Bangladesh has called off a $21 million agreement with Kolkata shipyard Garden Reach Shipbuilders and Engineers Ltd (GRSE) to deliver an advanced ocean-going tugboat, in a decision widely seen as a consequence of increasingly tense ties with India. The agreement, signed in July 2024 with the Bangladesh Navy, was the first big-ticket project for India’s $500 million line of credit for defence procurement. Yet its cancellation comes after Prime Minister Sheikh Hasina’s ousting in August 2024, which has radically altered Dhaka’s foreign policy stance.
GRSE confirmed the development in an official report to the National Stock Exchange of India, saying, “…we wish to inform you that the Government of the People’s Republic of Bangladesh has cancelled the order.” The move follows India putting limits on the entry of ready-made garments into its ports from Bangladesh through Kolkata and Nhava Sheva.
Rising Trade Barriers and Strategic Divergences With Bangladesh
The diplomatic repercussions are seen in the list of expanding trade restrictions. India recently prohibited imports of Bangladeshi products through 11 land border crossings in the northeast, affecting some $700 million worth of ready-made garment exports annually. More than 93% of these exports previously traveled through land ports.
Furthermore, India canceled its transshipment agreement in April, stopping the shipment of Bangladeshi exports to third nations through Indian airports and sea ports. Bangladesh retaliated by blocking the import of yarn from India through land ports from April 13.
These choices, therefore, represent a sharp shift from the previously strong trade relationship between the two countries. Notably, Bangladesh was India’s largest subcontinental trading partner in FY24, with bilateral trade reaching $11.06 billion in Indian exports and $1.8 billion in imports from Bangladesh.
Geo-Strategic Undercurrents and Bangladesh’s Tilt Toward China
Adding to the complexity, transitional Bangladeshi president Muhammad Yunus has seemed to shift towards China. Recent remarks indicated that India’s northeast states, being geographically remote, stand to gain from Chinese investment if Bangladesh opens up port facilities. “This opens up a huge possibility of an extension of the Chinese economy,” Yunus said, a remark that has angered New Delhi policymakers.
With commerce now cut off and defence cooperation increasingly strained, India and Bangladesh have come to a critical juncture. Moreover, the cancellation of the tugboat contract underscores a larger deterioration of bilateral trust, thereby suggesting a shifting balance in South Asian alignments.
