Wed Sep 18 05:09:56 UTC 2024: ## Bangladesh Unrest: Limited Impact on India’s Trade, But Some Sectors May Feel Pinch

**New Delhi:** While recent events in Bangladesh haven’t significantly impacted India’s overall trade, certain export-oriented sectors may face temporary challenges, according to CRISIL Ratings.

The agency predicts minimal near-term impact on Indian companies’ credit quality, but notes that the effects will vary based on industry exposure and specific nuances.

Sectors like cotton yarn, power, footwear, soft luggage, and FMCG might see a slight negative impact, primarily due to dependence on Bangladesh as a demand center or production hub. However, CRISIL expects these impacts to be manageable.

Conversely, the ship breaking, jute, and readymade garments (RMG) industries are likely to benefit from increased sales inquiries from key export markets like the US and Europe.

**Cotton Yarn:** The cotton yarn industry, which relies on Bangladesh for 8-10% of its sales, may face revenue profile challenges. However, their operating profit margins might not be significantly affected due to already modest cotton-yarn spreads.

**Footwear, FMCG, and Soft Luggage:** These sectors could see some impact due to manufacturing facilities located in Bangladesh. While most facilities have resumed operations after initial disruptions, maintaining supply chains and reaching full operational capacity remain crucial.

**Power and Construction:** Engineering, procurement, and construction companies engaged in power and other projects in Bangladesh may face execution delays this fiscal year. This is because a significant portion of their workforce was recalled to India, causing a temporary labor shortage.

**Financial Concerns:** CRISIL highlights potential debtor risk as major transactions in Bangladesh are often conducted through letters of credit (LCs). Non-payment could lead to dependence on Bangladeshi banks for settlement. Additionally, the depreciation of the Bangladeshi taka against the rupee and other currencies is raising forex concerns.

**Overall, CRISIL concludes that the impact of the situation in Bangladesh on Indian businesses will be sector-specific. While some industries may experience minor disruptions, others are expected to benefit from the evolving market dynamics.
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