India’s Diplomatic Move: Bangladesh Loses Key Transshipment Facility Samvada World

The termination of the facility forces exporters from Bangladesh to use more costly and longer duration shipping methods that could lead to estimated 20–30% higher logistics expenses.
The decision made by India to revoke the transhipment facility emerges from ongoing geopolitical transformations affecting the region and broader developments worldwide.
The long-term implication of this development requires Dhaka to create multiple trade channels since it cannot depend exclusively on Indian infrastructure.

The decision by India to end Bangladesh’s transhipment facility starting from April 8, 2025, creates a critical turning point in South Asia’s economic relations. Since 2020, the facility has enabled Bangladesh to send its exports to third nations through Indian ports and airports while decreasing costs and transit time for Bangladesh’s exporters. Terminating this service will create long-term consequences that will affect Bangladesh’s economic status, regional trade relations, and geopolitical standing.

Economic Implications for Bangladesh

Increased Export Costs and Logistical Challenges

The shutdown of transhipment services will generate significant financial problems for Bangladesh’s exports. The ready-made garment (RMG) industry represents more than 80% of Bangladesh’s export volume, thus becoming the principal industry affected by this decision. Bangladeshi exporters relied on Kolkata port altogether with the usage of Indira Gandhi International Airport in Delhi for the transhipment of their exports to Europe and North America. Using these ports and airports cuts transportation periods and expenses below what other routes from Sri Lanka or Singapore could offer.

The termination of the facility forces exporters from Bangladesh to use more costly and longer duration shipping methods. Using Colombo Port or similar hub ports in the region could lead to estimated 20–30% higher logistics expenses for shipping. The increased shipping expenses may result in diminishing Bangladeshi product price competitiveness on worldwide markets, most noticeably in the highly competitive apparel industry. Timely delivery service standards remain critical for fast fashion industries because missed deadlines may force customers like Zara and H&M to cancel orders and choose different supply partners.

Erosion of Competitive Advantage

The termination of the transhipment facility creates widespread effects for Bangladesh’s status as a global trading nation. The move made by India will enhance its export sectors by creating additional space for its shipments at facilities that previously handled Bangladesh’s products. The sectors of textiles, pharmaceuticals, and gems will experience better airfreight possibilities as well as less congestion, leading to enhanced opportunities for Indian exporters. This may result in Indian exporters stepping up their market competition in the European Union and the United States markets.

Bangladesh is currently competing intensely with Vietnam and Cambodia as well and Ethiopia in the global apparel market expansion. The additional expenses coming from India’s decision would threaten to reduce Bangladesh’s share of the market.

Geopolitical Dimensions

Strategic Context of India’s Decision

The decision made by India to revoke the transhipment facility emerges from ongoing geopolitical transformations affecting the region and broader developments worldwide. The Indian decision emerged after Muhammad Yunus gave controversial comments during his March 2025 Chinese visit. India perceived Yunus’s mention of the northeastern states as “landlocked” to be offensive because he advocated for China to increase its economic involvement in those territories during his trip to China in March 2025.

The quick Indian action demonstrates New Delhi’s awareness about Chinese moves into areas that it considers to be under its strategic control. The Belt and Road Initiative of China has led Bangladesh to establish strong economic bonds through major infrastructure development projects since the beginning of the last decade. Dhaka continues to maintain balanced diplomatic relations with China and India, yet it appears to favour Beijing more in recent times, which generates concern for New Delhi. India uses this shutdown as a visible expression of its unwillingness to permit actions that threaten its position as the dominant power in the area.

Impact on Regional Trade Relations

The closure of this facility creates effects on trade integration efforts in South Asia. India guarantees Bangladeshi exports heading toward Nepal and Bhutan through its territory, but the essential trade route blockage works against regional partnership advancement within the BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation). The operation violates World Trade Organization (WTO) mandates about transit freedom for landlocked states, which could lead international trade bodies to take notice.

The economic relationship between Nepal and Bhutan with third countries through Indian infrastructure will become strained when India chooses to promote self-exporting activities rather than support regional transits. The development presents extra barriers to South Asian economic integration since this region shows low intra-regional trade numbers in comparison to global trading areas.

Long-Term Repercussions

Shift Toward Alternative Routes

To adopt a new trans-shipment route for Bangladesh would require port access in Sri Lanka or Myanmar. Although these alternative routes present notable difficulties for use. The Colombo Port currently reaches its maximum capacity because neighboring South Asian countries drive rising demand yet Myanmar’s unstable political climate creates long-term trade facility risks.

The government of Bangladesh plans to speed up development initiatives for its two domestic seaports located in Chittagong and Mongla. Although these ports possess scope for recent improvements, their capacity and operational effectiveness do not match requirements for handling large volumes of export cargo bound for remote markets. The development of viable alternatives from these facilities necessitates major financial support combined with advanced technical capabilities.

Domestic Economic Pressures

The updated logistical arrangement following India’s policy shift will elevate expenses that might burden Bangladesh’s financial system during its present economic complications, including rising inflation, depleting foreign exchange reserves and decelerated GDP development. The RMG sector supports millions of employees, risking employment reductions because decreased export demands result from higher shipping fees as well as deteriorating market competitiveness.

Export-oriented small- and medium-sized enterprises within supply chains face major hurdles because they cannot cover increased logistics costs. The economic diffusion throughout the system would impact job positions, followed by house income distributions in the country.

Conclusion

The cancellation of India’s trans-shipment facilities for Bangladesh indicates a substantial change in their bilateral relations, which has substantial economic effects while affecting geopolitical standing. Higher export costs combined with logistical difficulties will create reduced competitiveness in global markets, as the direct effect of this change for Bangladesh. The long-term implication of this development requires Dhaka to create multiple trade channels since it cannot depend exclusively on Indian infrastructure.

Furthermore, the move shows rising tensions between India and Bangladesh because Dhaka strengthens its diplomatic relations with China. The evolution of South Asian dynamics necessitates that South Asian nations strengthen diplomatic efforts while maintaining economic partnership through their common interests. For Bangladesh to succeed in its new national circumstances, the country needs strategic investments in additional infrastructure while also reconsidering its diplomatic objectives.

References: