1.5% is a decent amount though I don't know if it inculdes pensions. Bangladesh could increase defense expenditure to build credible deterrence against India but that would need it to increase defense expenditure to 3.5 to 4% levels at least. That is what Pakistan spends and that does not include revenue earned from Military run businesses (Pakistani military runs a vast business empire from cornflakes to land development) or the military aid that flows from the US. I am not sure but I'd wager it also does not include pensions.What you say is somewhat true but even then it still spends 1.5% of GDP on defence when arms imports are taken into account.
While it is true that only a military clash with Myanmar is the only realistic scenario in the short-medium term, it is building a military over the medium-long term that would be a credible deterrent to India as you never know how things may turn out.
As you can imagine the cost that Pakistan pays is in low social and development growth. In fact, this is one of the reasons why Pakistan, who traditionally had better economic (per capita), developmental, social and health indices than India and Bangladesh now lags behind them. From the trends, it seems the gap will only rise, not reduce.
India spends nearly 1.6%, not including pensions. India could raise it depending on threat perception, but there are competing needs to invest in development and social sectors for the moment. For the time being though that is enough to ensure war superiority over Pakistan but just deterrence against China. India could amp it up depending on how the economy performs over the coming years.
So at the end of the day, it is all fine and nice to desire capabilities, the key question is what cost is the nation willing to pay. The second question is, can the country achieve the same deterrence levels by way foreign policy than military. If so, then that is a smarter way of going about it.
I believe BD has chosen the second way. For example, no amount of military could ever have made India part with so much land (over 10,000 acres) to Bangladesh to settle the land boundary. Pakistan has bankrupted itself trying to match India for decades and has never been able to get even 10 acres of land.
Goes to show that BD leaders were smarter, choose cooperation and goodwill to get what they wanted. This would not satisfy what Bangladeshis on this forum (Islamist / Pakistan sympathisers) want, but that is how statecraft is truly done.
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