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The Ripple Effect of Bangladesh Crisis on India's Economy The Bangladesh political crisis situation is bilaterally affecting the Indian economy in more ways than one

By Entrepreneur Staff

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Several Indian companies are being affected as a collateral damage due to the ongoing Bangladesh political crisis. Many India based companies outsource their operation to Bangladesh for various reasons. However, the ongoing crisis has taken a major toll on these companies. Ever since Sheikh Hasina took office in Bangladesh, the country has been an ally for India in trade and economy. The internal distress in the country is now having international repercussions.

Ever since Sheikh Hasina assumed office, Bangladesh has been a steadfast ally for India in terms of trade and economic cooperation. The country ranks as India's 25th largest trading partner, with bilateral trade valued at a substantial $12.9 billion. Notably, Bangladesh is India's 8th largest export market. In the financial year 2024, India enjoyed a notable trade surplus of $9.2 billion with Bangladesh, driven by key exports including cotton, coffee, tea, vegetables, vehicles and advanced electrical machinery.

The crisis in Bangladesh is severely impacting fast-moving consumer goods (FMCG) companies in India. For instance, Marico, a prominent player known for its Saffola edible oil, has seen its shares drop by over 5.5 per cent in the past week. With 11-12 per cent of its revenue coming from Bangladesh, the company is significantly exposed to the unrest.

In a regulatory filing, Marico stated, "We are writing to share an update on the status of Marico's business operations in Bangladesh in the wake of recent developments in the country. We would like to inform you that operating conditions in the market are gradually improving, however we remain watchful of the evolving situation. We continue to prioritize the safety of our employees, factory workers, distributors and other stakeholders of our business. After a brief interruption, a large majority of our retail sales force and distributors have now resumed operations. We expect our manufacturing operations to resume soon, while we continue to maintain an adequate assurance of supply of our products to meet market demand in the interim. We firmly believe that the medium-term prospects of Marico's business in Bangladesh remain intact."

Other major FMCG companies such as Dabur, Godrej Consumer Products Limited (GCPL), and Britannia also have exposure of sales to Bangladesh, albeit less than 5 per cent. Jubilant FoodWorks, which operates 28 Domino's outlets in Bangladesh, is also affected with approximately 1 per cent of its consolidated sales stemming from the country.

As for the textile and garments industry, the crisis has weaved an opportunity of hope for export. Companies like Gokaldas Exports have seen their shares soar, gaining up to 18 per cent and reaching a 52-week high of INR 1,089.40 on the NSE. Other textile firms such as KPR Mill, Arvind Ltd, SP Apparels, Century Enka, Kitex Garments, and Nahar Spinning are also experiencing significant gains.

Companies that rely on Bangladesh for their supply are feeling the heat as well. VIP Industries, for example, has seen its share price plummet by over 4 per cent in the last week. The company sources 30-35 per cent of its capacity from eight manufacturing facilities in Bangladesh, and the unrest is disrupting its supply chain and production capabilities. Similarly, Trent, a Tata Group company, has experienced a 4 per cent drop in share price. The group's reliance on Bangladesh for sourcing critical components is creating potential supply chain disruptions, raising concerns about long-term stability.

The ongoing crisis in Bangladesh underscores the importance of stable political environments for sustaining economic growth and international trade relations. Indian companies, particularly those with significant exposure to Bangladesh, need to monitor developments closely and adjust their strategies accordingly to maintain stability and growth.

Entrepreneur Staff

Entrepreneur Staff

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