Bangladesh: Indian firms cautiously get back to business

The effort to restore peace continues in Bangladesh on Friday after Nobel laureate Muhammad Yunus was sworn in as head of the nation’s interim government the day before. Yunus’ interim government is being backed by the country’s students bodies, whose violent protests over job reservation led former Prime Minister Sheikh Hasina Wazed to resign her post and escape to India earlier this week.

As Yunus and the Bangladesh military forces strive to restore peace in the nation, prospects of Indian companies conducting trade in the troubled nation have naturally come into focus. Bangladesh is a significant market for over a dozen listed Indian companies. These include Marico, Life Insurance Corporation (LIC) of India, Pearl Global Industries, Emami, Britannia, Bajaj Auto, Dabur, Asian Paints, Godrej Consumer Products, Pidilite, Jubilant Foodworks, Bayer, GCPL and Vikas Lifecare.

India primarily exports iron and steel, motor vehicles, refined petroleum oil, chemicals, sugar, tea, coffee, spices, confectionary and vegetables to Bangladesh. India’s main import from Bangladesh include fish, leather, apparel and plastic.

An Indian brand with a big market in Bangladesh is Marico, which manufactures Saffola cooking oil and Parachute hair oil. Shares of Marico Limited had notably dropped 4.41 per cent on Tuesday after Sheikh Hasina fled to India. Marico, which derives nearly 11 per cent of consolidated revenue from its distribution network of over 770,000 outlets in Bangladesh, resumed retail sale and distribution in the country and plans to restart manufacturing soon.

Life Insurance Corporation (LIC) Of India has 13 offices in Bangladesh and the company sold around 4,500 policies in that country during the fiscal year 2023-’24, or FY24. After Hasina fled to India, LIC had announced its offices in Bangladesh would remain shut till at least August 7. The company, which is backed by the government of India, has started operating partially since August 8.

Factories of Pearl Global Industries, the Indian garment maker that supplies material to labels such as Ralph Lauren, Macy’s and GAP, shut business during the two-day curfew and resumed operation on August 7 with an average staff count of over 97 per cent. The company, with manufacturing outlets in Dhaka and Gazipur, is currently operating around 70 per cent of its plants, according to a Reuters report.

The Squirrels had reported on August 6 that, according to S&P Global Ratings, the Bangladesh political crisis is unlikely to have an effect on India’s overall trade situation in the fiscal year 2024-’25, or FY25. The observation is pertinent because Bangladesh is India’s biggest trade partner in South Asia while India is Bangladesh’s second-biggest trade partner in Asia.

“India is a well-diversified exporter to the entire world. Its trade profile is significantly larger than bilateral trade relationships with economies like Bangladesh. Whatever the impact is going to be, is really quite unlikely to have a meaningful impact on its overall trade position for the fiscal year,” Andrew Wood, Director, Sovereign and International Public Finance Ratings (Asia-Pacific), S&P Global Ratings, said during a webinar on Tuesday.

According to S&P Global, domestic conditions in Bangladesh during this period are expected to be weak, which would mean less exports to the country from the world over including India.