Impact of Bangladesh Political Turmoil on Indian Corporates: CRISIL

CRISIL Ratings reported that recent political unrest in Bangladesh will not impact Indian corporates' credit quality in the near term. While trade remains unaffected, prolonged disruption could affect specific industries. Notably, export-oriented sectors may face revenue impacts, while others might benefit. Trade between India and Bangladesh includes cotton yarn, power, and FMCG.

Leading research firm CRISIL Ratings said on Wednesday that the recent political turmoil in neighbouring Bangladesh is unlikely to have any near-term impact on the credit quality of Indian corporates.

The report indicated that India's trade with Bangladesh has not seen a significant impact yet, although the effects could vary based on industry-specific exposure.

CRISIL warned that a prolonged disruption might affect the revenue profiles and working capital cycles of some export-oriented sectors such as cotton yarn, power, footwear, soft luggage, and FMCG. Conversely, sectors like shipbreaking, jute, and readymade garments may benefit.

In the financial year 2023-24, total trade with Bangladesh was around USD 12,949 million, with Indian exports at USD 11,065 million and imports at USD 1884 million.

India's trade with Bangladesh accounts for 2.5% of the country's total exports and 0.3% of its total imports. Cotton and cotton yarn, petroleum products, and energy are primary exports while imports consist mainly of vegetable oils, marine products, and apparel.

Electricity suppliers to Bangladesh could experience delayed payments. Furthermore, debtor risk for most sectors may rise with major transactions being carried out through letters of credit (LCs), which could be invoked in case of non-payment of dues.

(With inputs from agencies.)