Staff Reporter :
India’s exports to Bangladesh saw a significant drop of 28 per cent in August, declining to $681 million from $943 million in the same month last year, according to data released by The Indian Express.
Key export segments such as cotton, which remains India’s largest export to Bangladesh, were hit particularly hard. Cotton exports shrank by nearly 10 per cent, falling to $1 billion in August this year, down from $1.11 billion in August 2023.
The downturn comes in the wake of declining orders in Bangladesh’s textile and apparel sector, which has been impacted by widespread protests that erupted in July. The protests, sparked by issues of discrimination and reparations, culminated in the ousting of former Prime Minister Sheikh Hasina on 5th August.
India exports a wide range of goods to Bangladesh, including cotton, machinery, and food products, while Bangladesh primarily exports goods such as jute and fish to India.
However, the August trade data suggests that the fall in Bangladeshi orders has had a knock-on effect on India’s textile industry, which provides raw materials and other inputs to its neighbour’s manufacturing sector. Fresh inquiries for garment orders have been directed towards India, but the country’s cotton exports to Bangladesh have continued to decline.
Additionally, Indian companies supplying electricity to Bangladesh could face delays in payment settlements. Notably, there is a heightened risk of debtor default in many sectors, as major transactions are increasingly reliant on letters of credit (LCs). Should these LCs be invoked due to non-payment, Indian businesses may find themselves dependent on Bangladeshi banks for settlement, raising concerns about liquidity and transaction completion, as outlined in the report.
Over the last decade, Bangladesh has emerged as one of India’s most significant export markets, becoming the largest destination for Indian goods within the South Asian region. In fact, during the 2023-24 fiscal year, India’s exports to Bangladesh surpassed those to many of the world’s leading economies, including Japan, Germany, and France.
In the last financial year, India exported goods worth $11.1 billion to Bangladesh, including textiles, tea, coffee, auto parts, electricity, agricultural products, iron, steel, and plastics. In contrast, it imported $1.8 billion worth of Bangladeshi goods, such as readymade garments, leather, and leather products.
The share of Bangladesh in India’s overall merchandise exports has risen from 1.2 per cent in 2009 to 2.6 per cent in 2023. This is higher than several major economies like Japan (1.2%), South Korea (1.5%), France (1.7%), and Germany (2.2%) during the same period.
However, India’s exports to Bangladesh during the 2023-24 fiscal year amounted to $11 billion, down from $12.21 billion in 2022-23. On the flip side, Bangladesh’s exports to India crossed the $2 billion mark for the first time in the 2022-23 fiscal year, but saw a decline of 17 per cent in 2023-24.