NEW DELHI: Bangladesh has cancelled a $21 million defence deal with India’s state-owned Garden Reach Shipbuilders and Engineers Ltd (GRSE), signalling a further downturn in bilateral ties already strained by trade restrictions and political developments.
The cancellation was confirmed by GRSE in a filing to the National Stock Exchange of India on 21 May.
The Kolkata-based shipbuilder stated that the move followed a formal decision by the Government of Bangladesh and had been anticipated after “mutual discussions.”
The contract, awarded in July 2024, was for the construction of an advanced ocean-going tug for the Bangladesh Navy.
The vessel was intended for deep-sea towing and salvage operations and was seen as a strategic milestone in India-Bangladesh defence cooperation.
Although Dhaka has not publicly stated a reason for the cancellation, Indian media have reported that the decision is a retaliatory move following India’s recent import restrictions on Bangladeshi goods.
On 18 May, New Delhi imposed tighter controls at Integrated Check Posts (ICPs) in the northeastern region, disrupting shipments of ready-made garments and processed foods from Bangladesh.
This follows a series of restrictive actions by India since early April, including the termination of a transshipment facility that allowed Bangladeshi goods to reach third countries via Indian territory.
In response, Bangladesh suspended yarn imports from India through land ports on 13 April.
According to The Hindu, GRSE said the cancelled order accounted for only 0.8% of its ₹22,680.75 crore ($2.7 billion) order book as of 31 March 2025.
The tugboat deal was viewed as a key element in the broader military engagement between the two South Asian neighbours.
Its termination underscores a cooling of defence ties amid rising geopolitical friction.
The deterioration in relations comes in the wake of a major political shift in Dhaka following the departure of Prime Minister Sheikh Hasina’s administration in August 2024.
The interim government that succeeded her has taken a more confrontational stance, banning the Awami League and initiating new foreign policy alignments.
India-Bangladesh trade has also suffered. During the financial year 2023–24, Bangladesh was India’s largest trading partner in South Asia.
India exported goods worth $11.06 billion to Bangladesh while importing $1.8 billion, according to official figures. Bangladesh also ranked as India’s second-largest export destination, accounting for 12% of its exports.
However, since the change in government, India has limited the import of Bangladeshi garments to select ports, affecting an industry that contributes nearly $700 million in annual exports to India.
New Delhi has also blocked Bangladeshi consumer goods at 11 northeastern land ports.
