NEW DELHI: Bangladesh has cancelled a $21 million defence contract with India’s state-run Garden Reach Shipbuilders and Engineers Ltd (GRSE), reflecting growing strain in bilateral relations amid trade restrictions and shifting political dynamics.
GRSE confirmed the cancellation in a stock exchange filing on May 21, stating that the decision followed formal notification from the Government of Bangladesh and came after “mutual discussions.” The contract, awarded in July 2024, involved the construction of an advanced ocean-going tugboat for the Bangladesh Navy, intended for deep-sea towing and salvage missions. The project was seen as a key symbol of India-Bangladesh defence cooperation.
While Dhaka has not officially explained the move, Indian media have linked it to India’s recent trade measures against Bangladesh. On May 18, India tightened controls at Integrated Check Posts (ICPs) in the northeast, hindering shipments of Bangladeshi garments and food products. This came after earlier actions, including the withdrawal of a transshipment facility in April and Bangladesh’s subsequent suspension of yarn imports from India via land ports on April 13.
According to The Hindu, GRSE noted that the cancelled order represented just 0.8% of its ₹22,680.75 crore ($2.7 billion) order book as of March 31, 2025.
The cancellation highlights the cooling of defence relations amid rising geopolitical friction, especially following the departure of Prime Minister Sheikh Hasina’s administration in August 2024. The interim government that took office has adopted a tougher stance, banning the Awami League and pivoting foreign policy in new directions.
Economic ties have also taken a hit. In FY2023–24, Bangladesh was India’s top trading partner in South Asia, with exports from India valued at $11.06 billion and imports at $1.8 billion. Bangladesh ranked as India’s second-largest export destination, accounting for 12% of total exports.
However, recent Indian restrictions on Bangladeshi garment imports and a blockade of consumer goods at 11 northeastern land ports have significantly impacted bilateral trade, particularly Bangladesh’s apparel industry, which earns around $700 million annually from exports to India.
