Bangladesh crisis: How will India Inc be impacted?

Following the fall of Sheikh Hasina’s government, FMCG companies in Bangladesh face turmoil, advising employees to stay indoors.

Even since the fall of the Sheikh Hasina government in Bangladesh on Monday, chaos continues in the neighbouring country. The situation led to tough times for FMCG companies such as Marico, Dabur, Hindustan Unilever, Nestle, PepsiCo, and Coca-Cola. According to reports, the companies have advised their employees to stay indoors and work from home, while some have even suspended sales operations till the situation returns to normal.

Indian FMCG companies including Marico, Dabur, Emami and HUL have a presence in Bangladesh accounting for overall revenues in the range of 1-5 per cent.

Rohit Jawa, managing director of HUL, said, as reported by ET: “We hope the situation stabilises soon, because it is very important country for Unilever. As soon as the situation normalises… we will be back in operation because like in HUL, we sell a whole lot of daily goods and essential needs in Bangladesh. So, the sooner we can go back to operations, and the sooner we can start supplying again, the better is, also for the consumers.”

According to the ET report, Saugata Gupto, managing director of Marico, whose 44 per cent of international revenue comes from Bangladesh, said, “The Bangladesh business has held firm in a challenging environment on the back of a broad-based portfolio and robust portfolio. We remain watchful in the current on-ground situation.”

Marico had fallen over 5 per cent immediately after PM Hasina fled Bangladesh and the country fell into chaos.

What Will Be the Overall Impact of the Bangladesh Crisis on India Inc?

Suman Chowdhury, chief economist and head (research) at Acuité Ratings & Research, said, “While Bangladesh is an important trade partner for India, the impact of the severe political crisis there will have a very limited impact on India’s overall trade volumes. The exports to Bangladesh account for only 2.5 per cent of India’s total merchandise exports.”

However, specific industry segments where exports to that country constitute a large share such as cotton yarn, may witness a material impact in the near term; on the other hand, this can also be an opportunity for Indian RMG players who had lost export markets earlier to Bangladesh, he said.

“Indian manufacturing and infrastructure companies having business or project operations or supply linkages therein are likely to witness some disruption and uncertainty in the near term. Importantly, the current scenario may lead to deferment or slowdown of fresh investments by Indian companies in the neighbouring country pending the establishment of a stable government. The proposed FTA with Bangladesh will also be put on the backburner under the current circumstances,” Chowdhury added.

Authored by Mohammad Harris, Deputy News Editor (Business) at News18