Wed Sep 18 03:59:51 UTC 2024: ## India’s Exports to Bangladesh Slip Amidst Forex Crisis and Protests

**New Delhi, India:** India’s exports to Bangladesh experienced a significant decline of 28% in August 2023, dropping to $681 million compared to $943 million in the same month last year. The downturn is attributed to ongoing protests and violence in Bangladesh, exacerbating an existing foreign exchange crisis in the neighboring country.

According to official data released by the Commerce and Industry Ministry, cotton exports, India’s primary export commodity to Bangladesh, also saw a near 10% dip, reaching $1 billion in August 2023 compared to $1.11 billion in August 2022. This decline is largely attributed to slowing textile and apparel orders in Bangladesh following the protests.

The ripple effect of the situation has impacted the Indian textile industry, which supplies raw materials and input items to Bangladesh. While there have been fresh inquiries for garments from India, cotton exports to Bangladesh have begun to decline.

**Impact on Indian Businesses:**

Rating agency Crisil has analyzed the impact of these developments on Indian businesses. While acknowledging that the current situation hasn’t had a significant impact on overall India-Bangladesh trade, prolonged disruptions could affect the revenue profiles and working capital cycles of certain export-oriented Indian units.

Sectors expected to experience a modest negative impact include cotton yarn, power, footwear, soft luggage, and fast moving consumer goods (FMCG). However, sectors like ship breaking, jute, and readymade garments (RMG) are likely to benefit from the situation.

Crisil highlights potential challenges for specific industries:

* **Cotton yarn:** While Bangladesh accounts for 8-10% of sales for cotton yarn players, their ability to compensate for lost sales in other markets will be crucial.
* **Footwear, FMCG, and soft luggage:** Companies with manufacturing facilities in Bangladesh faced operational challenges during the initial phase of the crisis.
* **Engineering, procurement, and construction companies:** These companies engaged in projects in Bangladesh might face execution delays due to a significant portion of their workforce being recalled to India.

**Overall Impact:**

The study concludes that the impact of the crisis on India’s overall trade with Bangladesh is relatively low, accounting for 2.5% of total exports and 0.3% of total imports last fiscal year. While some sectors may experience a temporary impact, overall credit quality of Indian businesses is not expected to be significantly affected in the near term.

**Moving Forward:**

The situation in Bangladesh continues to evolve, and the long-term impact on India’s trade with its neighbor remains uncertain. It will be crucial to monitor the situation closely, particularly the movement of the Bangladeshi currency taka and the ability of various sectors to adapt to the changing landscape.

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