'India's bilateral trade to face issues as Bangladesh crisis deepens'

Domestic exporters on Monday expressed concerns over the crisis in Bangladesh and said the developments in the neighbouring country would have implications on bilateral trade.

However, exporters expect that the situation may normalise soon.

According to exporters, they are already facing disruptions in exports to Bangladesh due to a shortage of foreign exchange in that country.

India's exports of perishable goods are facing challenges at the border.

Bangladesh Prime Minister Sheikh Hasina has resigned, and an interim government is taking over in the country.

The neighbouring country has been witnessing fierce demonstrations over the controversial quota system that reserves 30 per cent of jobs for the families of veterans who fought the 1971 liberation war.

More than 100 people have been killed in the protests against the Hasina government in the last two days.

"We were facing some disruptions due to the issues in Bangladesh, but we are expecting that the situation will be restored soon and trade will not face any challenge," Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said.

West Bengal-based exporter and Managing Director of PATTON Sanjay Budhia said that as the two countries have close economic and geographic ties, the crisis can have a significant impact on India's trade.

India exports a variety of goods to Bangladesh, including cotton, machinery and food products, while imports goods like jute and fish.

Budhia said that supply disruptions can affect these sectors, and any crisis leading to border closures or increased security can disrupt the flow of goods, affecting the bilateral trade.

"While the crisis in Bangladesh poses several risks to India's trade, proactive measures and regional cooperation can help mitigate these impacts and ensure continued economic stability and growth. The need of the hour is to have a balanced approach, keeping the geopolitical and economic considerations in mind," he noted.

Budhia added that while the situation is not very heartwarming for the Indian exporters, "we must continue to focus on our own competitiveness development to achieve the target of USD 1 trillion merchandise exports by 2030".

FIEO Regional Chairman (Eastern Region) Yogesh Gupta said the development would have an impact on bilateral trade.

"Such incidents hurt the movement of goods at borders," Gupta said.

Sharing similar views, PSY Ltd owner Pravin Saraf said the crisis in Bangladesh would have long-term implications.

"We were already facing payment delay issues in that country because of forex shortage there, and now this development would further hurt the bilateral trade. We do not know when the situation will be normalised," Saraf said.

PSY Ltd exports several goods to Bangladesh, including spices, food grains and chemicals.

Think tank GTRI said Bangladesh has been facing a severe dollar shortage, which has limited its ability to import goods, including those from India.

Rising inflation in the country has also reduced domestic demand, leading to lower consumption of local and imported products.

"As Bangladesh experiences political turmoil, it is essential for all political factions to protect garment and other factories and keep supply lines open across the border to sustain trade and economic activity," Global Trade Research Initiative (GTRI) founder Ajay Srivastava said.

He said Bangladesh's economic challenges have negatively impacted bilateral trade in recent years.

Bangladesh is India's biggest trade partner in South Asia and India is the second biggest trade partner of the neighbouring country in Asia.

India's exports to Bangladesh dipped to USD 11 billion in 2023-24 from USD 12.21 billion in 2022-23. Imports too declined to USD 1.84 billion in the last fiscal from USD 2 billion in 2022-23.

India's main exports include vegetables, coffee, tea, spices, sugar, confectionary, refined petroleum oil, chemicals, cotton, iron and steel, and vehicles. The main import items are fish, plastic, leather, and apparel, among others.

According to GTRI, India's exports to Bangladesh are highly diversified, covering sectors like agriculture, textiles, machinery, electronics, auto parts, iron and steel, electricity and plastics.

Notably, most of these exports to Bangladesh are subject to full tariffs and fall outside the South Asian Free Trade Area (SAFTA) agreement.

In contrast, Bangladesh's exports to India are concentrated in a few categories, with textiles, garments, and made-ups making up 56 per cent of their exports.

These items benefit from zero tariffs under the SAFTA agreement, extended by India.