India Transit Weaponization

Diagnosis

Bangladesh's external trade is exposed to a set of coercive levers that a single neighbor can pull at low cost to itself and high cost to Dhaka. The curated problem note identifies three concrete vectors: land-port suspension, transit-tax change, and water-treaty risk. Each is a different instrument of the same threat. A land-port suspension can choke time-sensitive imports and exports that move overland, stranding cargo and raising landed costs overnight. A transit-tax change can quietly reprice the movement of goods through or alongside Indian territory, eroding the margins of exporters who have no alternative routing. Water-treaty risk sits upstream of agriculture, fisheries, and dry-season flows, turning a hydrological dependency into a bargaining chip.

Why now: these are latent risks (the engine classification is latent, the horizon medium), meaning they are not yet a live crisis but can be activated on short notice and with little warning. A risk that can be switched on faster than the response can be built is a risk that must be prepared for before it materializes, not after. The lead responsible body is the Ministry of Commerce (MoC), per the GovTwin entity registry, with Bangladesh Investment Development Authority, Bangladesh Standards and Testing Institution, Bangladesh Trade and Tariff Commission, and Chittagong Port Authority as supporting bodies.

Recommended actions

1. Map and rank the exposure (MoC, with Bangladesh Trade and Tariff Commission). Mechanism: commission a single classified corridor-dependency assessment that lists, by HS line and by land port, which trade flows have no viable alternative routing and which can shift to sea or air. Observable signal: a ranked exposure register exists and is reviewed quarterly by MoC; each high-exposure line has a named fallback route.
2. Build redundant corridors through Chittagong and Mongla (MoC with Chittagong Port Authority). Mechanism: a port-capacity and routing circular that pre-clears the highest-exposure overland flows to switch to maritime and, where viable, alternative regional transit, plus a fast-track customs lane reserved for diverted cargo. Observable signal: diversion drills run successfully, and the share of high-exposure cargo with a tested sea or air alternative rises over successive quarters.
3. Pre-legislate a transit-tax contingency response (MoC with Bangladesh Trade and Tariff Commission). Mechanism: a standing tariff-and-rebate contingency instrument that can be triggered by circular if transit costs are repriced against Bangladeshi exporters, cushioning affected sectors without ad hoc parliamentary delay. Observable signal: the instrument is drafted, legally cleared, and held ready; a tabletop trigger test confirms it can activate within days.
4. Stand up a standing leverage-monitoring cell (MoC). Mechanism: a dedicated unit that tracks land-port status, transit-fee notices, and water-flow signals, and reports to the Commerce and Foreign ministries on a fixed cadence. Observable signal: early-warning bulletins are issued before disruptions hit cargo, not after, and decision-makers act on them.
5. De-risk supply through investment and standards (Bangladesh Investment Development Authority and Bangladesh Standards and Testing Institution). Mechanism: BIDA channels incentives toward domestic and diversified-source production of inputs currently dependent on the exposed corridors, while BSTI ensures alternative-source goods meet standards so substitution is not blocked at the border. Observable signal: new approved suppliers and certified alternative inputs enter the market for the most exposed lines.

Sequencing (first 12 months)

Start with the exposure map (action 1): nothing else can be prioritized until MoC knows which flows are most coercible. The map unlocks corridor redundancy (action 2), because port and customs capacity should be reserved for the lines that actually lack alternatives. In parallel, draft the transit-tax contingency instrument (action 3) and stand up the monitoring cell (action 4), since both are low-cost to prepare and high-value when a lever is pulled. Investment and standards de-risking (action 5) is the slowest to bear fruit and should begin early so it matures by the time the medium-horizon risk window opens.

Risks and constraints

The binding constraint is diplomatic: visibly hardening against one neighbor can itself provoke the coercion it aims to deflect, so the redundancy build must be framed as routine resilience, not confrontation. The fiscal constraint is real port and corridor investment competing for scarce capital. The institutional constraint is coordination: MoC leads, but corridor, water, and standards levers sit across multiple bodies, and without a single accountable cell the response will fragment.

Bottom line

India's transit, tax, and water levers are latent but switchable on short notice, so Bangladesh must build redundant corridors and pre-cleared contingency instruments before they are pulled, not during the squeeze. The Ministry of Commerce should lead a single exposure map that drives Chittagong-routed redundancy, a ready-to-trigger transit-tax response, and a standing monitoring cell, with BIDA and BSTI de-risking the underlying supply.