Land port restrictions and the Kaladan project: Is bilateral trade between India and Bangladesh falling apart?

India's abrupt imposition of restrictions on the import of seven categories of Bangladeshi goods through land ports — effective from 17 May 2025 — has sent ripples across trade circles and raised concerns for our exporters. 

The latest trade restrictions also appear to align with its broader geopolitical calculus to reduce reliance on Bangladeshi transit routes by operationalising the Kaladan Multi-Modal Transit Transport Project. 

The long-delayed corridor connects India's eastern seaport of Kolkata with its landlocked Northeast via Myanmar's Sittwe port, the Kaladan river and a highway to Mizoram. Though significantly more expensive and complex than traditional overland routes through Bangladesh, India views Kaladan as a strategic alternative to the vulnerable Siliguri Corridor and, increasingly, to Bangladeshi cooperation itself — especially following the regime change in Dhaka. 

The convergence of these two developments marks a deeper strategic recalibration: While Bangladesh reels from immediate trade losses and disrupted supply chains, India is laying the groundwork for long-term transit autonomy through Myanmar. 

At stake is not only economic cooperation but the future of connectivity and influence in South Asia, where shifting alliances, retaliatory trade policies and infrastructure diplomacy are rapidly redrawing regional trade dynamics.

The impact on Bangladeshi exporters 

Trade between the two countries stood at roughly $13 billion in FY2023–24, with Bangladesh exporting about $2 billion worth of goods to India, according to data by the Export Promotion Bureau (EPB). 

India's exports to Bangladesh remain more than four times higher, giving it a large and persistent trade surplus. The new restrictions not only threaten to further widen this imbalance, but also risk eroding years of progress made through regional trade liberalisation efforts. 

The most immediate and severe impact has been felt by Bangladesh's garment sector, which constitutes the single-largest component of the country's exports to India. EPB data shows Bangladesh exported garments worth $563.81 million to India between July and April of FY2023–24, marking an 18.85% year-on-year increase. Nearly 93% of those shipments moved through land ports. 

"With a lot of challenges, trade between India and Bangladesh has reached above $10 billion and just as we are at the cusp of doing great things, we are again going down," Indian outlet The Hindu wrote recently, citing a diplomatic source. 

The restriction has left exporters scrambling to reroute consignments. Over 100 trucks, already en route to India, were stranded at ports like Benapole, Burimari and Banglabandha, with some forced to return. At Burimari Land Port, approximately 80 trucks carrying goods were stopped in a single day, and similar scenes were reported from Akhaura and Banglabandha. 

Exports have halved in two days through Benapole. 

Mostafizzohar Selim, office secretary of the Benapole C&F Agents Association, said that the sudden decision to impose a ban is weakening trade relations between the two countries. "Both Bangladeshi and Indian businesses are suffering losses as a result," he stated.

Meanwhile, not a single truck carrying garments was able to enter India on 19 May. 

He added, "More than a hundred trucks carrying goods that now fall under the restrictions have been left in limbo, with many eventually forced to turn back from the Benapole land port. With two consecutive bans on exports in the span of just one month, traders on both sides are now facing significant financial losses." 

PRAN-RFL Group, one of Bangladesh's top processed food exporters to India, is particularly vulnerable: It exports approximately $50 million worth of consumer products annually, about two-thirds of which are sold in India's northeastern Seven Sister states. 

With the five ports closest to these markets now effectively closed to Bangladeshi goods, PRAN and other exporters face a logistical nightmare — shipping items 1,200 kilometres from Kolkata to cities like Agartala or Guwahati via road and rail. The journey that used to take a day by truck, now stretches to 10–20 days at significantly higher cost. 

In a previous interview with TBS, Kamruzzaman Kamal, director of Marketing at PRAN-RFL Group, said the new route would take at least 10 to 20 days, compared to just one day via land ports. 

"Since Indian importers bear the transport costs after the goods cross the border, the added expenses could affect the competitiveness of Bangladeshi products in the Indian market," he added. 

RFL Group reported that 17 trucks carrying over $100,000 worth of processed food were stranded across multiple ports.

Dr Zahid Hussain, the former lead economist of the World Bank's Dhaka office, thinks that the restrictions have struck Bangladeshi exporters in two main ways. 

"Firstly, it is going to cost more to export; secondly, it is going to take more time. Many of the exporters cannot afford it," he said. 

"We need to open dialogues and negotiations to find a suitable solution. It is not like we are the only ones being hurt by the restrictions. Bangladeshi supplies to India's Northeast have a regional and economic rationale that benefits both sides. Tit-for-tat strategy will do more harm than good," he added. 

Why is India so eager to bypass Bangladesh?

India's decision to advance the Kaladan Multi-Modal Transit Transport Project (KMMTTP) — a logistically challenging, diplomatically complex, and militarily sensitive infrastructure corridor through Myanmar — is not merely about strategic redundancy. 

It is, increasingly, a signal of Delhi's shifting perception of Bangladesh as a less reliable partner under its current transitional government and about giving Dhaka a message that the Northeast is not a "captive market" of Bangladesh. 

While Dhaka has long been viewed as a vital transit bridge to the Northeast, recent regime changes and geopolitical recalibrations have prompted India to hedge its connectivity bets — even at greater financial and political cost.

The turning point for India's posture toward Bangladesh came with the departure of Prime Minister Sheikh Hasina, a staunch ally of Delhi, who granted India unprecedented access to Bangladeshi territory for connectivity projects, including transshipment of goods, road and rail access to Agartala, and coastal shipping initiatives.

Graphics: TBS

However, her fall from power marked a perceptible shift. Unlike Hasina's Awami League government, the Yunus-led interim regime has prioritised regional balancing over India-first cooperation. 

This includes greater openness toward Chinese investments and a more cautious approach to cross-border infrastructure involving India. The political climate in Dhaka has also become more nationalist, with growing opposition sentiment demanding greater scrutiny of foreign access to Bangladeshi territory.

For Delhi, this shift has practical consequences. It raises doubts about whether future Bangladeshi governments — elected or interim — would continue to grant India the same level of access to roads, railways and inland waterways. 

Tanbirul Miraj Ripon, a journalist who has extensively covered the Rohingya crisis and the Arakan conflict, thinks that the erosion of political trust has pushed India to explore routes that lie fully within its control or that of weaker regional actors. 

Perhaps the most intriguing — and riskiest — element of India's Kaladan equation involves its quiet accommodation of the Arakan Army, the ethnic armed group that effectively controls large parts of Rakhine State. While officially designated as a terrorist organisation by Myanmar's junta, the Arakan Army has emerged as a de facto authority in the region, with its own local administration, tax system and courts.

"The problem is that the Arakan Army is highly unlikely to be recognised as a legitimate force in the region. So, relying on them to ensure the security of the Kaladan Project may not be a wise decision for India," Ripon said. 

"Because, in Rakhine, the Chinese presence also creates tensions for India. An important concern for India is that the AA illegally occupied Paletwa, Chin state. It creates anger among Chin people; Chin is close to the neighbouring state of Mizoram, and it's very complicated to have relations with them," he added.

India's planners are acutely aware that completing the Paletwa-Zorinpui road — the final and most critical leg of the Kaladan project — requires engagement with the Arakan Army. 

In fact, by 2023, reports had surfaced that the group had not only ceased obstructing the roadworks but was actively providing security for construction teams along stretches of the corridor. Spokespersons from the group even publicly stated that they support the completion of the project and see it as beneficial to the local population.

But how well the arrangement is going will be another murky discussion. 

Md Obaidul Haque, Associate Professor at the Department of International Relations, University of Dhaka, thinks that it will not be prudent for India to rely on the Arakan Army to secure the safety of the critical route.

Economically, Kaladan could unlock new supply chains. Goods from Northeast India could access the Bay of Bengal faster via Sittwe than going through Siliguri and then Haldia. However, the volumes are unlikely to justify the investment in the short term. 

Much depends on security in Rakhine and infrastructure readiness in Mizoram, which remains underdeveloped. Without a robust economic ecosystem on both ends, Kaladan risks becoming an underutilised "strategic vanity project".

Md Obaidul Haque said, "India has invested a significant amount in the Kaladan Project, and the plan has been pursued over many years. However, it will be hard to implement. Even today, the best option for India to reach the seven sisters is through Bangladesh." 

The Indian government has also greenlit a highway from Shillong to Silchar to complement the Kaladan route. However, the project risks antagonising Bangladesh. Dhaka sees India's reluctance to commit more openly to transit through Bangladesh as a sign of mistrust.  

"Given the two decisions, it seems like a way to gain a bargaining chip against Bangladesh," said Obaidul Haque. 

Dr Zahid Hussain emphasised the transnational framework to resolve the issue. 

"This is not something that can be solved bilaterally. If India does not want to depend on Bangladesh alone for fear that any arbitrary decision would impact them, then there are regional cooperation frameworks in place to ensure that one party cannot do that. That way, both countries can be reassured." 

In the long run, India's use of Kaladan will hinge on whether Myanmar stabilises and whether logistical costs can be brought down. As things stand, the maritime and riverine sections work, but the road remains the Achilles' heel. 

Unless Delhi can pacify or circumvent insurgent violence, the route will remain unreliable — hardly an attractive alternative for commercial logistics.

Thus, while strategically sound on paper, the Kaladan Project is not a fully viable alternative — yet. Any realistic regional connectivity strategy must therefore involve Bangladesh not as a contingency but as a core partner.