Indo-Lanka trade to reach $10 bn by 2016

Indunil Hewage

Indo-Sri Lanka bi-lateral trade was expected to double to the $10 billion mark by 2016. In 2012, the total trade between India and Sri Lanka reached close to the $ 5 billion mark, said Saman Kelegama, Executive Director, Institute of Policy Studies.

Ashok K Kantha , High Commissioner of India handing over the handbook, India-Sri Lanka Free Trade Agreement to Ministry of Industry and Commerce Rishad Bathiudeen. Picture by Sumanachandra Ariyawansa

He expressed these views at the launch of the handbook on India- Sri Lanka Free Trade Agreement, held in Taj Samudra Hotel, Colombo. Highlighting the outcome of the free trade agreement between Sri Lanka and India over the last 10 years, Dr. Kelegama said that 70 % of Sri Lanka's exports to India was sent under the FTA and only 30% of Indian exports were channeled to Sri Lanka through FTA. “Even if you look at the import export ratio, it was 10 to 1 when the free trade agreement was signed. And currently, it has reduced to 6 to 1,”Kelegama said.

The India-Sri Lanka bi-lateral Free Trade Agreement was signed in 1998, and the agreement has resulted in substantial growth in trade between the two countries. The asymmetry between the two countries was accommodated by having special and differential treatment in favour of Sri Lanka,” Kelegama said.

In 2000, Sri Lankan exports to India amounted to $ 98 million while imports amounted to $ 600 million. In 2011, exports had increased to $ 519 million and imports to $ 4.4 billion partly due to an increase in petroleum imports, which were outside the FTA.

In 1999, India and Sri Lanka were trading 505 different items and over 1,000 items in 2005 and over 2,000 items by 2011.

“So if the free trade agreement was not there some of these additional products may not have gone to the Indian market,” Kelegama said.

India is the largest trading partner in Sri Lanka from both the exports and imports side, while India has become the largest source of imports to Sri Lanka.