Ajay Sahai, Director-General of the Federation of Indian Export Organizations (FIEO), stated, “We estimate that about $300 million worth of export trade has been affected due to the political crisis in Bangladesh. We export about $30 million to Bangladesh every day.” Bangladesh is a crucial trade partner for India, ranking as India’s foremost partner in the subcontinent and its fourth-largest export destination. The crisis may also delay the progress of the free trade agreement negotiations between the two countries that began in October last year.
Impact on Local Businesses The crisis has severely affected local businesses in Indian border states. Shopkeepers, transporters, and money changers are experiencing an 80 percent decline in business activity. At the Akhurah-Agartala border check post in Tripura, another major trading point, business has significantly dropped. Ujjal Saha, secretary of the West Bengal Exporters Coordination Committee, reported that delays in customs clearance by Bangladesh authorities have left hundreds of trucks stranded at various land ports, including Petrapole, Gojadanga, Mahadipur, and Fulbari in West Bengal. Trade through Petrapole, the largest land port in North 24 Parganas district, is halted as Benapole customs in Bangladesh are non-functional. Additionally, a three-day holiday declared by the Bangladesh government has further delayed the resumption of trade activities.
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), stressed the importance of protecting factories in Bangladesh and maintaining supply lines to sustain trade and economic activities. “It is essential for all political factions in Bangladesh to ensure the safety of garment and other factories and to keep supply lines open across the border,” he said.
Indian Companies Affected The political turmoil in Bangladesh has also affected several Indian companies with significant operations or market interests in the country. The stock market has reflected this, with shares of Indian firms linked to Bangladesh experiencing declines. Marico, known for Saffola edible oil, saw its stock drop by over 4%. Bangladesh contributes approximately 11-12% of its revenue, and the ongoing crisis threatens to disrupt its sales. Pearl Global Industries, which derives about 25% of its revenue from Bangladesh, reported a share decline of over 3%. Emami also experienced a decline of over 4% in its shares, facing potential disruptions due to its substantial operations in Bangladesh. Other Indian companies feeling the strain include Bayer Corp, GCPL, Britannia, Vikas Lifecare, Dabur, Asian Paints, Pidilite, Jubilant Foodworks, and Bajaj Auto. Companies like Trent, PDS, and VIP Industries, reliant on Bangladesh within their supply chains, are particularly affected.
Impact on Textile and Garment Sector The crisis has posed challenges for India’s textile and garment sector, with Bangladesh being a crucial market for yarn exports, constituting 25-30% of India’s total exports in this category. While the current impact on the textile and garment sector remains moderate, experts are concerned about potential long-term effects if the situation persists. Conversely, the turmoil presents opportunities for Indian textile and garment manufacturers to expand their market share. Stocks of companies such as Gokaldas Exports, KPR Mill, Arvind Ltd, SP Apparels, Century Enka, Kitex Garments, and Nahar Spinning have surged, reflecting market optimism.
Adani Power The situation also raises concerns about the Adani Power Limited and Bangladesh power supply agreement. Under the 2017 power purchase agreement (PPA), Adani Power is committed to supplying 1,496 MW of electricity to Bangladesh for 25 years. Although operational since June 2023, past concerns over coal pricing have surfaced. Experts caution that any drastic decisions could adversely affect investor sentiment, given Bangladesh’s pressing need for a stable power supply.
