Has India’s security-driven foreign policy progressively overridden its economic objective of regional connectivity?

Research & Analysis: Trade Facilitation Network (TFN) Research Team

Trade Facilitation Network (TFN)

07 September 2026

India’s economic geography provides the country with an exceptional potential position within the emerging trade architecture of Asia. Its western frontier provides the shortest geographical approach toward Pakistan, Afghanistan, Iran and Central Asia; its northern frontier interfaces with China and, indirectly, the wider Eurasian transport system; Bangladesh provides connectivity between mainland India and the Northeast; while Myanmar represents India’s principal terrestrial gateway toward Thailand and the wider ASEAN region.

India simultaneously possesses extensive maritime connectivity through the Arabian Sea, Indian Ocean and Bay of Bengal.

Over several decades, Indian policy has sought to convert this geography into economic connectivity through investments in highways, railways, integrated land ports, coastal infrastructure and international corridors. The Neighbourhood First Policy, Act East Policy, Bangladesh-Bhutan-India-Nepal Motor Vehicles Agreement (BBIN MVA), India-Myanmar-Thailand Trilateral Highway, Chabahar initiative and India’s participation in the International North-South Transport Corridor (INSTC) all reflect this strategic objective.

India’s accession to the United Nations TIR Convention in 2017 further demonstrated its intention to participate in internationally recognised Customs-transit arrangements for international road freight. TIR became operational in India in 2018, with FICCI serving as India’s national issuing and guaranteeing association.

The physical and institutional architecture therefore appears substantial.

The operational outcome, however, remains considerably more fragmented.

India conducts significant trade with its neighbouring countries, but bilateral trade should not be confused with regional transport integration. The more relevant trade-facilitation question is whether commercial vehicles can cross India’s borders, operate in neighbouring territories and, where appropriate, continue toward third countries under mutually recognised transport and Customs arrangements.

Viewed from this perspective, India’s regional connectivity presents an important policy paradox.

India has progressively constructed the infrastructure required for regional integration while geopolitical, security and regulatory conditions continue to constrain the international utilisation of that infrastructure.

The issue deserves examination from an Indian economic perspective rather than as a critique of India’s legitimate national-security considerations.

The relevant question is therefore:

Has India’s security-driven foreign policy progressively overridden its economic objective of regional connectivity?

Physical connectivity and operational connectivity are different

International freight connectivity requires several layers of interoperability.

Physical infrastructure is only the first.

A functioning international road corridor also requires reciprocal vehicle-entry rights, Customs-transit procedures, recognition of drivers and vehicle documents, insurance arrangements, border operating protocols and, for through-transit, permission for foreign vehicles and cargo to cross national territory toward another country.

India’s own Customs system demonstrates that the country possesses the institutional capability to administer sophisticated international transit.

Section 54 of India’s Customs Act, 1962 provides for transshipment of imported goods to destinations outside India. Under India’s treaty arrangements with neighbouring countries, Indian Customs administers bonded transit, authorised-carrier systems and, in appropriate cases, electronic cargo tracking.

The Nepal transit regime is particularly instructive. Under the Transhipment of Cargo to Nepal under Electronic Cargo Tracking System Regulations, 2019, Nepal-bound cargo arriving through Indian gateways can move under Customs control using authorised carriers, bonds and electronic cargo tracking.

India has also facilitated transit between Bhutan and Bangladesh through Indian territory.

India therefore does not suffer from an institutional inability to administer international transit.

The more difficult issue is continuity: whether India’s bilateral border and transit arrangements can be connected to create regional corridors extending beyond the immediately neighbouring state.

This distinction is also fundamental to understanding TIR.

TIR provides an internationally recognised Customs guarantee for goods moving across multiple Customs territories. It does not itself confer commercial road-transport rights.

A TIR Carnet can facilitate a transit operation only where the countries concerned permit the underlying vehicle and cargo movement.

Consequently, India’s participation in TIR needs to be examined alongside its bilateral and regional road-transport arrangements.

Pakistan and India’s access to western continental markets

Pakistan occupies a structurally important position in India’s continental geography.

The shortest overland routes between northern and western India and Afghanistan, Iran and much of Central Asia pass through Pakistani territory.

In an integrated regional transport environment, this geography could potentially support corridors such as:

India–Pakistan–Afghanistan–Central Asia

and

India–Pakistan–Iran–Türkiye and beyond.

Such connectivity is currently unavailable as a normal commercial transit option.

India-Pakistan relations have been dominated by longstanding territorial disputes, terrorism and security concerns, military confrontation and periodic suspension or restriction of bilateral transport and trade arrangements.

India’s own official records demonstrate the resulting connectivity constraint.

The Government of India informed Parliament that it had decided in 2015 to permit Afghan trucks to enter India through ICP Attari for unloading and loading cargo from and to Afghanistan. However, it also stated that Pakistan did not permit transit through its territory for Indian goods destined for Afghanistan through Attari.

Bilateral India-Pakistan trade through Attari subsequently remained suspended following the deterioration in relations in 2019.

The consequences are larger than bilateral India-Pakistan trade.

India is unable to use its geographically shortest western routes as normal commercial transit corridors toward Afghanistan, Iran and Central Asia.

This increases the strategic importance of alternatives, particularly maritime access to Iran through Chabahar and subsequent land connections toward Afghanistan and Central Asia.

Chabahar therefore represents both an important Indian connectivity strategy and evidence of the geographical constraint it is intended to overcome.

From a trade-cost perspective, the relevant comparison is not simply whether India possesses an alternative route. It is whether that alternative produces equivalent distance, transit time, logistics cost, reliability and market access to the geographically shorter land route.

China: trade integration without transport integration

The India-China relationship presents a different form of connectivity imbalance.

China is one of India’s largest sources of imports. Indian imports from China exceed US$100 billion annually, demonstrating the extraordinary depth of the commercial relationship despite strategic competition and unresolved territorial disputes.

Yet this trade has not translated into corresponding international road-freight integration.

India and China maintain designated border-trade arrangements, historically including Nathu La, Shipki La and Lipulekh/Gunji. These are specialised border-trade regimes rather than normal international through-trucking corridors.

The distinction is important.

Border trade allows designated commodities and traders to operate through specified frontier points. It does not create a commercial transport regime under which an Indian truck originating in Delhi or another industrial centre can enter China and continue through Chinese territory toward Central Asia.

The Himalayan frontier remains governed predominantly by strategic, territorial and security considerations. The consequences of the 2020 military confrontation reinforced this orientation, although subsequent diplomatic engagement and moves toward restoring elements of border trade indicate some improvement.

For India’s longer-term continental connectivity, the question extends beyond bilateral India-China trade.

China’s road system connects onward toward Kazakhstan, Kyrgyzstan, Russia and other Eurasian markets.

India therefore sits physically beside one of the world’s largest continental transport systems while Indian road freight cannot normally access that system through the shared frontier.

India consequently has substantial trade integration with China but very limited transport integration with China.

Nepal and Bhutan: strong bilateral connectivity but limited transit extension

India’s relationships with Nepal and Bhutan demonstrate that geopolitical hostility is not the only constraint on regional transport integration.

Both maintain close political and economic relationships with India.

The scale of India-Nepal land transport is substantial. India’s Land Ports Authority reports that ICP Raxaul handled approximately 219,210 cargo movements in FY2025-26, compared with 201,126 in FY2024-25. Trade handled through Raxaul reached approximately ₹38,426 crore in 2025-26.

Raxaul-Birgunj is also an important gateway for Nepal’s third-country trade.

Indian Customs facilitates Nepal-bound overseas cargo arriving through Indian ports using bonded transit and electronic cargo tracking. India has therefore demonstrated that it can provide a landlocked neighbour with sophisticated access to the international maritime system.

India similarly provides transit facilities for Bhutan and has facilitated Bhutan-Bangladesh cargo movement across Indian territory.

These are significant trade-facilitation achievements.

But they also reveal the distinction between bilateral/transit connectivity and regional through-connectivity.

Neither Nepal nor Bhutan currently provides Indian commercial trucks with a normal transit route into China and onward to the wider Eurasian road network.

India can therefore facilitate a neighbouring country’s transit through its own territory while remaining unable to use that neighbour as a transit bridge toward China.

The constraint is no longer principally Customs capability or physical infrastructure. It is the absence of the required trilateral political, transport and transit architecture.

Bangladesh and the unfinished BBIN transport architecture

Bangladesh represents perhaps India’s strongest potential case for deeper regional road integration.

The two countries possess extensive road and rail connections, inland-waterway arrangements, integrated land ports and substantial bilateral trade.

Petrapole-Benapole is India’s largest land gateway with Bangladesh and accounts for approximately 30% of India-Bangladesh land trade.

Indian Land Ports Authority data show the scale of the recent change.

Trade through Petrapole increased to approximately ₹36,634 crore in FY2024-25, with 154,192 cargo movements. In FY2025-26, trade declined to approximately ₹29,106 crore, while cargo movements fell to 111,210.

That represents a decline of approximately 20.5% in trade value and 27.9% in cargo movements in one year.

The causes require careful separation between policy restrictions, changing trade conditions and political factors. Nevertheless, the decline illustrates the economic sensitivity of even highly developed land gateways to changes in the bilateral environment.

India had also developed a significant third-country transit facility for Bangladesh.

Under arrangements introduced by Indian Customs, Bangladeshi export cargo could enter India through land borders and move across Indian territory toward designated Indian ports and airports for onward export to third countries.

In April 2025, India withdrew this particular transshipment facility for Bangladeshi exports using Indian ports and airports, although Bangladesh’s transit arrangements involving Nepal and Bhutan were not affected.

This provides an important example of the relationship between foreign economic policy and connectivity:

a transit facility can be created through Customs policy, become operational, and subsequently be curtailed when the wider trade and political environment changes.

The broader regional architecture remains the Bangladesh-Bhutan-India-Nepal Motor Vehicles Agreement, signed in 2015.

BBIN sought to address one of South Asia’s fundamental logistics inefficiencies: interruption of the transport operation at the national frontier and the resulting need for cargo transloading.

The agreement envisaged regulated cross-border movement of passenger and cargo vehicles, including bilateral and third-country movements.

Trial operations demonstrated the technical feasibility of the concept.

Full implementation, however, has remained incomplete. Bhutan did not ratify the original agreement, while the protocols required for broader operationalisation among the remaining participants have undergone prolonged negotiation.

The significance for India extends beyond bilateral trade with Bangladesh.

A functioning BBIN architecture could improve access between mainland India and the Northeast, reduce border logistics costs and potentially become part of a larger eastward connectivity system.

Bangladesh is therefore an important test of whether South Asia can convert substantial physical infrastructure into regulatory and operational connectivity.

Myanmar and India’s terrestrial access to ASEAN

The India-Myanmar-Thailand Trilateral Highway represents one of India’s most important attempts to establish an overland connection with Southeast Asia.

Its strategic logic follows India’s Act East Policy and provides a potential road axis:

India–Myanmar–Thailand–ASEAN.

India has invested substantially in transport infrastructure associated with this corridor.

But road construction alone does not produce international freight connectivity.

India itself recognised this when India, Myanmar and Thailand began negotiating a Motor Vehicles Agreement intended to facilitate passenger and cargo movement along the Trilateral Highway.

Commercial through-transport requires vehicle-entry rights, Customs procedures, insurance recognition, driver documentation and border protocols in addition to physical infrastructure.

Myanmar’s prolonged internal conflict has subsequently created major security and operational constraints.

India has simultaneously tightened elements of border management in response to insurgency, irregular movement and security concerns affecting its northeastern states.

Myanmar therefore presents perhaps the clearest intersection between India’s security and connectivity objectives.

The same frontier functions simultaneously as a security-sensitive boundary and India’s principal terrestrial gateway toward ASEAN.

The policy challenge for India is consequently not simply completing the highway.

It is establishing the political and operational conditions under which that infrastructure can function as a predictable international freight corridor.

TIR: the measurable gap between international accession and utilisation

India’s participation in the TIR Convention provides perhaps the clearest quantitative indicator of the wider problem.

When the Government of India approved accession to TIR in 2017, it specifically identified the system as a means of facilitating Indian trade through the International North-South Transport Corridor, Iran, Chabahar, Central Asia and the CIS.

The strategic intention was therefore explicit.

India became operational under TIR in 2018.

Yet UNECE statistics on TIR Carnets distributed by the International Road Transport Union to national associations show an extraordinary utilisation gap.

India’s association received:

2018 — 100 TIR Carnets

2019 — 0

2020 — 0

2021 — 0

2022 — 0

2023 — 0

2024 — 0

These figures require a technical qualification. They represent Carnets distributed by IRU to India’s national association and do not necessarily equal the number subsequently issued by FICCI to individual transport operators.

Nevertheless, the trend is unmistakable.

Only 100 Carnets were distributed to India’s association across the entire 2018-2024 period, all in the first year of operation.

The contrast with established continental TIR economies is substantial.

In 2024 alone, Iran received approximately 130,000 TIR Carnets, compared with India’s zero.

India did participate in a small number of actual TIR operations.

Indian Customs material presented through UNECE records TIR movements associated with Afghanistan-Chabahar-India traffic in 2019 and Indian exports toward Afghanistan through Chabahar in 2020. These involved only a small number of physical Carnets and were essentially pilot or limited operations rather than evidence of a large commercial TIR trucking market.

The significance is not that TIR has failed technically in India.

India demonstrated that it can process TIR movements.

Indian Customs possesses the necessary transit capabilities.

FICCI provides the institutional guaranteeing structure.

And India is surrounded by countries participating in TIR, including Pakistan, China, Iran, Afghanistan and several Central Asian economies.

The more important conclusion is:

India’s TIR system is legally and technically operational but has seen negligible commercial utilisation.

This suggests that the binding constraint may lie not primarily in Customs facilitation but in the limited availability of commercially usable international land corridors connecting Indian road operators to the wider TIR network.

The TIR figures therefore provide a measurable indicator of India’s geopolitical connectivity deficit.

Maritime alternatives and the cost of continental constraints

India’s strong maritime position substantially reduces the immediate economic consequences of constrained land connectivity.

Its ports provide access to the Gulf, Africa, Europe and Southeast Asia, and India’s international trade therefore does not depend upon neighbouring countries providing land transit.

This strategic advantage should not, however, obscure the economics of alternative routing.

Central Asia provides the clearest example.

India seeks deeper commercial engagement with the region, but its geographically shortest westward routes are constrained by the Pakistan relationship while its northward access through China remains unavailable for normal commercial road freight.

India has consequently invested in multimodal alternatives involving maritime movement to Iran and onward transport through Chabahar and the INSTC architecture.

These routes provide strategic resilience and should not be viewed merely as substitutes.

Nevertheless, their economic performance should be compared with the counterfactual of more direct continental access.

The relevant variables are not political slogans but measurable logistics indicators:

distance, transit time, freight cost, border-processing time, transshipment cost, inventory cost, insurance, reliability and disruption risk.

This is where the economic cost of geopolitics becomes measurable.

The cumulative economic cost of security-driven connectivity

Each Indian frontier has a different political and security context.

Pakistan cannot be analysed in the same manner as Bangladesh.

China presents fundamentally different strategic issues from Nepal and Bhutan.

Myanmar’s internal conflict differs from the regulatory and political challenges affecting BBIN.

It would therefore be analytically incorrect to attribute every connectivity constraint to a single Indian foreign-policy decision.

Nor should legitimate national-security concerns be subordinated to transport economics.

Nevertheless, when India’s borders are examined collectively, a structural pattern emerges.

India’s shortest western continental access is constrained.

Its northern access to China’s extensive Eurasian transport network is restricted.

Its strong Nepal and Bhutan relationships facilitate bilateral and third-country trade but do not provide onward Indian transit into China.

Its eastern BBIN vehicle architecture remains incompletely operationalised.

Its southeastern corridor toward ASEAN faces regulatory, political and security constraints.

And despite being operational under one of the world’s principal international Customs-transit systems since 2018, India’s utilisation of TIR remains negligible.

The cumulative result is a significant gap between India’s potential geographical connectivity and effective operational connectivity.

This gap may appropriately be described as India’s geopolitical connectivity deficit.

Rebalancing security and trade facilitation

The policy implication is not that India should compromise legitimate national-security interests to facilitate trucking.

The more relevant question is whether every existing transport restriction remains necessary for security, or whether some barriers persist because of regulatory inertia, incomplete agreements, lack of reciprocity or insufficient diplomatic engagement.

India’s own experience demonstrates that security and sophisticated transit facilitation can coexist.

Indian Customs already administers bonded transit.

It uses electronic cargo tracking.

It facilitates Nepal’s access to Indian ports.

It facilitates Bhutanese transit.

It has facilitated Bangladesh third-country cargo.

It has processed TIR movements.

The institutional capability therefore exists.

India’s next connectivity strategy should consequently evaluate physical infrastructure together with:

reciprocal transport rights; Customs interoperability; TIR utilisation; vehicle and driver recognition; insurance arrangements; transit rights; border predictability; and foreign-policy stability.

This makes regional connectivity more than an infrastructure portfolio.

It is increasingly an instrument of foreign economic policy.

Conclusion

India has invested substantially in the physical foundations of regional connectivity and has articulated clear strategic ambitions through Neighbourhood First, Act East, BBIN, Chabahar, the International North-South Transport Corridor and the India-Myanmar-Thailand Trilateral Highway.

Indian Customs has demonstrated that the country possesses the technical capability to administer sophisticated international transit.

The country’s experience with Nepal, Bhutan and Bangladesh shows that India can provide neighbouring economies with transit across its territory.

India’s TIR experience demonstrates that the international Customs architecture also exists.

Yet these capabilities have not developed into an integrated regional road-transport network through which Indian freight can move seamlessly across neighbouring territories toward third-country markets.

The principal challenge is therefore increasingly not simply the absence of infrastructure.

It is the gap between physical connectivity, regulatory connectivity and geopolitical connectivity.

This brings the analysis back to its central question:

Has India’s security-driven foreign policy progressively overridden its economic objective of regional connectivity?

The evidence does not support reducing the answer to a simple yes or no. India’s security concerns are real, and several constraints originate in neighbouring countries or circumstances beyond India’s unilateral control.

But the cumulative economic effect is increasingly visible.

India possesses roads and railways reaching its borders, modern land ports, sophisticated Customs systems, international transit conventions and ambitious regional corridor programmes.

Yet its ability to convert these assets into continuous international road-freight corridors remains limited.

For an economy seeking deeper integration with Central Asia, Eurasia and ASEAN, this distinction has strategic consequences.

India’s next phase of connectivity policy may therefore require less emphasis on announcing new corridors and greater emphasis on making existing corridors operational through transport agreements, transit rights, reciprocity, trade facilitation and sustained diplomatic engagement with its neighbours.

Infrastructure creates the physical possibility of regional connectivity.

Customs facilitation makes movement efficient. Transport agreements make it legally possible. Stable foreign relations make it commercially sustainable.