Context

• India’s economic engagement in the Bay of Bengal region appears to be entering a dynamic and consequential phase.
• On the surface, there are several encouraging indicators: trade volumes are increasing, major eastern ports such as Visakhapatnam, Paradip, and Haldia are witnessing steady growth in cargo throughput, and the recent signing of the BIMSTEC Maritime Transport Cooperation Agreement augurs well for improved regional integration.
• However, this optimism is tempered by emerging geopolitical tensions, particularly in India’s relationship with Bangladesh.
• These tensions have cast a shadow on India’s broader regional ambitions and exposed the fragility of its leadership claims in the Bay of Bengal.

The Withdrawal of the Transshipment Facility: Strategic Signal or Logistical Necessity?

• A critical turning point came in April when India abruptly withdrew a transshipment facility that allowed Bangladesh to route exports through Indian ports to third-country destinations.
• While New Delhi justified this move on logistical grounds, citing congestion and resultant delays at Indian terminals, the decision coincided with a diplomatic misstep in Dhaka.
• Bangladesh’s interim Chief Adviser, speaking in Beijing, referred to India’s northeastern states as landlocked and suggested that Bangladesh served as their maritime gateway.
• This statement clashed with New Delhi’s strategic narrative, which positions the Northeast as a linchpin of regional connectivity, not a dependent outpost.
• Although India’s concerns about logistics may be valid, the timing of the decision appeared retaliatory, especially in light of Bangladesh’s growing engagement with China and its broader hedging strategy.
• In Dhaka, the move was interpreted not as a pragmatic trade adjustment but as a calculated message, India was asserting displeasure through economic means.

The Larger Context: India’s Maritime Push

• This controversy unfolded just as India was redoubling its efforts to strengthen regional integration through maritime initiatives.
• Under the Sagarmala programme, India has invested substantially in improving port infrastructure and coastal logistics.
• Trade along the eastern seaboard has more than doubled over the past decade, thanks in part to policy incentives such as GST cuts on bunker fuel and support for coastal shipping.
• The BIMSTEC Maritime Transport Cooperation Agreement represents another layer of this effort, aiming to harmonise customs procedures and create multimodal linkages that would benefit not only India but also smaller landlocked or less-connected countries such as Bhutan, Nepal, and Myanmar.
• However, India’s unilateral withdrawal of the transshipment facility appears at odds with the cooperative ethos these regional efforts promote.
• For Bangladesh’s export-reliant economy, particularly its ready-made garment sector, the loss of access to Indian transshipment ports introduces significant uncertainty and cost, especially when alternatives via Sri Lanka or Southeast Asia are less viable.

Potential Implications of India’s Move

• Escalating Trade Frictions
  • The situation worsened in mid-May when India imposed new restrictions on the import of several Bangladeshi goods, mandating that they enter only through select seaports, rather than via the more accessible northeastern land ports.
  • Indian officials framed this as a reciprocal measure following Bangladesh’s earlier restrictions on Indian yarn imports.
  • However, given that India’s transshipment rollback preceded Bangladesh’s actions, many in Dhaka perceived the Indian response as excessive and punitive.
  • These tit-for-tat measures risk undermining years of progress in regional cooperation. Some in New Delhi argue that Dhaka is being warned of the perils of strategic hedging, given its closer ties with China and Pakistan.
  • Yet, Bangladesh, as a sovereign nation, is within its rights to diversify its foreign policy.
  • If India begins to weaponize trade access in response to perceived diplomatic slights, it risks transforming economic cooperation into a geopolitical contest, precisely what BIMSTEC and other multilateral efforts were designed to avoid.
• The Risk of Undermining Regional Trust
  • The implications extend beyond bilateral relations. Other regional capitals, Naypyidaw, Bangkok, Colombo are observing these developments closely.
  • The concern is not merely that India is using its leverage; great powers often do.
  • Rather, the concern is that India is doing so in a domain traditionally kept separate from geopolitics: regional trade infrastructure.
  • Once considered neutral and collective, these maritime corridors are beginning to feel conditional and transactional.
  • India does retain considerable strategic advantages. Its port infrastructure is the most advanced in the region, and its capacity for multimodal transport is unmatched among BIMSTEC countries.
  • However, material capacity alone is insufficient for regional leadership.
  • In a region historically marred by mistrust and fragmentation, India’s credibility, its consistency, fairness, and reliability, will ultimately determine the success of its regional ambitions.

The Way Ahead: Rebuilding Credibility and Drawing Clearer Lines

• The Bay of Bengal stands at an inflection On one hand, it offers tremendous potential as a connective corridor between South and Southeast Asia.
• A well-executed BIMSTEC Free Trade Agreement could reshape trade patterns and deepen economic ties.
• On the other hand, the region remains vulnerable to strategic anxieties and national rivalries.
• The recent blurring of economic policy and geopolitical positioning threatens to derail India’s carefully constructed narrative of regional cooperation.
• There is still time for course correction. India could reframe its withdrawal of the transshipment facility as a temporary measure and set clear, rule-based criteria for its reinstatement.
• Better yet, it could establish a depoliticised mechanism for trade facilitation, one that ensures predictability and fairness irrespective of diplomatic currents.
• Such a move would not only reassure Bangladesh but also reinforce India’s image as a responsible regional leader.

Conclusion

• The central question facing India is whether it can balance the assertion of its strategic interests with the cultivation of regional trust.
• Its recent actions have sent mixed signals, combining infrastructural ambition with political reactivity.
• For India to truly lead in the Bay of Bengal, it must ensure that its economic policies serve as bridges, not battlegrounds.
• The success of its regional vision hinges not merely on ports and corridors, but on the credibility, it commands among its neighbours.