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17 Jun 2025 : India’s uneasy balancing act in the Bay of Bengal

Editorial 2: India’s uneasy balancing act in the Bay of Bengal

Context

India risks eroding its commitment to cooperative regionalism by using trade access to convey political displeasure.

 

Introduction

India’s economic engagement in the Bay of Bengal region appears to be entering a promising new phase. There is cause for measured optimism, as trade volumes through eastern ports such as Visakhapatnam, Paradip, and Haldiahave shown steady growth. The recent signing of the BIMSTEC Maritime Transport Cooperation Agreement is a significant step forward, aiming to streamline regulations and lower port-related costs. For a region historically marked by limited trade integration, these developments signal a positive shift toward deeper economic connectivity.

 

Contradiction Between Optimism and Action

Aspect

Details

Optimism in Trade

- India’s trade volumes are rising through eastern ports.  
- BIMSTEC Maritime Agreement promises regulatory ease.

Unexpected Move

- In April, India withdrew the transshipment facility for Bangladesh. 
- This facility had allowed Bangladesh to route exports via Indian ports to third countries.

Official Reason

- Logistical issues cited: port congestion and export delays.

Perception in Dhaka

- Viewed as a diplomatic signal of India’s disapproval. 
- Possibly linked to Bangladesh’s growing engagement with China.

Triggering Context

- Bangladesh’s interim Chief Adviser, during a speech in Beijing, described India’s Northeast as ‘landlocked’. 
- Called Bangladesh a maritime lifeline, which was seen as provocative in New Delhi.

 

Strategic Sensitivities and Maritime Priorities

Aspect

Details

Indian Response

- New Delhi viewed the statement as undermining its Northeast connectivity strategy. 
- PM Modi and ministers have emphasised the Northeast’s strategic importance.

India's Maritime Strategy

- India is actively investing in coastal infrastructure through the Sagarmala programme.

East Coast Progress

- Cargo movement on the east coast has more than doubled in a decade.

Policy Support

- GST cuts on bunker fuel. 
- Incentives for coastal shipping.

Broader Vision

- Maritime trade is treated as a national priority. 
- India aims to be a regional integrator through enhanced logistics and connectivity.

 

Tensions amid reenergised BIMSTEC

India’s Regional Trade Vision and BIMSTEC Push

  • India has made a strategic effort to revive BIMSTEC as a platform for regional integration.
  • The BIMSTEC Maritime Transport Cooperation Agreement seeks to:
    • Harmonise customs procedures
    • Foster multimodal transport linkages
    • Reduce trade costs and frictions within the Bay of Bengal
  • For smaller economies like Bhutan, Myanmar, and Nepal, access via Indian ports is critical — a lifeline for regional trade and connectivity.

 

Withdrawal of Bangladesh Transshipment Facility: A Disruption

Aspect

Details

India’s Action

Revoked Bangladesh’s transshipment facility in April, which had enabled Dhaka to use Indian ports for third-country exports.

Perceived Justification

India cited port congestion and exporter delays.

Dhaka’s Interpretation

Seen as a political signal, potentially linked to Bangladesh’s recent diplomatic outreach to China.

Contextual Trigger

Bangladesh’s interim Chief Adviser referred to India’s Northeast as ‘landlocked’ in Beijing, promoting Bangladesh as the maritime gateway.

Strategic Sensitivity

This narrative clashed with India’s emphasis on the Northeast’s strategic autonomy and role in connectivity.

 

Impact on Bangladesh’s Economy

  • The ready-made garment (RMG) sector, contributing over 85% of Bangladesh’s foreign exchange, is disproportionately affected.
  • Exporters had grown dependent on Indian gateways for:
    • Faster shipment timelines
    • Lower transportation costs
  • Alternative routes (e.g., via Sri Lanka or Southeast Asia) are:
    • Costlier
    • More time-consuming
  • The move adds uncertainty to export logistics amid fragile global demand.

 

Escalation of Trade Tensions

New Restrictions

Implications

India imposed curbs(May)

On seven categories of Bangladeshi goods: garments, plastics, processed foods, etc.

Land Route Restrictions

Goods can now only enter India through seaports like Kolkata or Nhava Sheva, not Northeastern land ports.

India’s Justification

Cited Dhaka’s restrictions on yarn imports via land routes.

Bangladesh’s View

Sees India’s move as disproportionate and retaliatory, especially since transshipment was revoked earlier.

 

Strategic Signaling vs. Cooperative Regionalism

  • Some in New Delhi argue this is a reminder to Dhaka about the risks of strategic hedging.
    • Bangladesh has increased ties with China, reopened maritime trade with Pakistan, and asserted its connector role.
  • But these are sovereign decisions Dhaka is entitled to make.
  • If India uses trade access as leverage, it risks:
    • Undermining the principle of cooperative regionalism
    • Sending a negative signal to the rest of South and Southeast Asia

 

Wider Regional Implications

  • This issue is not limited to India–Bangladesh ties.
  • Nations like Myanmar, Thailand, and Sri Lanka are closely watching.
  • The concern isn’t the use of leverage — that’s expected from major powers.
  • The concern is that maritime trade, once viewed as neutral, shared infrastructure, is now becoming:
    • Transactional
    • Politicized
    • Vulnerable to geopolitical shifts

 

India’s Strategic Trade Advantage

  • India's Port Strengths:
    • Possesses the most extensive and efficient port infrastructure in the Bay of Bengal region.
    • Rapidly expanding cargo-handling capacity.
    • Coastal shipping and multimodal linkages are more advanced than those of any other BIMSTECmember.
  • Strategic Limitation:
    • Infrastructure alone does not guarantee regional leadership.
    • Credibility and consistency in policy are equally vital in a fragmented and cautious region like the Bay.

 

Risks of Politicised Trade Facilitation

Concern

Impact

Shifting trade policies

If seen as politically motivated, they undermine trust among regional partners.

Neighbouring countries may hedge

Partners could diversify trade routes away from India, reducing India's regional clout.

Regional architecture may stall

India’s broader vision for regional integration under BIMSTEC could face setbacks.

 

Bay of Bengal: A Region at Crossroads

  • Opportunities:
    • Can become a vibrant corridor linking South and Southeast Asia.
    • Improved connectivity offers the potential for sustainable regional growth.
    • A BIMSTEC Free Trade Agreement, if executed well, could reshape trade dynamics.
  • Challenges:
    • The region is still strategically sensitive.
    • The blurred line between economic policy and geopolitical motives can create instability and mistrust.

 

Conclusion

There is still an opportunity for India to clearly define its position on the transshipment arrangement with Bangladesh. It could specify the conditions under which the agreement might be reinstated or, preferably, establish a rules-based framework that ensures trade remains shielded from political fluctuations. Such a move would send a reassuring message not only to Dhaka but to the broader Bay of Bengal region. However, the more pressing challenge lies in whether India can successfully balance its strategic imperatives with the need to foster regional trust. As of now, the signals on this front remain ambiguous and mixed.