Imports are also likely to be disrupted in the near term, affecting the supply chain of some Indian companies in the textile sector, the agency noted.

Bangladesh has also been a consumer market for some Indian fast moving consumer goods manufacturers and some slowdown can be expected in that arena as well, it noted.

India had a healthy trade surplus with Bangladesh in the last fiscal (FY24), with significant exports of cotton yarn, agricultural items, engineering goods and chemicals.

But the overall impact on India’s trade and economy is not likely to be significant as trade with Bangladesh (merchandise exports and imports) comprise only 1.2 per cent of India’s aggregate trade volumes.

Bangladesh is a major market for Indian yarn, accounting for 25-30 per cent of the total yarn exports. If the crisis persists for a longer period, such exports, which stood at $1.3 billion in FY24, may be affected, the agency said in a release. This may translate to lower realizations and margins in the export markets.

On the other hand, the crisis presents opportunities for Indian fabric and garment manufacturers to raise their export market share.

The primary markets for Bangladesh textiles goods are the European Union, the United States, Canada, Australia and Japan. There can be a potential 15-20 per cent decline in garment exports for the next summer season (January-March 2025) due to recent disruptions and factory shutdowns. This can be both a short and a longer term opportunity for Indian garment exporters if the crisis doesn’t dissipate in a short period, Acuité Ratings noted.

Bangladesh may experience a severe shortage of foreign exchange, which hampers its ability to pay for imports. Indian exporters may face payment delays and challenges in receiving payments for their goods, it said. This financial strain can further disrupt trade relationships and lead to a decline in exports.

Political unrest often leads to heightened security measures at borders, which can slow down the movement of goods and increase trade costs. This can affect both imports from and exports to Bangladesh, potentially making Indian products less competitive, it added.

Fibre2Fashion News Desk (DS)