Bangladesh Halts $21M Defense Deal with India Over Trade Disputes

Pakistan, May 24 — Bangladesh has terminated a $21 million defense agreement with India’s public-sector shipbuilding company, Garden Reach Shipbuilders and Engineers Ltd (GRSE). This pact was intended for providing an advanced deep-sea tugboat to the Bangladeshi Navy. Following discussions with the Bangladesh authorities, GRSE verified this decision. The annulment represents a step back in military collaboration between the nations involved.

The agreement was finalized in July 2024 and played a crucial role in strengthening defense relations between India and Bangladesh. Bangladesh has not provided an official explanation for terminating the pact. Nonetheless, experts believe this decision may be linked to the recent tightening of Indian trade policies concerning Bangladeshi products. Recently, India has increased oversight on clothing and food exports originating from Bangladesh, which has raised concerns in Dhaka.

The trading relationship between India and Bangladesh has deteriorated since August 2024 following the shift in Bangladesh’s leadership. India has halted imports of Bangladeshi products through multiple northeast border checkpoints and terminated a transit agreement beneficial to Bangladesh’s export operations. In retaliation, Bangladesh ceased importing yarn from India. Consequently, these actions have adversely affected the textile sector as well as overall commerce between both countries.

The canceled order represents only a minor portion of GRSE’s total operations and thus will not significantly affect their finances. They have successfully provided more than 100 warships to various Indian and allied naval forces. Recently, GRSE secured an important contract from the Indian Navy for a significant Corvette program as well. Even though they faced a hurdle with Bangladesh, GRSE continues to maintain a robust business perspective.

Escalating tensions underscore a change in India-Bangladesh ties, marked by increasing trade and political disagreements. The caretaker administration of Bangladesh has additionally prohibited the Awami League party using security regulations. Analysts express concern that these conflicts could impact future collaboration and stability across South Asia.