India has officially withdrawn the transshipment privilege that permitted Bangladesh to send goods to other nations

Transshipment Agreement

Established in 2020 by India’s Central Board of Indirect Taxes and Customs (CBIC), this agreement was designed to improve regional connectivity and foster trade collaboration.

Through this arrangement, cargo from Bangladesh was permitted to transit through Indian Land Customs Stations (LCSs) on its way to various ports and airports. This process streamlined trade for Bangladeshi exports to markets in Europe, West Asia, and beyond.

What led to its revocation?

• India cited logistical difficulties as the main reason for discontinuing the arrangement.
• The transshipment agreement caused considerable congestion at Indian airports and ports.
• This congestion led to delays, increased expenses, and backlogs that adversely affected India’s own export operations.
• The decision is anticipated to have a significant effect on Bangladesh’s trade logistics and costs, especially for exports aimed at Western markets.

Key Aspects of India-Bangladesh Relations

Independence and Liberation War: India was instrumental in Bangladesh’s independence in 1971, providing support to the Bengali nationalist movement against Pakistani rule.

This pivotal moment established a strong foundation for bilateral relations.

Land Boundary Agreement (LBA): In 2015, both nations addressed long-standing border disputes by exchanging enclaves and simplifying their international boundary, which had remained unresolved since the 1947 partition.

Connectivity: Five rail links that existed prior to 1965 have been restored between India and Bangladesh. Currently, three railway services operate between the two countries: Maitri Express, Bandhan Express, and Mitali Express.

The launch of the Akhaura-Agartala cross-border rail link represents a significant advancement in enhancing connectivity between northeastern India and Bangladesh.

Economic Relations: Bangladesh stands as India’s largest trade partner in South Asia, while India ranks as Bangladesh’s second-largest trade partner in Asia.

The total trade volume for FY24 reached US$ 12.90 billion, with India’s exports to Bangladesh amounting to US$ 11.06 billion during the same fiscal year.

Trade Agreements: Both nations participate in several regional trade agreements, including the Asia Pacific Trade Agreement (APTA), the SAARC Preferential Trade Agreement (SAPTA), and the Agreement on South Asian Free Trade Area (SAFTA), which regulate their tariff structures for trade.

Regional Cooperation: The countries are engaged members of regional organizations such as SAARC (South Asian Association for Regional Cooperation) and BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation), fostering regional integration and collaboration.

Joint military exercises are conducted between the two nations, including Exercise Sampriti (Army) and Exercise Milan (Navy). In the energy sector, Bangladesh relies on India for nearly 2,000 megawatts of electricity.

Challenges:

Border Issues: Despite the resolution of many long-standing border disputes through the Land Boundary Agreement in 2015, occasional challenges related to border security and illegal crossings continue to affect bilateral relations.

Water Sharing: Ongoing disputes regarding the equitable sharing of shared rivers, particularly the Teesta River, remain unresolved.

Trade Imbalance: Although trade between India and Bangladesh has increased significantly, a trade imbalance persists, with India exporting more to Bangladesh than it imports, leading to economic tensions and protectionist responses.

Cross-Border Migration and Demographic Shifts: Historical and undocumented migration from Bangladesh to Indian states such as Assam and West Bengal is a politically sensitive topic.

Security Concerns: Issues surrounding border security, cross-border smuggling, and sporadic incidents involving extremist groups present security challenges for both nations, necessitating ongoing cooperation and vigilance.

China’s Growing Influence in Bangladesh: The strengthening of Bangladesh's ties with China, especially in infrastructure and defense, raises strategic concerns for India, which views this development as a potential threat to its strategic interests.