Bangladesh unrest not likely to impact India's overall trade balance: S&P

India is a well diversified exporter and a blip in its exports to Bangladesh is unlikely to have any meaningful impact on India's overall trade position for the full year, S&P Global Ratings said on Tuesday.

Bangladesh is facing its worst political crisis since independence in 1971, with Prime Minister Sheikh Hasina resigning amid massive anti-government protests.

Bangladesh Army Chief General Waqar-uz-Zaman on Monday announced that an interim government would be taking over the responsibilities.

S&P Global Ratings, Director, Sovereign and International Public Finance Ratings (Asia-Pacific), Andrew Wood said that S&P expects domestic demand conditions in Bangladesh in this period of time to be weak and probably going to entail less support for exports from other countries, including India, into Bangladesh.

 

"India is a well diversified exporter to the entire world and its trade profile is significantly larger than bilateral trade relationships with economies like Bangladesh."

"Whatever the impact is going to be on directly is really quite unlikely to have a meaningful impact on its overall trade position for the fiscal year... its external position is quite strong in the country and is a net creditor to the world by our calculation," Wood said in a webinar.

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

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

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

India stands out on growth and external fronts amongst South Asian economies: S&P 

S&P Global Ratings on Tuesday said India stands out both on growth and external fronts amongst the South Asian countries, and the trajectory of government's fiscal deficit will decide on the direction of sovereign ratings.
 

S&P Director, Sovereign and International Public Finance Ratings (Asia-Pacific), Andrew Wood said the rating agency sees a lot of promise in India's economic growth story even though the global economic growth outlook remains somewhat challenging.
 

"We could raise the rating if India's fiscal deficit narrows meaningfully such that change in net general government deficit falls below 7 per cent of GDP on a structural basis," Wood said at a webinar on Asia-Pacific.
 

He said in the geography of South Asia, India stands out both on growth and external fronts.
 

"India is a net external creditor economy which is a core support for its investment grade rating. We see a lot of promise in India's economic growth story even in a somewhat challenging global economic growth outlook," Wood added.
 

The Budget for 2024-25 has announced targeting a central government fiscal deficit of 4.9 per cent of GDP in the current fiscal, lower than 5.1 per cent targeted earlier.
 

"This is good news at the margin but combined with local government deficit, general government deficit is likely to remain above 7 per cent of GDP at least for current fiscal. So the trajectory for this metrics over the next few years will remain an important one for the directionality of India's ratings," Wood said.
 

In May, S&P Global Ratings had upped India's sovereign rating outlook to positive from stable on robust growth prospects for next three years and public spending, and raised hopes for an upgrade in two years provided the government continues reforms and policies to keep fiscal deficit under check.
 

While retaining India's sovereign rating at the lowest investment grade of 'BBB-', S&P said it expects broad continuity in economic reforms and fiscal policies, irrespective of the election outcome.