Bangladesh has withdrawn from a $21 million defense agreement with India’s state-owned shipbuilder, Garden Reach Shipbuilders and Engineers Ltd (GRSE). The deal, which involved the construction of an advanced ocean-going tug for the Bangladesh Navy, was officially canceled following discussions between GRSE and the Bangladesh government.
In a filing with the National Stock Exchange of India Ltd and BSE Ltd, in accordance with the Securities and Exchange Board of India Regulations, 2015, GRSE declared that Bangladesh’s government had revoked the order, which was initially placed in July 2024.
The agreement was considered an element of military cooperation between India and Bangladesh. While Bangladesh has not officially stated its reasons for canceling the contract, analysts suggest it may be connected to India’s recent trade restrictions on Bangladeshi goods. India has recently imposed tighter controls on garment and food exports from Bangladesh, sparking concerns in Dhaka.
The company stated that the financial impact of the cancellation would be minimal, as the order accounted for only 0.8% of its ₹22,680.75 crore ($2.7 billion) order book as of March 31.
Since August 2024, trade relations between India and Bangladesh have deteriorated after a shift in Bangladesh’s government. India has restricted imports of Bangladeshi goods at multiple northeastern land ports and suspended a transit facility previously used by Bangladesh for exports. In response, Bangladesh halted yarn imports from India. These actions have negatively impacted the garment industry and overall trade between the two nations.
In 2023, Dhaka and New Delhi formalized a $500 million defense loan agreement, with the tugboat order marking the first acquisition under the deal. Additionally, Bangladesh is utilizing the Indian loan for various infrastructure projects, a process initiated during the tenure of former authoritarian Prime Minister Sheikh Hasina. Although Bangladesh was India’s largest regional trading partner in FY24, with India ranking as its second-largest export market, trade relations have since deteriorated.
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