Dhaka responds to India’s trade cut-off: ‘We’ll manage on our own’

Bangladesh’s interim Commerce Adviser Sheikh Bashir Uddin has stated that the country is taking proactive steps to mitigate the impact of India’s sudden decision to revoke a key trans-shipment facility. Describing the move as a logistical challenge rather than a crisis, Uddin indicated that discussions were already underway with major stakeholders across sectors, including export buyers and transport operators. According to him, the government was focused on addressing infrastructure limitations and managing the anticipated rise in export-related costs through domestic interventions.

He also reiterated that Bangladesh remained committed to maintaining its export competitiveness and improving internal connectivity. While diplomatic engagement with New Delhi has not been ruled out, Uddin clarified that no official communication had yet been planned in response to the decision. His remarks suggest that Dhaka is currently prioritising short-term economic adjustments over political escalation, even as speculation mounts over the geopolitical subtext of India‘s announcement.

What led to India’s suspension of the trade transit facility?

India formally suspended the trans-shipment facility for Bangladesh on April 9, 2025. The facility, implemented in 2020, had enabled Bangladeshi exporters to transport goods via Indian ports—including Kolkata and Haldia—for shipment to third countries beyond the South Asian region, excluding Nepal and Bhutan. This arrangement had proven particularly advantageous for Bangladesh’s ready-made garment (RMG) sector, which depends on timely, cost-efficient logistics for its global supply chain.

Indian authorities attributed the move to mounting congestion at key logistical hubs, which they claimed was disrupting their own export operations. The Ministry of External Affairs cited port bottlenecks, rising cargo delays, and infrastructure strain as core reasons for terminating the transit allowance.

However, the decision came just a day after provocative remarks made by Bangladesh’s Chief Adviser Muhammad Yunus during a visit to China, raising questions about whether strategic considerations also played a role. While the Indian government has refrained from explicitly linking the two events, the proximity of the announcements has fuelled speculation that political factors influenced the suspension.

What did Yunus say during his China visit—and why did it raise concerns in India?

During an official programme in Beijing, Yunus described Bangladesh as the “only guardian of the ocean” for India’s northeastern region, popularly known as the “seven sisters.” He pointed out that these Indian states are landlocked and rely on Bangladesh for maritime access. Framing this geography as a strategic advantage, Yunus invited China to enhance its economic footprint in the area by using Bangladesh as a platform for production, logistics, and exports to the global market.

His comments were perceived in New Delhi as a veiled attempt to reposition Bangladesh within China’s Belt and Road Initiative (BRI) strategy. In a further move that underscored Dhaka’s growing alignment with Beijing, Yunus also held talks with Chinese President Xi Jinping, discussing potential bilateral cooperation in river water management, including technical support on the Teesta River—an issue that has historically involved trilateral sensitivities among China, India, and Bangladesh.

Although India has not made any official statement criticising Yunus’ remarks, the nature and timing of its policy reversal on trans-shipment privileges indicate a possible shift in its perception of Bangladesh’s strategic posture.

What does the suspension mean for Bangladesh’s export economy?

The cancellation of trans-shipment access is expected to disrupt Bangladesh’s trade logistics, particularly for sectors that rely heavily on global market integration. The RMG industry, which constitutes more than 80% of Bangladesh’s total exports, had benefitted from reduced freight times and cost savings offered by access to Indian ports. Without this facility, exporters are now expected to reroute shipments through domestic ports such as Chittagong and Payra, which are already operating near capacity and face long-standing infrastructure limitations.

Industry representatives have warned that the shift could increase shipping costs, delay deliveries, and reduce Bangladesh’s competitiveness in price-sensitive markets such as the European Union and the Middle East. Some export associations have also highlighted the limited availability of deep-sea port access within Bangladesh’s own territory, further complicating efforts to substitute Indian connectivity options in the short term.

To mitigate these challenges, the Bangladeshi government is reportedly accelerating infrastructure development projects and exploring new trade facilitation partnerships with regional logistics hubs, including ports in Sri Lanka, the UAE, and Southeast Asia. There are also discussions underway regarding investments in customs digitisation and port automation to streamline domestic supply chains.

Is there a broader geopolitical context shaping this decision?

India’s suspension of the trans-shipment facility must also be seen within the broader geopolitical rivalry between New Delhi and Beijing. Over the past decade, Bangladesh has emerged as a focal point in this contest, attracting substantial Chinese investment in infrastructure, energy, and connectivity. China has financed or co-financed several major projects in Bangladesh, including the Padma Bridge rail link, the Payra deep-sea port, and multiple power generation units, reinforcing its role as a key development partner.

For India, this growing Chinese footprint near its eastern border has long been a source of concern. While India has sought to strengthen its own ties with Bangladesh through trade incentives, infrastructure cooperation, and connectivity initiatives under the BBIN (Bangladesh-Bhutan-India-Nepal) framework, Dhaka’s deepening engagement with Beijing has tested the balance.

Yunus’ remarks in China, particularly his reference to Bangladesh as a gateway for Chinese goods to reach global markets, were seen by many observers as a departure from the traditional neutrality that Dhaka has tried to maintain. India’s swift policy shift—regardless of official explanations—may reflect an emerging threshold beyond which New Delhi is unwilling to overlook such overtures to Beijing.

What are the regional and trade policy implications?

The development serves as a stark reminder of how trade arrangements in South Asia remain vulnerable to geopolitical tensions. Despite aspirations for regional integration through platforms like SAARC and BIMSTEC, bilateral sensitivities continue to override economic logic when political pressures mount. India’s decision, while framed in terms of operational efficiency, signals a recalibration of its strategic tolerance for Bangladesh’s diplomatic signalling towards China.

For Bangladesh, the immediate priority lies in stabilising its export logistics, particularly for sectors like garments, pharmaceuticals, and jute. In the medium term, the country may pursue a policy of trade route diversification to avoid future overdependence on a single partner—be it India or China. This could include deeper engagement with Southeast Asian markets, greater investment in maritime logistics, and renewed efforts to improve domestic port throughput.

At the same time, the incident could lead to renewed diplomatic dialogue between Dhaka and New Delhi on the future of trade cooperation. With elections looming in both countries in 2026, how this issue is handled may influence broader bilateral dynamics and the strategic alignment of South Asia’s trade corridors.