Dhaka Strife Big Threat
By Shivaji Sarkar
The ongoing unrest in Bangladesh is having a significant impact on businesses across India, affecting a wide range of sectors. From onion exporters to large corporations, many are experiencing substantial losses, including in the stock market. Although Bangladesh accounts for only 2.5 per cent of India’s total merchandise trade, its influence is felt across various industries.
Auto-part traders in Delhi and other regions, for example, rely on Dhaka as a transit hub for goods moving from western India to the Northeast. Small businesses in Kolkata, Ludhiana, Jaipur, and Delhi are also feeling the pinch, prompting them to band together in response to the crisis.
Indian conglomerates, which have invested billions in Bangladesh, are voicing their concerns, while many Bangladeshi firms are similarly affected. The turmoil is disrupting the lives of thousands of people who work across borders. Students from both countries are also caught up in the situation, highlighting the deep, interconnected ties between India and Bangladesh that extend beyond just trade and investment.
During Sheikh Hasina’s tenure, trade relations between India and Bangladesh experienced a significant boost, resulting in a notable trade surplus for India. Her departure could potentially disrupt these gains, impacting the flow of goods and people and delaying a proposed free trade agreement (FTA). Indian cotton farmers may lose $1.2 billion exports. Overall, at stake is $ 12.9 billion bilateral trade, though it shrank to $11 billion in 2024 plus $8 billion Indian credit to Bangladesh.
Losses to Bangladesh economy during the last two years have increased. Its forex reserves depleted to $15.82 billion from $48 billion two years ago. Over 3 crore of 17 crore are jobless. The economy has slowed sharply since the Russia-Ukraine war pushed up prices of fuel and food imports, forcing Bangladesh to turn last year to the International Monetary Fund (IMF) for a $4.7-billion bailout.
The interim government composition and influence of Bangladesh Nationalist Party of Begum Khaleda Zia on the new dispensation, may come in the way of India doing better. Because of Sheikh Hasina favouring some of the business houses, anti-India sentiments are strong. The interim administration has difficult task of restoring peace and ensuring free and fair elections in a surcharged atmosphere that targets minority Hindu community, Awami League (AL) leaders and supporters. Even a film maker and his son, who made a biographical film on Sheikh Mujibur Rahman were lynched to death. Brutal deaths of Hindu minorities, AL leaders, and workers may have crossed many thousands. Innumerable women and girls have been raped, molested and abducted.
Minorities are uniting against the atrocities in Bangladesh. Elites are holding meets and now demanding four to five districts as the minority autonomous region. According to Bangladesh Hindu Bauddha Unity Council, despite minorities resisting the marauders in a few areas, the arson and loot is widespread. Whether AL would be allowed to contest the elections or not would be crucial for normalisation. Jamaat-e-Islam, however, is a powerful organisation. It controls banks, businesses, trade, educational institutions and has enough clout to influence policies in the new dispensation. India is acting cautiously building links with the new leaders. Begum Zia would be a key factor.
India’s major exports include vegetables, coffee, tea, spices, sugar, confectionery, refined petroleum oil, chemicals, cotton, iron and steel, and vehicles, while its main imports consist of fish, plastic, leather, and apparel.
In the fiscal year 2023-24, the total trade between India and Bangladesh reached Rs 1,35,285 crore, with India holding a substantial trade surplus. According to Ajay Srivastava, founder of the Global Trade Research Initiative, India has a strategic interest in supporting peace and stability in Bangladesh and garment industry must be protected. As a flip side, it can boost Indian garment exports to the West till Dhaka corrects the domestic affairs.
The commerce ministry states that India exported goods worth Rs 91,614 crore to Bangladesh during this period, while importing goods worth Rs 15,268 crore. This resulted in a trade surplus of Rs 76,346 crore in favour of India. The data underscores Bangladesh’s role as a crucial trading partner for India, and any disruptions will impact the economies of both countries.
Notably, infrastructure and connectivity projects have been crucial in bolstering Indo-Bangladesh relations. Since 2016, India has provided $8 billion in credit for the development of road, rail, shipping, and port infrastructure in Bangladesh. Key projects include the Akhaura-Agartala rail link and the Khulna-Mongla Port rail line, both inaugurated in November 2023, which aim to boost trade and strengthen people-to-people ties. Large investments of India are locked in these projects. Disruptions in these connections could hinder India’s access to its Northeast region and jeopardise existing bus routes and agreements for Chittagong and Mongla ports.
Several Indian companies – including Tata Group, VIP Industries, Marico, Adani Power, Emami, Hero MotorCorp, TVS Motors, among others have strong ties to Bangladesh. Marico is an instant sufferer. Marico exports widely to Asia, the Middle East and Africa, but Bangladesh is a particularly large market, accounting for 51 per cent of the company’s international business in fiscal 2022, and reportedly yields 11 per cent to 12 per cent of total sales. The stock price fell on concerns that a hit to sales in Bangladesh would depress Marico’s earnings. It hits onion farmers as well. India exports approximately 35 per cent of its onion production to Bangladesh.
Auto motor spare parts are in large demand in Bangladesh as most two-wheeler and four-wheelers of the same brand are sold in the two countries. Items worth Rs 1000 crore are exported from Delhi every month, says Chamber of Trade and Industry. The sector had suffered during the Sri Lanka upheavals. The new orders are not possible but old consignments are locked in payment hassle.
There are many small businesses in Punjab, who use the Dhaka route to send their consignments to North-East. They earn double benefits. The consignment from India to Bangladesh earns export incentives and similarly the reexport by their company to North-East helps them get another incentive from Dhaka. This apart it saves on transit and transportation time and expenses. Similar linkages are there from different corners.
The key government properties – railways, metro, expressways have been destroyed across the country in recent carnage. Rebuilding would take time. Government officers are wary of going to offices and private industries may take longer to resume functioning. It is a loss to the subcontinent just not India. — INFA