Recent Bangladesh crisis won’t have significant impact on India Inc: Report

New Delhi, Sep 17 (IANS) Recent developments in Bangladesh haven’t had a significant impact on India’s trade and going forward, the effect will vary based on industry and sector-specific nuances and exposure, a report showed on Tuesday. 

A Crisil Ratings report said it does not foresee any near-term impact on the credit quality of India Inc too.

However, a prolonged disruption can affect the revenue profiles and working capital cycles of some export-oriented industries for which, Bangladesh is either a demand centre or a production hub.

That, and the movement in the Bangladeshi currency taka, will bear watching, the report mentioned.

India’s trade with Bangladesh is relatively low, accounting for 2.5 per cent of its total exports and 0.3 per cent of total imports last fiscal (FY24).

“Sectors such as cotton yarn, power, footwear, soft luggage, fast moving consumer goods (FMCG) may see a small but manageable negative impact, while ship breaking, jute, readymade garments (RMG) should benefit. For most others, the impact will be insignificant.,” the report findings showed.

Merchandise exports mainly comprise cotton and cotton yarn, petroleum products, electric energy, etc., while imports largely consist of vegetable fat oils, marine products and apparel.

The report said that for cotton yarn players, Bangladesh accounts for 8-10 per cent of sales, so the revenue profile of major exporters could be affected. “Their ability to compensate sales in other geographies will be an important monitorable,” it added.

Companies into footwear, FMCG and soft luggage could also see some impact because of manufacturing facilities located in Bangladesh.

These facilities faced operational challenges during the initial phase of the crisis. However most have since commenced operations, though a full ramp-up and the ability to maintain their supply chain will be critical.

Meanwhile, Bangladeshi interim government's Chief Adviser Muhammad Yunus has decided to form six commissions to reform the judiciary, election system, administration, police, anti-corruption commission, and the constitution. According to Yunus, these commissions are expected to start their work on October 1 and finish within the next three months to create a democratic framework for the country.

According to the Crisil report, engineering, procurement and construction companies engaged in power and other projects in Bangladesh could see execution delays this fiscal as a sizeable portion of their workforce has been recalled to India for almost a month now.

With only a gradual ramp-up in workforce expected, revenue booking could be lower this fiscal compared with earlier expectations. Besides, companies supplying electricity could see delayed payment of dues, the report mentioned.

--IANS

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