Bangladesh has cancelled a $21 million defense agreement with India’s Garden Reach Shipbuilders and Engineers Limited (GRSE), a Kolkata-based defense company. The deal involved the procurement of an 800-ton tugboat for the Bangladesh Navy and was considered the first major project under India’s $500 million Line of Credit signed with Bangladesh in 2023.

According to Indian media reports, the cancellation came abruptly and is believed to be linked to recent diplomatic tensions between the two neighbors. Analysts suggest that Bangladesh’s move may be a response to India’s recent ban on the transportation of Bangladeshi goods, including garments, through its land ports.

The termination of the contract is expected to cause financial losses for GRSE, which operates under India’s Ministry of Defence. Some observers view the development as a reflection of growing geopolitical friction, particularly in light of Bangladesh’s increasing economic ties with China and recent political remarks regarding India’s northeastern region.

The cancellation could have long-term implications for bilateral defense cooperation and economic engagement between the two countries.