What Future for India-Bangladesh Connectivity?

Introduction

August 5, 2025, will mark a year since a student-led uprising reshaped Bangladesh’s political future. The ‘monsoon revolution’ of 2024 resulted in the ousting of Prime Minister Sheikh Hasina after 15 years in power. Nobel Laureate, Prof. Muhammad Yunus, stepped in as Chief Advisor to the interim government. The effects of this transition have been felt closely in the South Asian region, particularly by India, Bangladesh’s closest neighbour.

Once at the core of India’s ‘Neighbourhood First’ and ‘Act East’ policies, Bangladesh was the largest recipient of Indian Lines of Credit (US$ 7.2 billion), among the top-five export destinations in Asia, and the largest source of India’s tourist exports. It was also a vital link in New Delhi’s regional connectivity ambitions, with road, rail, energy, and digital networks being stitched together across borders with Dhaka as a willing partner.

However, in the past year, political turbulence has affected this momentum. Bilateral ties have grown unpredictable. Non-tariff barriers have crept in, stalling trade flows and frustrating businesses on both sides. Connectivity linkages have been disrupted, with trade and transshipment rights suspended. The unease in bilateral relations deepened with the inaugural China-Pakistan-Bangladesh trilateral summit in Kunming on June 19, 2025. For New Delhi, the symbolism of that meeting was hard to ignore. Bangladesh’s growing comfort with Beijing and Islamabad presents a strategic and economic challenge for India, particularly for the connectivity projects.

That said, all is not lost. New Delhi recently provided medical support for burn victims in the tragic air crash in Dhaka. Earlier, Dhaka had extended ‘mango diplomacy’ and both countries exchanged Eid greetings. This offered a sliver of thaw in an otherwise frosty year. But the hard truth remains that until a permanent government takes charge when elections are held in Bangladesh, relations between the two countries will likely remain politically difficult. India’s challenge is not just to wait for political stability in Dhaka, but to adapt.

…until a permanent government takes charge when elections are held in Bangladesh, relations between the two countries will likely remain politically difficult. India’s challenge is not just to wait for political stability in Dhaka, but to adapt.

Against this backdrop, this blog explores how India can work towards functional connectivity with Bangladesh after elections are held. To influence the future contours of connectivity with Bangladesh, India must act now. From recalibrating its regional strategy to leveraging subnational channels, this blog outlines four actionable pathways for New Delhi to keep the connectivity agenda pragmatic.

Current state of connectivity projects

After investing heavily towards multi-faceted connectivity with Dhaka during a phase of relations that was described as “Sonaali Adhyay” (golden chapter), bilateral relations witnessed a tumult. Connectivity projects both physical like railway lines, and ones related to digital connectivity have been stalled and indefinitely suspended in many cases (Table 1).

Recent developments have underscored the extent to which cross-border connectivity and economic integration in South Asia remain highly susceptible to political relations. For India, the experience with Bangladesh illustrates that even well-structured connectivity and trade initiatives can be compromised when bilateral political trust is eroded.

Recent developments have underscored the extent to which cross-border connectivity and economic integration in South Asia remain highly susceptible to political relations. For India, the experience with Bangladesh illustrates that even well-structured connectivity and trade initiatives can be compromised when bilateral political trust is eroded.

Tensions began to overtly surface following India’s decision to provide political refuge to the former Bangladeshi Prime Minister Sheikh Hasina. While initial diplomatic friction was anticipated, a series of subsequent measures and public statements from Bangladesh’s interim administration, particularly concerning trade and connectivity, have further strained the relationship. A notable inflection point was the statement made by Chief Advisor Prof. Muhammad Yunus during a visit to China in March 2025, wherein he referred to India’s Northeast region as landlocked and promoted Bangladesh as the “only guardian of the ocean for all this region.” In April, India withdrew transshipment rights previously granted to Bangladeshi goods transiting through Indian territory. Tension further exacerbated after reports surfaced in May about China aiding Bangladesh in reviving an old air base at Lalmonirhat, located just 12 km from the Indian border.

Such measures, combined with the other trade restrictions imposed subsequently (Table 2), have raised concerns about the broader implications for regional economic cooperation. The suspension of land-route transshipment has had a tangible economic impact on Bangladesh, particularly its export-driven garment sector. According to recent reports, India’s restrictions on land-port imports from Bangladesh may affect trade worth approximately USD 770 million, amounting to nearly 42% of total bilateral trade.

Table 1: Status of Select Connectivity Project between India and Bangladesh

Source: Prepared by authors using various sources, including MEA, PIB and news articles. Note: The table covers projects that were affected after August 5, 2024.

Apart from hiccups in the physical connectivity linkages, India and Bangladesh have also taken steps to restrict bilateral trade and transshipment (Table 2)

Table 2: Trade and Transit Restrictions between India and Bangladesh since August 2024

Source: Prepared by authors using various sources.

The suspension of cross-border passenger trains, for instance, has undercut one of New Delhi’s most valuable tools in bilateral diplomacy – people-to-people ties.

India’s connectivity ties with Bangladesh are undergoing a phase of uncertainty, marked by suspended linkages, limited economic cooperation, and rising competition from China. The suspension of cross-border passenger trains, for instance, has undercut one of New Delhi’s most valuable tools in bilateral diplomacy – people-to-people ties. Consequently, medical tourism, which emerged as another pillar of India-Bangladesh relations, takes a hit. Bangladesh accounts for nearly 50% of India’s medical tourists, a statistic that underscores both the demand for Indian healthcare services and the broader economic value of this sector.

Additionally, amid the deterioration of connectivity, reports have emerged about China trying to attract medical tourists from Bangladesh. Recent reports also suggest that China is trying to take over Indian port projects in Bangladesh.

Such developments warrant urgent policy recalibration from New Delhi, particularly in preparation for engagement post elections in Bangladesh.

The Way Forward for New Delhi

This blog suggests four ways that New Delhi can prepare for a functional connectivity with Dhaka.

1. Focus on low-visibility, high-impact connectivity projects

Rather than large, politically sensitive infrastructure ventures that may trigger domestic opposition within Bangladesh, India can focus on less visible but economically vital projects.

Rather than large, politically sensitive infrastructure ventures that may trigger domestic opposition within Bangladesh, India can focus on less visible but economically vital projects. For example, the extension of the India-Bangladesh Friendship Pipeline, which was stalled due to political unrest, can be restarted. This pipeline transports diesel critical for powering Bangladesh’s textile industry, a key driver of its economy. Projects like these are mutually beneficial.  Additionally, India has already seen a positive turn with the resumption of freight train services in February 2025 after a nine-month pause. Building on this momentum by extending similar trade facilitation and logistical support projects can slowly rebuild trust and functional interdependence.

Lastly, India should also consider deepening cross-border power cooperation. The inauguration of the region’s first trilateral power agreement between Nepal – India – Bangladesh came in the midst of a turbulent political situation between New Delhi and Dhaka. A similar power cooperation agreement is being pursued with Bhutan, while bilateral power cooperation continues between Tripura in Northeast India and Comilla in eastern Bangladesh, despite financial challenges (Table 1). Strengthening such energy partnerships can enhance regional energy security and serve as a mutually beneficial pathway.

This would also embed Bangladesh more firmly in a regional cooperation framework led by India.

      2. Engaging Like-Minded Countries: Toward Triangular Cooperation

India should also expand its strategic bandwidth by further engaging with like-minded countries like Japan. Japan already has a strong institutional presence in Bangladesh through projects like the Matarbari deep-sea port. By developing triangular cooperation or coordination models, such as co-financing development projects, India can regain strategic influence without bearing the full financial or diplomatic burden alone. A case in point is Japan’s USD 641 million loan via Japan International Cooperation Agency (JICA) for the modernisation of the Joydebpur-Ishurdi railway, a vital segment of the Trans-Asian Railway connecting Bangladesh with Kolkata. India can indirectly further its own connectivity goals through such engagements.

India could explore the possibility of leveraging Quad-based cooperation, albeit in flexible, issue-specific permutations. This could take the form of digital infrastructure, health diplomacy, or regional connectivity…

Finally, India could explore the possibility of leveraging Quad-based cooperation, albeit in flexible, issue-specific permutations. This could take the form of digital infrastructure, health diplomacy, or regional connectivity, areas where India and its Quad partners, Japan, the US, and Australia, share long-term interests.

     3. Strengthen people-to-people ties and developmental partnership

With Bangladesh, complementing the narrative of shared history as well as shared future, India needs to expand on its developmental assistance for Dhaka. India has funded over 90 High Impact Community Development Projects (HICDPs) cumulatively worth over USD 50 million so far that includes the construction of student hostels, academic buildings, cultural centres, orphanages, and others. Additionally, Border Haats between India and Bangladesh need to be restarted. The imperative to undertake such projects is more now when India needs to find ways to reengage with Dhaka.

To solidify long-term linkages, the Ministry of External Affairs can perhaps increase the Indian Technical and Economic Cooperation (ITEC) slots from the current 800 annually (in 2024) and ensure regular budgetary support for existing scholarships to Bangladeshi students. Capacity Building programs and training programs for Bangladeshi civil service officers, judicial officers and judges, police officers need to continue unimpeded as it lies in New Delhi’s interests to foster deeper institutional linkages with various quarters of the Bangladeshi polity. Such initiatives need to be sustained from the Indian side to gain strategic advantage. The cancellation of judicial officials’ training in India scheduled for February this year when juxtaposed with the 2025 Bangladeshi Diplomats Training Program offered by China accentuates the point.

New Delhi often emphasises shared history, cultural and familial linkages that connect the two neighbours in bonds that far transcend the logic of strategic relations.

New Delhi often emphasises shared history, cultural and familial linkages that connect the two neighbours in bonds that far transcend the logic of strategic relations. India’s expression of interest to restore filmmaker late Satyajit Ray’s ancestral property in Mymensingh as part of a “shared cultural heritage” helps underline the message of both neighbors being co-custodians of Bengali heritage and culture.

     4. Engage via paradiplomacy/ sub-national engagements

Para-diplomacy as a strategy of engagement needs to be further explored. States like Tripura and West Bengal can take the lead due to their geographic proximity, linguistic and cultural affinities with India’s eastern neighbour. Such initiatives can complement national efforts, while also keeping the engagement relatively insulated from the political sensitivities that often characterise central-level diplomacy. For instance, Assam’s successful para-diplomacy push with Bhutan, including through high-level visits from both sides can serve as a replicable model for Agartala and Kolkata. Politically contentious issues like Teesta, however, need to be avoided. The Centre though not directly involved, can facilitate the engagement via vital inputs and assistance of its various agencies (such as the Land Port Authority of India). Additionally, other bordering states, including Meghalaya, Mizoram, and Assam, should be encouraged to explore similar engagement models, thereby contributing to a more decentralised and resilient framework for subregional cooperation in India’s eastern neighbourhood.

The recent political tensions have strained relations between New Delhi and Dhaka and disrupted the hard-won connectivity gains of the last two decades. Yet, the foundations of the relationship remain strong and are worth reinvesting in. While the current sensitivities may limit India’s ability to initiate or implement connectivity initiatives, this interim period leading up to election in Bangladesh in early 2026, offers India a crucial period to prepare. Over the next 6–12 months, New Delhi must focus on doing its groundwork, including identifying priority areas, strengthening internal coordination, and building the institutional and delivery capacity needed to act decisively once a new elected government takes office in Dhaka and is ready to re-engage.