Kolkata: Amid mounting geopolitical tensions and economic instability, Indian exporters are grappling with significant challenges as concerns about payment reliability grow, particularly when trading with Bangladesh.
With the reliability of letters of credit being honored by Bangladeshi banks diminishing, exporters are faced with fears of delayed or unfulfilled payments, which could severely impact trade between the neighboring countries. Yogesh Gupta, Regional Chairman of the Federation of Indian Export Organisations (FIEO), warned, "Export out of India to Bangladesh has hit badly because the payment assurance have come down to a very low level." Gupta highlighted the hesitation of Indian exporters to make shipments, as they are acutely aware of the growing uncertainty surrounding payment processing.
The current political backdrop in Bangladesh amplifies these uncertainties, affecting its banking sector's stability. Notably, global rating agency Moody’s revised its ratings for six Bangladeshi banks due to concerns raised from the country’s recent sovereign downgrade. Such developments have led to fears about the sustainability of the Bangladeshi banking system, pushing Indian exporters to reconsider engaging with this market. The influx of political upheaval has resulted in fewer letters of credit issued, with Kartik Chakraborty, secretary of the Petrapole Clearing Agents’ Staff Welfare Association, stating, "There are fewer letters of credit being issued to traders, and Indian exporters are unwilling to ship goods due to fears of non-payment."
Despite these challenges, commerce flows between the two nations continue, albeit at risk of substantial decline should tensions escalate. Petrapole-Benapole, the largest land port for India-Bangladesh trade, remains operational, yet industry insiders note significant reductions are expected shortly. The growth of healthcare services between the two nations has also been adversely affected, with fewer Bangladeshi patients seeking medical treatment across the border. Many are opting for online consultations with Indian healthcare providers as tensions dissuade physical travel.
On the flip side, not all news is bleak for Indian exporters. Europe has become a bright spot, presenting lucrative opportunities as demand for oil products soars amid geopolitical tensions impacting fuel supplies globally. Geopolitics has drastically changed fuel imports for countries across Europe and the UK, especially following the embargo on Russian diesel. Indian exporters have capitalized on this opportunity, ramping up shipments substantially. Benjamin Tang, head of liquid bulk at S&P Global Commodities at Sea, noted, "Refineries in India have ramped up exports to Europe and the Mediterranean since Europe and the UK banned Russian diesel in 2023." With gasoil exports to Europe rising significantly, reaching 215,000 barrels per day (b/d) this October, the trend signals resilience amid challenges faced elsewhere.
Data from CAS indicates Indian gasoil exports spiked following the shifting supply chains and political pressures. October’s uptick came down from the previous month’s high but remains greater than earlier months, reflecting how Indian exporters have managed to pivot their focus effectively. The increased exports are expected to continue flowing well beyond this year.
The Indian oil trade's dynamics are also shifting, with gasoil pricing metrics indicating favorable conditions for continued exports. The narrowing spreads of the Platts-assessed front-month gasoil exchange futures reflect market strategies, validating exporting activities toward Europe.
Even though political tensions loom large, and trade dynamics fluctuate, Indian exporters are showing adaptability. Engaging with the European market as opportunities for oil product exports expand demonstrates the underlying potential for Indian trade, even as uncertainties persist with Bangladesh. The balancing act requires exporters to weigh risks against competitiveness and secure production capabilities.
Looking forward, if tensions between India and Bangladesh themselves escalate or if political volatility continues within Bangladesh, it could strain trade relations ominously. Conversely, the sustained demand for oil products from Europe offers another channel for Indian exporters, providing hope amid the stormy seas of international commerce.
To sum up, the dual narrative of challenge and opportunity paints the picture of Indian exporters maneuvering through rough waters, illustrating the capacity for resilience and adaptation during uncertain times.
