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Crisil Ratings said on Tuesday that recent developments in Bangladesh have not had a material impact on India’s trading and it does not expect any near-term impact on India Inc’s credit quality.
Crisil Ratings said the effect will vary depending on industry and sector-specific nuances and exposure. “We also do not foresee any near-term impact on India Inc.’s credit quality,” it added.
However, a prolonged disruption may affect the revenue profiles and working capital cycles of some export-oriented industries for which Bangladesh is a demand center or a production hub.
The movement of the Bangladeshi currency, the taka, will also need to be closely monitored, the credit rating agency said.
“The recent developments in Bangladesh have not had a material impact on India’s trade and going forward, the effect will vary depending on industry/sector specific nuances and exposure. We also do not foresee any near-term impact on India Inc.’s credit quality,” Crisil Ratings said.
Footwear, FMCG and soft luggage companies could also be affected due to manufacturing facilities located in Bangladesh, which faced operational challenges during the initial phase of the crisis.
However, most have already started operating, although a full recovery and the ability to maintain their supply chain will be critical, he said.
Engineering, procurement and construction companies involved in power and other projects in Bangladesh may face delays in execution during this fiscal year as a significant portion of their workforce has been recalled to India for nearly a month now.
With only a gradual increase in the workforce expected, the revenue pool could be lower this fiscal compared to earlier expectations, Crisil Ratings added.
While sectors such as cotton spinning, power, footwear, soft luggage and fast-moving consumer goods (FMCG) may see a small but manageable negative impact, shipbreaking, jute and ready-made garments (RMG) should benefit, Crisil Ratings said.
For most others, the impact will be negligible.
India’s trade with Bangladesh is relatively low, accounting for 2.5 per cent of its total exports and 0.3 per cent of its total imports in the last fiscal year, according to Crisil Ratings.
Merchandise exports comprise mainly cotton and cotton yarn, petroleum products, electric power, etc., while imports consist largely of vegetable oils, marine products and clothing.
For cotton yarn producers, Bangladesh accounts for 8-10 per cent of sales, so the revenue profile of major exporters could be affected. Their ability to offset sales in other geographies will be an important factor to monitor, Crisil Ratings added.
Nobel laureate Muhammad Yunus was last month appointed as Bangladesh’s chief adviser following the resignation of Sheikh Hasina, who fled the country on August 5 amid mass student-led protests.
(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First published: September 17, 2024 | 16:29 IS
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