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Lanka-India trade ties at a new high

india Updated: Nov 04, 2006 19:13 IST
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Sri Lanka is India's largest trading partner in the SAARC region, with bilateral trade having crossed $2 billion in 2005.

India is the largest source of imports for Sri Lanka, and is the third largest export destination for it.

India is the second largest investor in the island country. And among tourists, who are a valuable source of foreign exchange, Indians are the single largest group.

These and many other facts about India-Sri Lanka economic relations were revealed by A Manickam, the Acting High Commissioner for India, at the Ninth meeting of the India-Sri Lanka Joint Business Council here on Friday.

The envoy said that the tremendous growth in bilateral trade and Sri Lanka's exports to India could be attributed to the Free Trade Agreement (FTA), which became operational in 2000.

About 90 per cent of Sri Lanka's exports to India and 45 per cent of India's exports to Sri Lanka were under the FTA, he pointed out.

Correcting the view held by some in Sri Lanka that the trade deficit between the two countries was due to the FTA, Manickam said that this was so only for a few years in the beginning. The gap had been narrowing rapidly since then.

"In 1999, for $10 worth of Indian exports, Sri Lanka exported 1 dollar worth of goods. But in 2005 this ratio had come down to 2.4:1," he pointed out.

"Projecting these export growth trends into the future, Sri Lankan exports to India might soon exceed Indian exports to Sri Lanka," he predicted.

The envoy urged businessmen of the two countries to avail of the 4150 zero tariff lines offered by India, and 1208 offered by Sri Lanka.

Sri Lankan businessmen should also use the quotas in tea and garments given by India, he urged.

Investment flows have not been in one direction only - India to Sri Lanka. Sri Lankan business have also begun investing in India.

Ceylon Biscuits ltd, Brandix, MAS Holdings and the Hirdaramanis have put their money in ventures in India, which Manickam described as "heartening."

Few may know that Sri Lanka's national carrier, "Sri Lankan" is the largest foreign airline operating in India. It operates 86 weekly flights.

By the winter of 2008, there would be seven additional weekly flights to Mumbai; 7 additional flights to Bangalore, and 7 weekly flights to Coimbatore and Pune.

Indian tourists bring foreign exchange into Sri Lanka in a significant way because in terms of tourist arrivals in 2005, Indians were the single largest group. 113,000 Indians had visited Sri Lanka that year.

Benefits of CEPA

Sri Lankans often complain about the non-tariff barriers in India, which make concessions offered under the FTA seem illusory.

Addressing this concern, Manickam said under the proposed Comprehensive Economic Partnership Agreement (CEPA) there would be a removal of non-tariff barriers and institution of trade facilitation mechanisms.

"Enhanced flows will result from flexibility of Rules of Origin criteria," he said, referring to another ticklish issue.

"CEPA would also look at trade in services, facilitation measures on bilateral investment and bilateral economic cooperation to complement economic liberalisation," he said.

India-Sri Lanka economic relations, which had been showing "great vibrancy and dynamism" had entered a "new epoch" Manickam said.

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