Rethinking Bangladesh–India transit relations: The question of reciprocity

By S M ABIR HOSSAIN, JAHID HOSSAIN

Day had started before dawn for Ayesha. She was standing in the shadow of the light of her warehouses in Narayanganj, looking at the packed cartons of jute-diversified products—namely table mats, eco-friendly bags, and bamboo baskets—waiting to be shipped to a boutique retail chain in Europe. To small exporters like her, the Indian transshipment corridor was never just a policy arrangement; it was the delicate bridge that kept their businesses running. However, when India unexpectedly withdrew the transshipment facility last April, the support system on which many small exporters relied was abruptly disrupted. Shipment cost for Ayesha is now approximately 40 percent higher, and she is in danger of missing the seasonal sales window. Her buyer has already reacted sharply, signalling that she may lose the subsequent orders altogether.

In April 2025, India halted the transshipment arrangement used by Bangladesh to export cargo to third countries via its land borders. Bangladesh’s garment industry, the backbone of its export sector, has been hit particularly hard by India’s unilateral decision. The move left exporters scrambling for alternatives, forcing them to reroute shipments through Colombo, rely more heavily on Dubai for time-sensitive consignments, and push domestic airports beyond capacity. Although emergency upgrades—such as new explosive detection systems in Sylhet and repairs at HSIA in Dhaka—offered some relief, costs have surged and delivery timelines have tightened. Chartered flights are already being used by major brands simply to keep operations going in Sylhet. In an industry that exported US $36 billion in the last financial year, even minor logistical disruptions ripple through thousands of factories and millions of workers. India’s decision lays bare just how vulnerable Bangladesh’s export remain to external factors.

File Photo: Star

Policymakers initially portrayed the formalisation of the transit arrangement as a turning point in regional integration, highlighting a range of expected benefits for Bangladesh, including improved access to third-country markets. The arrangement was also expected to generate infrastructural gains for both sides: India would use Mongla and Chattogram ports to transport goods to its Northeastern states, while Bangladesh would accrue indirect benefits from the infrastructure development such transit would require. Increased connectivity was further projected to strengthen bilateral trade. The framing was decidedly optimistic—transit was not presented as a one-sided favour but as a shared platform of mutual advantage for both countries.

So what was the result? Did anything change? In the short term, the answer is yes—but only for India. For Bangladesh, the gains have been far more limited. The trade deficit between Bangladesh and India has not significantly reduced. Bilateral trade in FY 2023–24 amounted to USD 14.01 billion; Bangladesh managed to export only USD 1.97 billion, while its imports from India totalled USD 12.00 billion.

In April 2025, India halted the transshipment arrangement used by Bangladesh to export cargo to third countries via its land borders. Bangladesh’s garment industry, the backbone of its export sector, has been hit particularly hard by India’s unilateral decision.

This naturally raises the question: why has Bangladesh not been able to sell more to India? Although Bangladesh enjoys duty-free, quota-free access on various goods under SAFTA—excluding alcohol and tobacco—Bangladeshi exporters continue to face barriers in the Indian market. These barriers now extend beyond sanitary requirements, encompassing port delays, state-level taxation, and administrative red tape.

Recent restrictions have barred several Bangladeshi products from entering through any land port—including bleached woven cloth made from synthetic fibres, jute twine and ropes, and jute sacks—which are now allowed entry solely through Mumbai’s distant Nhava Sheva Seaport. This comes after a series of restrictions over the past six months on clothing and apparel items, with India currently prohibiting seven categories of Bangladeshi goods at 13 land ports, forcing exporters to rely on more expensive sea routes.

Jute and RMG exporters risk losing competitiveness, as shipping to Mumbai increases costs more than sixfold. Although India justifies these restrictions as measures to protect its domestic industries, they also show how readily its trade policies can shift when internal pressures rise. Bangladesh, meanwhile, continues to uphold its transit commitments without interruption, underscoring a deliberate and long-standing imbalance in the way the two countries conduct their bilateral trade. Considering all this, one must ask: why maintain an agreement that appears so unfavourable?

Bangladesh–India relations have long operated within an unequal institutional framework, a pattern that became even more pronounced during the previous regime. Issues such as transit, security cooperation, power imports, and water diplomacy were rarely managed through balanced, formal mechanisms; instead, they were shaped by political signalling, uneven expectations, and a sense of obligation rather than reciprocity.

Going back to Ayesha — And what her story means for policy

Ayesha is only one among many small exporters working out of modest warehouses, trying to hold together a fragile supply chain that supports her family, her employees, her craftspeople, and the suppliers who depend on her orders. Now, however, she finds herself struggling to keep her business alive as India moves to shield its domestic industries and export market. The question before Bangladesh is how it intends to safeguard its own exporters in this changing landscape.

Issues such as transit, security cooperation, power imports, and water diplomacy were rarely managed through balanced, formal mechanisms; instead, they were shaped by political signalling, uneven expectations, and a sense of obligation rather than reciprocity.

If India’s new transit regime prioritises its internal market over regional commitments, Bangladesh must adopt a similarly clear-eyed approach—not by rejecting cooperation, but by refusing to accept arrangements that entrench structural imbalance. This means treating transit as a commercial service rather than a diplomatic concession, and ensuring that Indian cargo moving across Bangladeshi territory pays according to the real economic, environmental, and security costs involved. It also demands genuine operational reciprocity; for example, if Indian trucks can move freely through Bangladesh, Bangladeshi trucks must be granted the same access in India.

In addition, Bangladesh will need to address the question of non-tariff barriers in a constructive manner by ensuring that future trade and transit agreements include clear, mutually agreed mechanisms for reducing non-tariff barriers over time. Enhancing negotiation capacity is also essential, which calls for the establishment of a dedicated Transit and Trade Commission comprising economists, legal experts, environmental planners, and geopolitical analysts. Finally, Bangladesh may use this juncture as an opportunity to engage India in renewed dialogue that reflects the interests of both countries, while remaining aligned with Bangladesh’s own national priorities.

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S M Abir Hossain is a research assistant and Jahid Hossain is a research intern at the Dacca Institute of Research and Analytics (daira)

SOURCE : thedailystar