ports remains a lifeline.
That is what makes the rollback of Bangladesh’s transshipment facility seem somewhat jarring. It reintroduces conditionality into what had been presented as a neutral economic architecture — one where trade facilitation serves regional integration, not shifting political winds. For Bangladesh, the impact is immediate: exporters, particularly in the ready-made garment sector (which accounts for over 85% of the country’s foreign earnings), will likely bear the brunt. Many had come to rely on Indian gateways for faster, cheaper access to global markets. The alternatives — via Sri Lanka or Southeast Asia — are costlier and less time-efficient. The move injects uncertainty into Bangladesh’s export logistics at a time of already fragile demand.
Tensions have since escalated. In mid-May, India placed restrictions on the import of seven categories of Bangladeshi goods, which include garments, plastics, and processed foods, through land ports in the Northeast. These products can now only enter India through seaports such as Kolkata and Nhava Sheva (Maharashtra), which raises costs and delays. Indian officials cited Dhaka’s restriction on yarn imports via land routes as justification, though India’s revocation of the transshipment facility had preceded that move. Many in Bangladesh, nonetheless, view New Delhi’s response as disproportionate.
Some in Delhi argue that Dhaka is being reminded of the risks of strategic hedging. Bangladesh has, after all, stepped up diplomatic engagement with China, reopened maritime trade with Pakistan, and asserted its role as a regional connector. But these are choices Dhaka is entitled to make. If India recalibrates trade access to signal political displeasure, it risks undermining the very idea of cooperative regionalism it has sought to promote.
This is not just a bilateral issue. What affects Dhaka will be noted in Naypyidaw, Bangkok, and Colombo. The concern is not that India has used leverage — major powers often do. The concern is that India has done so in a domain once insulated from overt geopolitical contest. Maritime trade corridors, once seen as shared infrastructure, are beginning to feel more transactional.
The issue is about credibility
India still holds many cards. Its port infrastructure remains the most extensive and efficient in the region. Cargo-handling capacity is expanding rapidly, and coastal shipping and multimodal linkages are more developed than those of any other BIMSTEC partner. But infrastructure alone does not confer leadership. In a region as fragmented and wary as the Bay, credibility matters as much as capacity. If neighbours begin to view Indian trade facilitation as shifting with the political winds, they will hedge — and the regional architecture India hopes to build will inevitably stall.
The Bay of Bengal, then, is at an inflection point. On one level, it is a zone of opportunity. With improved connectivity, it could emerge as a self-sustaining corridor between South and Southeast Asia. A proposed BIMSTEC free trade agreement, if concluded and implemented well, could reshape regional trade patterns. On another level, the region remains vulnerable to strategic anxieties. The line between economic policy and geopolitical preference is beginning to blur.
There may still be time to draw that line more clearly. India could clarify the circumstances under which the transshipment arrangement with Bangladesh might be reinstated — or, better yet, replace it with a rules-based mechanism that insulates trade from political cycles. That would send a reassuring signal not only to Dhaka but to the rest of the Bay.
The larger question is whether India can maintain the balance between asserting strategic interests and cultivating regional trust. So far, the signals are mixed.
Abhijit Singh is the former head of maritime policy at the Observer Research Foundation (ORF), New Delhi
Published – June 17, 2025 12:08 am IST