India’s Withdrawal of the Transshipment Facility: Implications for Bangladesh-India Relations
India’s recent withdrawal of the transshipment facility that allowed Bangladeshi exports to reach third countries via Indian territory marks a significant setback in bilateral ties. Introduced in 2020, this facility had played a crucial role in streamlining the export of Bangladeshi goods—particularly readymade garments—by offering a cost-effective and time-efficient trade route through India. Its sudden suspension, without a gradual phase-out, undermines years of progress in trade facilitation and reveals the fragile foundations of regional cooperation in South Asia.
This move has once again brought to light the systemic weaknesses in South Asian economic integration. The region remains the least integrated globally, with intra-regional trade accounting for a mere 5% of total trade—far behind ASEAN’s 25%, North America’s 40–50%, and the EU’s 60–65%. Structural constraints such as political mistrust, security dilemmas, infrastructure deficits, and non-tariff barriers have long impeded the region’s trade potential.
India’s decision comes at a particularly sensitive moment in bilateral relations, following the unexpected fall of Bangladesh’s Awami League government on August 5, 2024, in a democratic, student-led movement. Since then, diplomatic engagement has entered uncertain terrain, marked by heightened rhetoric, a surge in misinformation—especially in the Indian media—and growing nationalism in both countries. Yet, the enduring socio-economic interdependence and strategic imperatives between the two neighbours provide a compelling case for recalibrating ties through diplomacy and constructive dialogue.
The deep-rooted historical bonds between Bangladesh and India—especially India’s pivotal role in Bangladesh’s 1971 Liberation War—continue to serve as a strong foundation for cooperation. Shared geography and cultural affinity foster a level of people-to-people connectivity rare in the region. Both nations also share vital interests in disaster response, transboundary river management, forest conservation, cross-border security, and marine governance. Still, the relationship is not without friction. Longstanding issues such as border killings, unresolved water-sharing agreements, and political sensitivities—including the status of former Prime Minister Sheikh Hasina, now in India—have frequently strained bilateral ties. The current political transition in Dhaka marks another inflection point requiring nuanced, empathetic diplomacy.
In this complex climate, it is crucial to disentangle state policy from populist narratives. While tensions remain high, this moment also offers a chance to reassess bilateral priorities and build a more equitable, forward-looking partnership. A promising development in this regard was the meeting between Professor Dr Muhammad Yunus, Chief Adviser of Bangladesh’s interim government, and Indian Prime Minister Narendra Modi on the sidelines of the BIMSTEC Summit on June 4 in Thailand. As the first high-level interaction since the change in government, the meeting was diplomatically significant. Though the official statements from both countries differed in tone, the encounter itself signalled a willingness to engage and acknowledge complex realities.
Bangladesh reportedly raised pressing concerns—border violence, water-sharing disputes, and the extradition of Sheikh Hasina—while India emphasised regional security, extremism, and the treatment of minorities in Bangladesh. Despite divergent agendas, both parties recognised the necessity of sustained dialogue—an essential step toward a resilient diplomatic architecture.
Security concerns in Eastern South Asia further highlight the need for deeper collaboration. The rise of the Arakan Army along the Bangladesh-Myanmar border, the ongoing Rohingya crisis, and threats from non-state actors pose common challenges. These issues transcend borders and demand coordinated political and security responses grounded in mutual respect and shared interests. Instability in Myanmar and the radicalisation risks among displaced populations could severely impact the Bay of Bengal region. A strong Bangladesh-India alliance is therefore indispensable for regional stability.
Over the past two decades, both countries have developed multi-tiered institutional mechanisms for cooperation—ranging from joint working groups to coordinated border management systems. Reinvigorating these platforms is essential for reducing misunderstandings, preventing escalations, and fostering predictability. However, future cooperation must not replicate past imbalances, where benefits skewed heavily in India’s favour. Bangladesh’s interim leadership has made it clear: any renewed engagement must be anchored in reciprocity and mutual gain.
Another growing concern is the manipulation of digital information. The digital age has amplified the spread of disinformation, deepening mistrust at the grassroots. Even after the Yunus-Modi meeting, segments of the Indian media continued to disseminate hostile narratives targeting Bangladesh’s interim government. Combating this requires cyber diplomacy, media literacy, and cross-border fact-checking mechanisms to protect the integrity of public discourse.
While the current uncertainty in Bangladesh-India relations is deeply concerning, it also presents a rare opportunity to reset the framework of engagement. The political shift in Dhaka has changed the dynamics but not the underlying logic of cooperation. On the contrary, the evolving situation underscores the need for greater engagement, not less. The Yunus-Modi dialogue serves as a hopeful indicator that diplomacy can endure even in moments of upheaval.
For the region to move forward, both nations must rise above short-term frictions and commit to a long-term vision rooted in historical solidarity, mutual respect, and shared aspirations. Only through consistent dialogue, balanced cooperation, and a firm commitment to transparency can Bangladesh and India forge a partnership resilient enough to weather future storms—and strong enough to lead South Asia toward lasting peace and prosperity.
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