India suspends shipping privileges for Bangladesh after Dhaka backs China’s northeast push

In a sharp diplomatic and strategic response, India has revoked a key transshipment facility for Bangladeshi export cargo following remarks made by Bangladesh's interim Chief Adviser, Professor Muhammad Yunus, during a recent visit to China that appeared to bolster Beijing’s strategic influence in Northeast India.

The Indian government's move — which could have sweeping implications for regional trade — was announced in a circular issued by the Central Board of Indirect Taxes and Customs (CBIC) on April 8. It rescinded a 2020 policy that had allowed Bangladeshi goods to transit through Indian Land Customs Stations (LCSs) to access ports and airports en route to third countries like Bhutan, Nepal, and Myanmar.

Yunus’ remarks: The flashpoint

The decision follows Yunus’s visit to China from March 26–29, where he positioned Bangladesh as the “only guardian of the ocean” for Northeast India, which he described as a “landlocked” region.
“This opens up a huge opportunity,” Yunus said, suggesting that the region could evolve into “an extension of the Chinese economy” — a statement widely perceived in Delhi as provocative and a potential challenge to India’s sovereignty and strategic interests.

The comments, seen as Dhaka signaling alignment with Beijing’s expanding regional agenda, triggered backlash across India. Assam Chief Minister Himanta Biswa Sarma slammed the remarks as “offensive” and underscored the fragility of India’s narrow Siliguri Corridor — the vital 22-km wide ‘Chicken Neck’ that links the Northeast with the rest of India.

Strategic and trade fallout

India's now-canceled transshipment facility had been a cornerstone of regional trade, streamlining cargo movements from Bangladesh to landlocked nations like Nepal and Bhutan via Indian infrastructure. According to the CBIC circular, while shipments already in transit will be processed under existing rules, all future access under this route has been withdrawn.
Ajay Srivastava, former trade official and head of the Global Trade Research Initiative (GTRI), said the move reflects India’s discomfort with Bangladesh inviting Chinese investments — notably the proposed revival of an airbase in Lalmonirhat, perilously close to the Siliguri Corridor. “India has supported Bangladesh’s trade interests for decades, including offering one-way zero-tariff access to its massive market. But national security appears to have taken precedence,” Srivastava noted.
This abrupt halt could severely disrupt Bangladeshi exporters, raising logistical costs and uncertainty, particularly for shipments destined for Bhutan, Nepal, and Myanmar. It may also hamper trade routes vital to Nepal and Bhutan, who rely heavily on Indian transit for cross-border commerce.

WTO commitments under scrutiny

The revocation raises broader questions about India’s adherence to its World Trade Organization (WTO) obligations. Article V of the General Agreement on Tariffs and Trade (GATT) 1994 mandates member nations to ensure freedom of transit for landlocked countries — a requirement further strengthened by the WTO Trade Facilitation Agreement (TFA), which calls for seamless, transparent cross-border trade procedures.

“While India has legitimate strategic concerns, it must also navigate the fine line between safeguarding its security and fulfilling its global trade commitments,” Srivastava warned.

Geopolitics at the crossroads

The latest friction underscores the growing influence of China in South Asia and the delicate balancing act India must perform in its neighborhood diplomacy. With Bangladesh seen as increasingly tilting toward Beijing — economically and strategically — India’s response is a clear message that trade facilitation cannot be taken for granted amid shifting regional allegiances.
As regional tensions rise, landlocked nations like Nepal and Bhutan could become unintended casualties, caught between two competing regional powers and vulnerable to the fallout of geopolitics intruding into trade corridors.