India-Bangladesh Maritime Frictions

India’s recent decision to revoke Bangladesh’s transshipment facility amid growing strategic tensions has sparked debate over the politicization of regional trade. As India seeks to lead BIMSTEC’s maritime integration, this move risks undermining its regional credibility and cooperative vision.

Navigating Trade and Strategy in the Bay of Bengal: India-Bangladesh Maritime Frictions

Shifting Regional Maritime Dynamics

• Growing Trade Through Eastern Ports: India’s eastern ports such as Visakhapatnam, Paradip, and Haldia have witnessed steady growth in cargo throughput. The Sagarmala Programme and GST-related incentives have significantly boosted coastal shipping. These developments reflect India’s intent to anchor itself as a regional maritime trade hub.
• BIMSTEC Maritime Agreement: The BIMSTEC Maritime Transport Cooperation Agreement signed in early 2025 aims to streamline customs processes, reduce regulatory frictions, and encourage multimodal linkages. It is designed to enhance intra-regional trade and connectivity, especially for landlocked member states like Bhutan and Nepal.
• Suspension of Transshipment to Bangladesh: India revoked a key transshipment facility previously granted to Bangladesh, citing port congestion. However, the decision followed Dhaka’s diplomatic outreach to China and a controversial speech in Beijing, raising concerns of strategic retaliation. Bangladesh viewed this as a politicized rollback of earlier cooperation.

Strategic Signalling and Economic Retaliation

• Impact on Bangladesh’s Export Sector: The withdrawal directly affects Bangladesh’s ready-made garment exports — a sector that contributes over 85% of its foreign exchange earnings. Alternatives via Sri Lanka or Southeast Asia are costlier and slower, straining Bangladesh’s trade competitiveness in a slowing global market.
• Import Restrictions and Trade Conditionalities: India later restricted seven categories of Bangladeshi goods — including garments and processed foods — via Northeast land ports, redirecting them to more distant seaports like Kolkata and Nhava Sheva. Indian officials cited retaliatory reasoning, linking it to Bangladesh’s curbs on yarn imports.
• Erosion of Neutral Trade Architecture: India’s actions appear to introduce conditionality into regional trade frameworks once considered apolitical. The strategic use of trade levers could signal to regional partners that India’s commitments may shift based on bilateral tensions, thereby weakening the trust underpinning BIMSTEC cooperation.

Strategic Implications and Regional Trust Deficit

• Regional Perceptions and Credibility Risks: India’s port and logistical infrastructure remain unmatched in the Bay of Bengal. However, strategic signalling through trade instruments may affect India’s credibility as a regional integrator. Smaller neighbours may seek alternatives to hedge against political unpredictability.
• Rising Strategic Competition in the Bay: Bangladesh’s enhanced engagement with China, reopening of maritime trade with Pakistan, and self-projection as a regional transit node reflect broader strategic rebalancing. If India appears intolerant of such choices, it risks being seen as coercive rather than cooperative.
• The Need for Rules-Based Regionalism: To rebuild trust, India could consider instituting a transparent, rules-based transshipment mechanism insulated from political fluctuations. This would reinforce the Bay of Bengal as a shared economic space rather than a theatre of geopolitical contestation.

Practice Question:

Q. Examine the implications of India’s recent maritime trade decisions in the Bay of Bengal on regional connectivity and trust-building in BIMSTEC. How can India balance strategic interests with cooperative regionalism?