Originally posted in Dhaka Tribune on 10 April 2025
India cancels transshipment facility: What impact will it have on Bangladesh’s economy?
This happened on the same day the US imposed extra tariffs on Bangladeshi products, worsening the pressure on exporters
India canceled a key transit route that allowed Bangladesh to export goods through its land and sea ports. Photo: Bangla Tribune.
On the same day that the United States imposed additional tariffs on Bangladesh, its neighboring India canceled the long-standing transshipment facility that allowed Bangladesh to send export goods to third countries.
This move has raised concerns among Bangladeshi businessmen and economists, who fear it will pose new challenges to the country’s commercial transportation system. With businesses already under pressure from the US tariffs, this decision is seen as another major obstacle. There are concerns that Bangladesh will now have to face more expensive, time-consuming, and uncertain transportation routes. In particular, this decision has created a new challenge for exporters trying to access Southeast Asian, Central Asian, and European markets.
Previously, Bangladesh could send goods at a lower cost and faster speed to nearby countries using Indian land ports. Especially through the Petrapole and Benapole borders, it was easier and more affordable to send goods to third countries via India’s land and sea ports. Now that route is closed, Bangladesh must turn to alternative routes—like sea or air—which will increase both time and cost.
Experts warn of competitive threats
Experts believe that this decision will threaten the competitiveness of Bangladesh’s export sector. Sectors like garments, leather goods, light engineering, and pharmaceuticals require fast and reliable delivery. Extra time and cost could result in the loss of market share for Bangladeshi exporters.
Business community’s concern
Mohiuuddin Rubel, former director of BGMEA and managing director of Bangladesh Apparel Exchange, said:
“This decision came at a time when Bangladeshi exporters are already under pressure due to the US tariffs. It’s a new blow for our businesses.”
He added: “We received this decision during a period of rising pressure in commercial relations and the overall economic environment. Such a decision could add further complications to the country’s commercial transport system.”
Although Rubel said the decision might not cause serious economic damage immediately, he warned it could affect bilateral relations between India and Bangladesh.
He told Bangla Tribune: “The timing of India’s decision is quite significant, especially when the US has imposed retaliatory tariffs and there are political tensions between the two countries. It is somewhat surprising.”
Rubel further noted: “As a WTO member, we did not expect such a situation. As a neighboring country, this decision from India poses a challenge for us.”
He believes this decision will raise new questions about bilateral relations, particularly at a time of rising commercial and political tensions.
Potential economic impact
According to WTO rules, landlocked countries must be provided with free and uninterrupted transit facilities. However, India’s cancellation of this facility may hinder trade and transportation between Bangladesh and its neighboring countries like Bhutan, Nepal, and Myanmar.
Dr Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD), said: “India’s decision could significantly obstruct Bangladesh’s export flows, which may harm regional trade in the future.”
Impact on regional trade and diplomacy
Analysts believe that India’s move is not just a commercial issue for Bangladesh but also has diplomatic implications. This decision could create a major obstacle to expanding mutual trade among South Asian countries. For Bangladesh, it represents a crisis that could worsen disputes with neighboring countries over regional trade relations.
Dr Fahmida Khatun added: “The cancellation may disrupt Bangladesh’s export flows—especially for goods that travel via Indian gateways.”
She also said: “This decision could create hurdles in our commercial transport systems, particularly with neighboring countries like Bhutan, Nepal, and Myanmar, which are heavily dependent on India’s infrastructure.”
According to Dr Khatun, WTO rules require member states to ensure unrestricted transit for landlocked countries. India’s decision may lead to future challenges for Bangladesh in regional trade. Although the transshipment system via India was not heavily used so far, it had the potential to become more important in the future.
Symbolic but significant move
Former BGMEA president and prominent entrepreneur Dr Rubana Huq commented that while India’s announcement may not cause immediate disaster, it is a setback to future regional prospects.
She said: “Bangladesh has always prioritized direct sea shipment. So far, transshipment through India hasn’t been widely used, so there may not be a major direct impact on current exports. But this definitely hurts our intraregional trade potential.”
According to Rubana Huq, India’s transshipment facility could have been significant in expanding mutual trade and alternative transport routes in South Asia. Now that this option is closed, it may be difficult to capitalize on those future opportunities.
She added: “At this moment, it’s essential for us to increase our port capacity, look for alternative export routes, and build a new framework for regional cooperation. We can also see this situation as an opportunity.”
Business leaders’ proposal: Need for alternative export routes
University professor and former BGMEA president Dr Rubana Huq said: “India’s decision is not just a crisis for Bangladesh—it can also be an opportunity to explore alternative ways for export management. We must expand our port capacities, create new export routes, and establish fresh regional cooperation frameworks.”
Experts believe that while India’s decision may pose a challenge for regional cooperation, it also offers Bangladesh a chance to adopt new strategies. Alongside increasing port capacity, adopting strategic plans for alternative export routes has become essential. Through this, Bangladeshi businesses can focus on broader regional cooperation and international trade networks.
Toufiqul Islam Khan, Senior Research Fellow at CPD, said: “The economic impact of India’s decision is less significant than its effect on regional relations.”
He added: ‘It was already important to establish strong relationships among the countries in this region, but that didn’t exist. India’s decision will negatively impact regional relations and cultural ties, which could lead to greater crises in the future.”
“This is not just a commercial decision—it’s a major obstacle to regional diplomacy and cooperation.”
He emphasized that both countries have long shared economic and cultural ties, and maintaining smooth trade flows is vital for both sides.
He also noted that in today’s rapidly changing global market, both countries need a cooperative approach so that neither’s growth or development is harmed.
The path forward: Joint action needed
Experts say that to tackle the challenges posed by the cancellation of India’s transshipment facility and the US tariff hikes, joint action by both businesses and the government is crucial.
They recommend alternative measures, such as increasing the capacity of Chittagong and Mongla ports, improving coordination in port transport, and renegotiating bilateral or regional agreements with neighboring countries. They also suggest updating Bangladesh’s export strategy and focusing on market diversification to ensure the resilience of the export sector.