Bangladesh has scrapped a $21 million defence contract with India’s state-run Garden Reach Shipbuilders and Engineers Ltd (GRSE), a move that highlights worsening bilateral ties. The contract, signed in July 2024, involved building an advanced ocean-going tug for the Bangladesh Navy.
GRSE confirmed the cancellation in a May 21 stock filing, calling it an expected outcome after “mutual discussions.” The financial impact is minimal, as the deal comprised just 0.8% of GRSE’s $2.7 billion order book.
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Although Dhaka gave no official explanation, analysts suggest it may be retaliation for India’s recent trade curbs, including restrictions on Bangladeshi garment and food exports via northeastern land ports, and the withdrawal of key transshipment routes.
The tug project had been a symbolic element of India-Bangladesh defence cooperation, and its cancellation marks a further cooling of ties following the August 2024 exit of Prime Minister Sheikh Hasina.
Tensions have grown as both nations impose trade barriers. Despite being each other’s major trade partners in South Asia, both countries have taken restrictive steps, including Bangladesh halting yarn imports and India limiting garment shipments.
Meanwhile, Bangladesh’s interim government has outlawed the former ruling Awami League under anti-terror laws, further straining the political environment. Despite setbacks, GRSE announced it has been shortlisted for the Indian Navy’s Next Generation Corvette programme.
