The steep fall of Indian rupee against the US dollar should make Bangladesh’s imports cheaper while putting its exports in tough competition with India local products, businessmen said yesterday.
Exports to India would be affected as local products like garments – mainstay of Bangladesh economy – will lose competitive edge while import costs would fall by more than 10% or around $500m.
“Devalued rupee is a bane for local exporters, but boon for the importers,” said Matlub Ahmad, President of India-Bangladesh Chamber of Commerce and Industry (IBCCI).
Since June 2013, the rupee depreciated by 17% against the greenback. Its exchange rate currently averaged at a range between Rs63 and Rs64 to a dollar.
Bangladesh exports goods including raw jute, jute goods, frozen food, agri-products, woven garments, knitwear, leather and chemical products while imports goods including automobile, textiles and textile articles, products of the chemical or allied industries, machinery and mechanical appliances.
Matlub said India would get competitive advantage to export Bangladesh’s common products like garments, shrimp and jute to third countries, which is not good news for the country’s apparel industry.
Moreover, Indian importers feel discouraged to import from Bangladesh because of their higher import costs, he said. “But the silver lining is that we can save over $500m, which is 10% of our total import from India. This is not bad.”
Annual bilateral trade between the two countries is around $5bn, broadly tilting towards India with its exports to Bangladesh hitting at around $4.5b.
Matlub, however, said the plunging rupee would stage comeback within a short span of time as the base of India’s economy is strong.
Bangladesh Institute of Development Studies research director Zaid Bakth said local exports would lose competitiveness for a short-period.
“But in my view rupee will strongly rebound as Indian economy will be back on track,” he said.
Export of products like fish and edibles to India is also being affected.
Imports of fish and other edibles from Bangladesh remained suspended for over a month even as traders on the other side of the border are continuing to export goods through the Akhaura check post in Agartala, Times of India reported on Monday.
The India-Bangladesh Importers-Exporters Association has blamed devaluation of Indian currency and rise in the value of the US dollar for the suspension of trade between the two countries.
Indian importers said that because of the devaluation of the rupee, they do not have the required demand to import items from Bangladesh as prices of the imported goods will be much higher in Tripura’s market compared to normal prices. This has prevented the traders from importing goods from the neighbouring country.
Habul Biswas, an official of India-Bangladesh Traders Association, said import of fish and other edible items from Bangladesh has been suspended since July 9 because of Ramzan. But even after Bangladesh lifted the suspension of exports on August 10, Indian traders have not yet resumed import of fish and edible items because of the devaluation of rupee.
He said trade volume between India and Bangladesh has reduced by 15%, and except for boulders, nothing has been imported from Bangladesh for over a month due to the escalating exchange rate.