Bangladesh's relations with India appear to be undergoing a significant shift, marked by increasing tensions and a move away from previous collaborations. A key indicator of this change is the recent cancellation of a defense contract with India.
On May 21, 2025, Bangladesh cancelled a deal worth approximately $21 million (Rs 180.25 crore) with Garden Reach Shipbuilders & Engineers Ltd (GRSE), a Kolkata-based Indian state-run shipbuilding firm. GRSE, operating under India's Ministry of Defence, was contracted to construct an advanced ocean-going tug for the Bangladesh Navy. This contract, signed in July 2024, was the first major agreement under India's $500 million line of credit for defense purchases. The cancellation is a blow to India's defense exports and is seen as a reflection of worsening diplomatic ties.
Several factors contribute to this downturn in relations. One immediate trigger appears to be India's recent decision to revoke transshipment facilities for Bangladeshi cargo exports to third countries. This move followed controversial remarks by Muhammad Yunus, Bangladesh's interim government chief advisor, who described India's northeast as "landlocked" during a visit to China and asserted Dhaka's role as the "only guardian" of the ocean in the region.
In addition to the revocation of transshipment facilities, India imposed restrictions on imports of Bangladeshi goods, including ready-made garments and processed food, effective May 18, 2025. These restrictions limit the entry of goods through Integrated Check Posts (ICPs) in the northeast, mirroring similar trade curbs previously imposed by Dhaka.
The broader context involves a shift in Bangladesh's political landscape. The ousting of former Prime Minister Sheikh Hasina in August 2024, who had close ties with India, has led to a recalibration of alliances. The new administration, under Muhammad Yunus, is perceived to be leaning towards China and Pakistan for defense and economic support. This shift is also fueled by growing anti-India sentiment among the Bangladeshi public, stemming from various factors including unresolved water-sharing issues, border clashes, and perceptions of political meddling. Concerns have also emerged regarding India's visa policies, which have seen a significant drop in approvals for Bangladeshi citizens.
The cancellation of the GRSE contract signifies a strategic recalibration of Bangladesh's naval procurement plans. Bangladesh is actively diversifying its defense procurement sources, seeking to balance relations with traditional partners while exploring collaborations with new suppliers like China, Turkey, or South Korea. This move also underscores Bangladesh's intent to maintain strategic autonomy in its defense posture, with concerns about becoming overly dependent on India.
While the future trajectory of Bangladesh-India relations remains uncertain, it is clear that the current climate is marked by increased tensions and a reassessment of priorities on both sides. The economic implications of these trade restrictions and the shift in defense partnerships will likely have a significant impact on the regional dynamics in the coming years.
