India’s tricky balancing task in the Bay of Bengal

• India’s economic engagements in the Bay of Bengal are gaining momentum, with increased trade volumes through India’s eastern ports.

• The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Maritime Transport Cooperation Agreement aims to ease regulatory frictions and reduce port costs.

• However, India withdrew the transshipment facility it had granted to Bangladesh in April, causing concern in Dhaka.

• The move was seen as an assertion of Indian disapproval, possibly linked to Bangladesh’s recent diplomatic overtures towards China.

• India has invested heavily in port infrastructure through the Sagarmala programme to improve coastal logistics and connectivity.

• The BIMSTEC Maritime Transport Cooperation Agreement aims to harmonise customs procedures and foster multimodal linkages, reducing the cost and friction of trade within the Bay.

• The rollback of Bangladesh’s transshipment facility has reintroduced conditionality into the neutral economic architecture, affecting exporters, particularly in the ready-made garment sector.

• Tensions have escalated with India placing restrictions on the import of seven categories of Bangladeshi goods, raising costs and delays.

• The issue is about credibility, as India’s port infrastructure remains the most extensive and efficient in the region.

• The Bay of Bengal is at an inflection point, with improved connectivity potentially emerging as a self-sustaining corridor between South and Southeast Asia.

• India could clarify the circumstances under which the transshipment arrangement with Bangladesh might be reinstated or replace it with a rules-based mechanism that insulates trade from political cycles.