MX dropping traffic after GRE decapsulation

Hi All,

I have the following setup :

VM1  4.4.4.3/24——CONTRAIL——GRE——ge-0/0/0  MX-960  xe-1/0/0——2.2.2.2/24  VM2

I see that when a ping is started from VM1 towards VM2, the packets show up as input on GRE tunnel interface statistics, but don't go out of xe-1/0/0. They get dropped (Normal discard) on MX as shown in show pfe statistics traffic fpc 0 . What I might be missing here ?

It's a MX-960 and here are some more details :-

root@mde-bng-mx960-a> show pfe statistics traffic fpc 0 | match discard
Packet Forwarding Engine hardware discard statistics:
    Timeout                    :                    0
    Normal discard             :                    5
    Extended discard           :                    0

root@mde-bng-mx960-a> show dynamic-tunnels database
Table: inet.3

Destination-network: 5.5.5.0/24
Tunnel to: 5.5.5.2/32 State: Up
  Reference count: 1
  Next-hop type: gre
    Source address: 5.5.5.1
    Next hop: gr-0/0/10.32769
    State: Up

root@mde-bng-mx960-a> show interfaces gr-0/0/10.32769 extensive
  Logical interface gr-0/0/10.32769 (Index 141077) (SNMP ifIndex 639) (Generation 177)
    Flags: Point-To-Point SNMP-Traps 0x4000 IP-Header 5.5.5.2:5.5.5.1:47:df:64:0000000800000000 Encapsulation: GRE-NULL
    Gre keepalives configured: Off, Gre keepalives adjacency state: down
    Traffic statistics:
     Input  bytes  :                 2992
     Output bytes  :                    0
     Input  packets:                   34
     Output packets:                    0
    Local statistics:
     Input  bytes  :                    0
     Output bytes  :                    0
     Input  packets:                    0
     Output packets:                    0
    Transit statistics:
     Input  bytes  :                 2992                    0 bps
     Output bytes  :                    0                    0 bps
     Input  packets:                   34                    0 pps
     Output packets:                    0                    0 pps
    Protocol inet, MTU: 1476, Generation: 234, Route table: 0
      Flags: None
    Protocol mpls, MTU: 1464, Maximum labels: 3, Generation: 235, Route table: 0
      Flags: Is-Primary

root@mde-bng-mx960-a> show route table test-cso-vrf.inet.0

test-cso-vrf.inet.0: 3 destinations, 3 routes (3 active, 0 holddown, 0 hidden)
+ = Active Route, - = Last Active, * = Both

2.2.2.0/24         *[Direct/0] 15:57:50
                    > via xe-1/0/0.0
2.2.2.1/32         *[Local/0] 15:57:50
                      Local via xe-1/0/0.0
4.4.4.3/32         *[BGP/170] 15:49:41, localpref 200, from 5.5.5.2
                      AS path: ?, validation-state: unverified> via gr-0/0/10.32769, Push 17

root@mde-bng-mx960-a> show bgp summary
Groups: 1 Peers: 1 Down peers: 0
Table Tot Paths Act Paths Suppressed History Damp State Pending
bgp.l3vpn.0
 1 1 0 0 0 0
Peer AS InPkt OutPkt OutQ Flaps Last Up/Dwn State|#Active/Received/Accepted/Damped...
5.5.5.2 64512 1998 2221 0 0 16:37:58 Establ
 bgp.l3vpn.0: 1/1/1/0
 test-cso-vrf.inet.0: 1/1/1/0

root@mde-bng-mx960-a> show configuration chassis
fpc 0 {
    pic 0 {
        tunnel-services {
            bandwidth 1g;
        }
    }
}

root@mde-bng-mx960-a> show configuration routing-instances test-cso-vrf
instance-type vrf;
interface xe-1/0/0.0;
vrf-target target:64512:123;
vrf-table-label;

root@mde-bng-mx960-a> show configuration interfaces xe-1/0/0.0
family inet {
    address 2.2.2.1/24;
}

root@mde-bng-mx960-a> show configuration protocols bgp
group Contrail {
    type internal;
    local-address 5.5.5.1;
    family inet-vpn {
        unicast;
    }
    neighbor 5.5.5.2;
}

root@mde-bng-mx960-a> show configuration routing-options
static {
    route 0.0.0.0/0 next-hop 10.209.63.254;
}
route-distinguisher-id 5.5.5.1;
autonomous-system 64512;
dynamic-tunnels {
    Contrail {
        source-address 5.5.5.1;
        gre;
        destination-networks {
            5.5.5.0/24;
        }
    }
}

root@mde-bng-mx960-a> show configuration interfaces ge-0/0/0
unit 0 {
    family inet {
        address 5.5.5.1/24;
    }
}