Dhaka/New Delhi: Bangladesh has called off a $21 million defence contract with India’s state-owned Garden Reach Shipbuilders and Engineers Ltd (GRSE) for the construction of a high-capacity ocean-going tugboat, as diplomatic and trade relations between Dhaka and New Delhi continue to deteriorate following political upheaval in Bangladesh last year.
The Kolkata-based firm confirmed the cancellation in a regulatory filing to the National Stock Exchange of India on 21 May, stating: “The Government of the People’s Republic of Bangladesh has cancelled the order.”
No official explanation was offered by the Bangladesh government or GRSE regarding the reasons behind the decision, according to Business Standard BD.
The deal, originally signed in July 2024 with the Bangladesh Navy, came just weeks before the ouster of Prime Minister Sheikh Hasina in a mass uprising in July.
It was the first major project under India’s $500 million line of credit aimed at boosting defence ties between the two nations. The contract was formalised after Hasina’s June 2024 visit to India, during which both sides pledged to deepen defence cooperation.
The cancellation comes at a time of increasing friction in trade and diplomatic ties between the two nations, which have deteriorated considerably in the last few months and have almost completely frozen under Bangladesh’s interim government led by Chief Advisor Muhammad Yunus.
Since taking office in late 2024, the Yunus administration has overseen a steady retreat from several economic and logistical arrangements with India.
In recent months, India has responded by limiting imports of Bangladeshi ready-made garments — a key export sector for Dhaka — to just two ports: Kolkata and Nhava Sheva.
Earlier this month, India also restricted the import of consumer goods from Bangladesh through 11 land ports in the northeast, a region that previously handled the vast majority of such trade.
These restrictions follow Bangladesh’s unilateral decision in April to stop yarn imports from India via land routes, shortly after India ended a longstanding transshipment facility that had allowed Bangladeshi exports to third countries through Indian ports and airports.
Economic ties between the two neighbours have historically been very strong, with Dhaka-Delhi bilateral trade in FY2023–24 amounting to $12 billion, making Bangladesh India’s largest trading partner in the region.
However, relations have cooled noticeably under the interim Yunus govt, whose remarks about India’s Seven Sister states, its anti-India rhetoric, ongoing Islamisation, persecution of Hindus and minorities, along with greater collaboration with China have further strained ties.
The fallout from the cancelled deal also rippled through financial markets. GRSE shares dipped on Wednesday morning following the announcement, before recovering later in the day.
As of now, the cancellation stands as a stark signal of the shifting dynamics between the two countries, with broader implications for regional trade and security cooperation.
