India's Economic Engagement in the Bay of Bengal

India's involvement in the Bay of Bengal is evolving with increased trade through its eastern ports, such as Visakhapatnam, Paradip, and Haldia. These developments have resulted in a steady growth of cargo throughput. The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Maritime Transport Cooperation Agreement aims to ease trade by reducing regulatory friction and port costs.

India-Bangladesh Transshipment Facility

• India recently withdrew a transshipment facility granted to Bangladesh, which allowed Bangladeshi exports to route through Indian ports.
• This withdrawal came as a response to Bangladesh's diplomatic moves toward China, perceived by India as a strategic hedging.
• The withdrawal impacts Bangladesh's export logistics, especially the ready-made garment sector, which heavily relies on cost-effective trade routes.

India's Strategic Positioning

India has been positioning itself as a regional integrator by investing in port infrastructure under the Sagarmala program and enhancing coastal logistics. This includes:

• Doubling cargo movement on the east coast over the past decade.
• Introducing policy changes like GST cuts on bunker fuel to promote coastal shipping.
• Reinvigorating BIMSTEC to harmonize customs procedures and reduce trade costs and frictions.

Impact on Regional Trade Dynamics

The withdrawal of the transshipment facility for Bangladesh is seen as a deviation from neutral economic architecture, which was intended to serve regional integration. The impact includes:

• Increased costs and delays for Bangladeshi exports, especially garments.
• Rising tensions as India imposes restrictions on Bangladeshi goods entering through land ports.

Geo-Political Implications

The move is perceived as India's political leveraging, shifting maritime trade from a shared infrastructure to a transactional domain. This has implications for India's standing in the region:

• India's port infrastructure remains superior, but credibility is essential as much as capacity.
• Neighboring countries may begin to hedge if trade facilitation appears politically motivated.
• India risks undermining regional cooperation by intertwining trade access with political intent.

Future Directions

The Bay of Bengal presents both an opportunity for enhanced connectivity and a vulnerability to strategic anxieties:

• A BIMSTEC free trade agreement could redefine regional trade patterns.
• India must balance strategic interests with fostering trust among neighbors.
• A rules-based mechanism to insulate trade from political cycles could restore confidence.

Expert suggests that drawing a clear line between economic policy and geopolitical preferences can help maintain regional trust.