Bangladesh cancels Indian defence contract as trade, political tensions escalate

Bangladesh has officially cancelled a $21 million defence contract with India’s state-owned shipbuilder Garden Reach Shipbuilders and Engineers Ltd (GRSE) for the construction of an advanced ocean-going tugboat for the Bangladesh Navy.

The cancellation marks a significant setback in bilateral defence cooperation between the two neighboring countries, Caliber.Az reports via Indian media.

This decision follows the political upheaval in Bangladesh, where Prime Minister Sheikh Hasina was ousted from power in 2024, triggering a cooling of ties between Dhaka and New Delhi. The cancelled contract was the first major deal under India’s $500 million line of credit for defence purchases, signed just a month before Hasina’s departure in July 2024.

GRSE officially informed the National Stock Exchange of India Limited about the cancellation, citing a directive from the Government of Bangladesh. In its statement, the company referenced the Securities and Exchange Board of India (SEBI) regulations, confirming the termination of the order by Bangladesh’s government.

The cancellation comes amid escalating trade tensions between the two nations. India recently imposed restrictions on imports of Bangladeshi ready-made garments, limiting them to specific ports and affecting exports valued at approximately $700 million annually. Moreover, New Delhi barred imports of Bangladeshi consumer goods through 11 northeastern land border posts earlier this month.

In April, India also terminated a transit agreement allowing Bangladeshi exports to third countries via Indian airports and seaports. Bangladesh retaliated by halting yarn imports from India through land ports starting April 13, reflecting a deepening economic rift.

Despite these tensions, India remained Bangladesh’s second-largest export destination in the fiscal year 2024, accounting for 12 per cent of Bangladesh’s total exports. India’s exports to Bangladesh amounted to $11.06 billion, while imports from Bangladesh stood at $1.8 billion.

Further complicating the relationship, Bangladesh’s interim government banned all activities of the Awami League, the former ruling party led by Sheikh Hasina, under the country’s Anti-Terrorism Act, citing concerns over national security. 

By Vafa Guliyeva