April 17, 2025
DHAKA – India’s withdrawal of the transshipment facility for Bangladesh—which allowed Bangladeshi exports to reach third countries through India—could potentially cause a significant setback in bilateral relations between the neighbouring nations. Launched in 2020, the facility had allowed Bangladeshi goods, particularly RMG, to move through Indian land to reach their global destinations, thereby enhancing trade efficiency and saving costs.
Undoubtedly, the abrupt withdrawal of this facility, without a phase-down period, undermines the progress made in bilateral trade facilitation over the past few decades. The experience also highlights the exposed nature of South Asian regional cooperation and the need for resilient, mutually reinforcing and beneficial trade arrangements that can withstand political and economic shocks. In fact, South Asia has already been ranked as the least economically integrated region in the world, with intra-regional trade constituting only 5 percent of the region’s total trade volume, compared to ASEAN’s 25 percent, North America’s 40-50 percent, and the European Union’s 60-65 percent. The low degree of integration has been caused by a legacy of perceived political tensions, divergent perceptions on bilateral and mutual security affairs, absence of infrastructure, and non-tariff barriers, which have been stifling regional trade potential for the past couple of decades.
The recent withdrawal by India also does not help alleviate diplomatic tensions that have been brewing between Bangladesh and India for some time. In the aftermath of the unexpected political shift in Bangladesh on August 5, 2024—which saw the fall of the Awami League-led government through a student-led democratic uprising—the bilateral relationship entered a new phase of uncertainty. A notable manifestation of this transition was the visible rise in acrimonious rhetoric, a proliferation of misinformation from the Indian media, and an uptick in nationalistic posturing from various quarters in both countries. However, the strategic imperatives and the socio-economic interdependencies that underpin the relationship between the neighbours continue to provide a strong justification for recalibrating bilateral engagement through dialogue, diplomacy, and pragmatic cooperation.
Bangladesh-India’s deep historical linkages—particularly the role India played during the 1971 Liberation War—serve as a strong basis for sustained cooperation, especially in areas such as cultural exchange, people-to-people connectivity, and trade. The geographical contiguity and ethnic ties across the borders further cement the relationship, facilitating an exceptional level of social interaction uncommon elsewhere in South Asia. Additionally, the two countries share a wide range of mutual interests in domains including disaster management, basin-wide river management, forest conservation, cross-border security, and marine resource governance. Yet, despite these historical and structural advantages, the relationship is not without its complexities. Periodic border skirmishes and killings, water-sharing disputes, and unresolved political sensitivities have, at times, strained this strategic partnership. The current phase, marked by the political transition in Dhaka, is one such inflection point where diplomacy must be agile and empathetic. Several issues, such as cross-border killings, the long-pending Teesta water-sharing agreement, and the status of former Prime Minister Sheikh Hasina—now residing in India—have become flashpoints, complicating the diplomatic environment.
In such a fraught context, it remains imperative to separate state-level policies from populist or partisan narratives. The volatility of the current moment, while challenging, also offers an opportunity: a chance to reassess and reinvigorate bilateral relations based on shared interests and mutual respect.
Against this backdrop, one noteworthy development was the meeting between the Chief Adviser of the Bangladesh interim government Professor Dr Muhammad Yunus and Indian Prime Minister Narendra Modi on the sidelines of the BIMSTEC Summit on June 4 in Thailand. This represented a diplomatic milestone. The unexpected nature of this engagement, being the first high-level dialogue since the regime change in Dhaka, made it particularly significant. The meeting not only provided a platform for a direct exchange of views but also symbolised a mutual willingness to acknowledge the complexities at hand. While the public statements issued by the Ministry of Foreign Affairs of Bangladesh and India’s Ministry of External Affairs appeared to diverge in tone and emphasis, the very act of dialogue signalled a step towards constructive engagement. The Bangladeshi side reportedly prioritised concerns over border violence, water-sharing issues, and the call for the extradition of Sheikh Hasina. Meanwhile, India expressed concerns over regional security, particularly the rise of extremist forces and the persecution and protection of minorities in Bangladesh. Despite these divergent priorities, both sides acknowledged the necessity of continued dialogue—a crucial step towards building a conflict-resilient diplomatic framework.
Another important factor in increasing dialogue and cooperation between the two nations is the security dynamics of Eastern South Asia, which highlight the necessity for close cooperation between Dhaka and New Delhi. The rise of the Arakan Army along the Bangladesh-Myanmar border, the protracted Rohingya refugee crisis, and the latent threat posed by non-state insurgent actors represent shared security challenges. These threats are transnational in nature and cannot be effectively addressed in isolation. Political and security cooperation, underpinned by mutual recognition of each other’s sovereignty and core interests, becomes not just desirable but essential. The current instability in Myanmar, combined with the potential for radicalisation among displaced communities, has the capacity to destabilise the broader Bay of Bengal region. A robust, trust-based Bangladesh-India partnership is therefore a critical pillar in ensuring regional peace and stability.
A defining feature of Bangladesh-India relations over the past two decades has been the development of multi-tiered institutional frameworks for dialogue and cooperation. These include joint working groups, border management coordination mechanisms, and shared intelligence platforms. Reinvigorating these structures in the current political climate is vital for managing misunderstandings, preventing escalation, and fostering predictability. However, rebuilding the structures to better bilateral relations must follow a new template—not that of the past regime, whose cooperation between the two nations served India’s national and economic interests in a lopsided manner. Bangladesh’s chief adviser has reiterated that rebuilding the relations must be done to benefit both nations equally.
Moreover, a key challenge in the digital age is the weaponisation of information. The spread of disinformation and fabricated narratives through social media has emerged as a potent destabilising force, fuelling mistrust and animosity at the grassroots level. Even after the meeting between the two leaders, hostile rhetoric in sections of the Indian media has continued towards the current government of Bangladesh. Both governments must prioritise cyber diplomacy and information hygiene by establishing fact-checking protocols, digital literacy campaigns, and cross-border communication frameworks to combat this emerging threat.
The present uncertainty in Bangladesh-India relations, while concerning, also offers a rare opportunity to redefine the terms of engagement, and it is imperative that both nations seize it. The political transition in Bangladesh has altered the dynamics of bilateral diplomacy, but it has not diminished the strategic logic that binds the two nations. In fact, the challenges of the current moment underscore the need for more—not less—engagement. The Yunus-Modi meeting serves as a beacon of cautious optimism, a reminder that even in moments of political flux, diplomacy can prevail. To ensure a stable and prosperous South Asia, it is imperative for both nations to transcend short-term disagreements and invest in a long-term, cooperative framework grounded in mutual respect, historical solidarity, and shared aspirations. Only through sustained dialogue, robust institutional cooperation, and an unwavering commitment to truth and transparency can Bangladesh and India chart a course through this testing time and emerge with a stronger, more resilient partnership.